Study: Untapped Green Insurance Market Shows Profit Potential

February 5, 2009

The potential and sustainability of green insurance products and services has not yet been fully examined or determined, according to a new study that examines the potential profit potential and sustainability of the emerging green insurance market.

The study, conducted by Simon-Kucher & Partners, a global consulting firm on pricing strategy, polled 1,500 U.S. insurance executives and found a significant profit potential in the green insurance segment. The study aimed to determine the sustainability of the segment as well as potential differences between the needs of green insurance customers and traditional insurance customers.

Two-thirds of respondents (67 percent) to the survey expect green insurance to be a durable, considerable and profitable market segment. One explanation of this possible trend is that customers of green insurance products will have a higher willingness-to-pay and generate lower costs (72 percent and 56 percent of respondents, respectively). However, the study also found green insurance customers to be more knowledgeable and demanding about their providers.

Almost all insurance execs responding to the survey believe that provider and service certification will be important for the success of green insurance (94 percent of respondents). Providers will need to prove their credibility in order to capture this segment's higher willingness-to-pay.

Simon-Kucher & Partners say the survey's results offers several strategic actions that insurance companies can take to combat the current economic downturn. The study's authors recommend insurers should focus on developing market excellence and strategic advantages in the green insurance business. In order to do this, they say providers must develop benefit-based products which are highly customized for this segment's needs. Once these products have been created, they should be heavily communicated through targeted advertising campaigns and reinforced with environmental certifications to appease the segment's desire for credibility.

"In the past, it has been observed that investing in brand and product differentiation contribute to a distinct and positive image for a company. Innovative products such as green insurance policies that reflect customers' needs should do just this and will counteract stagnant sales and help firms through difficult times," the study says.

Source: Simon-Kucher & Partners