Rate Reductions For Photovoltaic Arrays or Ground-Source Heat Pumps

HARRISBURG, Penn. — A Pennsylvania insurance company, Dongal Insurance Group, is offering a 5% “green” discount on homeowners’ insurance. The discount applies only to homes with solar equipment or a ground-source heat pump.

While Donegal’s new green rate may be good news for some homeowners, the company can’t provide a rationale for the discount. Announcing the newly approved rate, Pennsylvania insurance commissioner Joel Ario falsely stated that the discount “makes risk-management sense because alternative energy sources keep homes operating when there is a power loss.” In fact, power outages disable both ground-source heat pumps and grid-tied photovoltaic (PV) systems.

According to Melissa Fox, a spokesperson for the Pennsylvania Department of Insurance, rate-change requests by insurance companies require “actuarial documentation.” Fox explained, “You have to support why the rate is justified.” In spite of her statement, however, Fox was unable to provide a rationale for the discount.

“These People Are More Conservative”

Chuck Romberger, director of the Property and Casualty Bureau at the Department of Insurance, justified the department’s decision with the explanation that rates for “new and innovative” insurance products do not require actuarial documentation; instead, they can be based on “underwriting judgment.” Romberger continued, “The thought behind why these discounts were given was, those people are considered to be more conservative, and therefore better insurance risks than people who would not consider installing these products.”

According to Cyril Greenya, chief underwriting officer for the Donegal Insurance Group, the new rates have nothing to do with concerns over global warming. Greenya explained that the connection between ground-source heat pumps or solar equipment and lower risk is “an intangible connection.”

More Likely To Perform Maintenance?

Greenya continued, “Maybe there is no actuarial justification, but you could make a case that people who are thinking about the environment might be the kind of folks who might be more careful in the maintenance of their property. But you can’t show empirical data to prove it.”

In fact, some homeowners with new PV systems may end up paying higher rather than lower insurance premiums, since the value of a PV array may require a policy with higher coverage than would otherwise be necessary.