Insurers in California, Washington, and New York will be required to describe the steps they're taking to address climate change.

Insurance commissioners in three states, including California, are now requiring that insurers report on how they’re preparing for climate change. Insurers will fill out a survey, which was adopted by The National Association of Insurance Commissioners (NAIC) in 2009, but was never implemented by commissioners in all fifty states. Instead, it’s been a piecemeal approach. California administered the survey in 2009 and ’10, requiring all insurers that met a minimum size requirement and that were headquartered in the state to fill it out. Now California is expanding the initiative: all insurers that write premiums worth more than $300 million and do business in the state–not just those based here–will be required to fill out the survey. New York and Washington are doing the same.

The Climate Risk Survey covers general questions: does the company have a climate change policy with respect to risk management and investment management, has the company considered the impact of climate change on its investment portfolio, does the insurer have a plan to assess or mitigate its own emissions?  An example of California’s survey from 2009 is available as a PDF from the NAIC website.

“It’s very broad,” said Andrew Logan, who directs the insurance program at Ceres, a non-profit that focuses on making businesses more sustainable. “It covers everything from how insurers are building climate science into their risk models to how they’re thinking about climate change as investors, to whether they’re building products that encourage climate-friendly behavior. So it cuts across all the types of ways climate change could impact the industry.”

Ceres worked with NAIC to develop the survey. Logan said climate change has the potential to impact all sectors of the industry. Property, life, and health insurers all face risks from it. NPR reported last month that homeowners insurance rates will go up as much as 10% this year, following the series of natural disasters in 2011. NPR didn’t link those disasters to climate change, but Logan pointed, out it’s years like that that make the insurance industry vulnerable.

“They’re really on the front lines as we see the the physical impacts of climate change getting worse,” he said. “The fact that regulators who are responsible for overseeing the solvency of the biggest industry in the world are worried about climate change is a powerful statement about the urgency of this problem.”

Los Angeles traffic (Photo: Gabriel Bouys)

Most car insurance is priced in the United States kind of like an all-you-can-eat salad bar, says Justin Horner, a transportation analyst at the Natural Resources Defense Council. You pay a set amount once or twice a year, and then you can eat one little salad, or you can totally chow down, making several trips back for more food, piles of cole slaw and jello threatening to topple from your over-filled plate. Either way, it makes no difference to your wallet.

And, of course, regardless of hunger level, it can be kind of tempting to go back again and again, just because you can.

On the other hand, if you get your salad at one of those pay-by-weight places, you’re likely to be a lot more discriminating about what’s on your plate. That’s how we buy gas, says Horner.

And, according to a study by the Brookings Institution, a non-partisan think tank, that’s also how we should be buying our car insurance.

“Just as an all-you-can-eat restaurant encourages more eating, all-you-can-drive insurance pricing encourages more driving,” states the report. “That means more accidents, congestion, carbon emissions, local pollution, and dependence on oil.”

According to the study, if car insurance premiums were priced per mile driven, driving would decrease nationwide by eight percent (it would take a $1 per gallon increase in the price of gas to achieve this kind of reduction). This would:

- Decrease carbon emissions by 2%

- Decrease oil consumption by 4%

- Save $50-$60 billion in reduced “driving-related harms”

In California alone, the study finds that an eight percent decrease in driving would account for between seven-and-nine percent of the total CO2 reductions needed to meet the states mandated levels for 2020.

In another study, professors at the Massachusetts Institute of Technology found that if all Massachusetts drivers switched to car insurance priced by the mile, fuel consumption would go down 9.5%, cutting two million tons of CO2 emissions.

You can listen online to Gretchen’s companion radio report to this post at The California Report. You can see and hear our entire series, Miles to Go, at our special coverage page.