Green Buildings and sustainable business practices have become one of the big success stories in US business. Forward looking insurance agents are paying attention, getting educated and growing their business.
Green and sustainability are really all about economics and risk. Data gathered by the US Green Building Council on the economic performance of LEED certified buildings clearly shows that green building practices can reduce the cost to operate commercial buildings by as much as 30%. That might be why 40% of new nonresidential building starts in the US in 2015 will apply for LEED certification. Or why USGBC has already certified over 3.6 billion square feet of new and existing construction.
New studies suggest that green buildings are healthier places to live and work. The elimination of most VOCs (volatile organic compounds) from finishes and furnishings and state of the art ventilation systems make for healthier occupants and higher employee productivity.
From and insurance perspective, green buildings mitigate traditional risks while they introduce new and emerging risks. Standard insurance coverages are not designed to address either the opportunities or risks associated with green buildings. At their most fundamental level, sustainable business practices are essentially a risk management response. Successful agents understand how new insurance products respond to the coverage and risk management needs of green and sustainable insureds. Even though most large insurers are selling green coverage forms there are significant coverage differences. Agents are also developing their risk management and loss control support to encourage clients to adopt the risk reduction best practices of green and sustainable practices while managing a new set of emerging green risks.
All of these trends reflect the strong economic and business case that green buildings and sustainable business practices offer. More and more consumers and businesses are moving toward green and sustainability, and looking to their trusted insurance advisor to understand the various risk and insurance implications. Agents and brokers need to position themselves to support their customers or their competitors will.
Think about this …
A study by MIT Sloan School of Management found that 68% of business executives increased their commitment to corporate sustainability over the last year. The vast majority see this commitment as a core strategic consideration.
KPMG’s “Corporate Sustainability, A Progress Report” concludes:
The evidence that sustainability is becoming a core consideration for successful businesses around the world grows stronger every day. Sixty-two percent of companies surveyed have a strategy for corporate sustainability. Regulatory requirements, brand enhancement and risk management remain key drivers of sustainability. Sustainability is being viewed as a source of innovation—and new growth. Forty-four percent of executives agree sustainability is a source of innovation, and 39 percent see it as a source of new business opportunities.
According to the US Green Building Council, it is estimated that in 2015, 40-48% of new nonresidential construction will be green, equating to a $120-145 billion opportunity. More than 3.6 billion square feet of building space are LEED-certified (as of January, 2015).
Compared to the average commercial building, the LEED Gold buildings in the General Services Administration’s portfolio, consumed 25% less energy and 11% less water. They also have 19% lower maintenance costs and enjoy 27% higher occupant satisfaction
Current market trends suggest that building owners and managers will invest an estimated $960 billion between now and 2023 on greening their existing built infrastructure. In 2015, the green share of the largest nonresidential retrofit and renovation activity is expected to more than triple, growing to 25-33% of the activity by value.
Firms that completed green building retrofit projects report a decrease in operating costs over one year of 9% and 13% over five years, with an expected 4% increase in asset valuation according to building owners.
According to a Business Insurance online survey of 315 executives who influence and participate in decision-making in their organizations, 36% said they are not sure whether their commercial property insurance was designed to include green buildings. Thirty-four percent said it is not, and only 30% said their coverage includes green buildings.
Meanwhile, of those who have green insurance, 32% said they searched themselves for the coverage, and only 28% said a broker advised them to switch to green coverage or add an endorsement for green features.
Of 212 respondents who said their commercial property insurance does not cover their green buildings, or they were unsure about the coverage, 62% were unaware that green insurance or specific endorsements are even available.
So what does this all mean for agents and brokers? Now is the time to act and learn about the insurance and risk management aspects of green and sustainability. Stephen Bushnell and Associates can help you translate green and sustainability into competitive advantage.
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