Why aren’t there more green home insurance discounts?

Facing the growing impact of climate change, more and more homeowners are turning to green technology and energy-efficient home upgrades to do their part to help the environment. 

While things like solar panels, smart thermostats and power strips, and energy-efficient appliances can lead to utility bill savings in your home, unfortunately they won’t necessarily earn you a discount on your home insurance.

Drivers who opt for eco-friendly vehicles will often find themselves eligible for “green savings” from certain car insurance carriers. But green discounts in Canada’s home insurance industry are less prevalent. We spoke to some experts to find out why.

Why are there so few green home insurance discounts?

“Think of insurance as like a large pot that everyone puts a little bit of money into over the course of the year,” says Stefan Tirschler, product and underwriting manager at Square One Insurance Services Inc. in Vancouver.

If an insurance provider thinks a certain group of people are less likely to take money out of that pot, via filing a claim, then they’ll reward that cohort with a home insurance discount, he says. We see this happen with homeowners who install security/burglary alarm systems, for instance, and non-smokers. 

But insurance providers can’t really prove that incorporating green technology and making energy-efficient upgrades to your home will reduce the likelihood of a claim being made. Without that proof, it’s difficult to give discounts because insurance providers could actually wind up in a shortfall position. In fact, Tirschler says some green technologies or upgrades could even make the cost of claims higher.

For instance, if someone has solar panels installed on their roof and a hailstorm comes along and damages them, those solar panels may now become part of a claim, making it costlier to pay out than it would have been had they not been there. “The technology is fantastic and it’s really important that it’s developed,” says Tirschler, “but it may actually be more expensive to fix, not less.”

The future of green home insurance discounts in Canada

That’s not to say we’ll never see home insurance discounts for homeowners’ green initiatives.

“The insurance industry is continuously evolving and therefore I believe we may see ‘green’ discounts in the future for home insurance policies,” says Sara Caruana, service team leader at DirectRate.ca, an insurance brokerage in Windsor, Ont. 

One of the current exceptions to the lack of discounts is The Co-operators Envirowise 10% insurance discount for owners of eligible Leadership in Energy and Environment Design (LEED)-certified homes. LEED certification is granted by the Canada Green Building Council for homes that have been created with sustainable site development, water efficiency, energy efficiency, materials selection, and indoor environmental quality.

Caruana notes that when electric and hybrid vehicles hit the market, it took a little time for green discounts to kick in. Even today, not all carriers offer them. 

One reason that some insurance companies now offer green car insurance discounts could be due to research that shows some electric vehicles can be safer on the road than conventionally powered vehicles. According to the Highway Loss Institute, EVs are involved in significantly lower collision and property damage liability claims. One theory for this is that EVs weigh more than traditional vehicles, and therefore experience less force or impact when involved in a collision. 

As for green home insurance discounts, Tirschler explains that the information gathering process usually occurs when technologies are being used in already-insured homes and as claims are made. This can happen five or 10 years after a technology has been in use.

“It’s so early in the process that I’m not sure that we as an industry are quite sure of what the impact of these technologies will be on claims,” he says. “But I do think pricing changes are definitely coming.”