Industries, businesses, schools, municipalities and homes are “going green” with new energy technologies. It's likely the trend toward more efficient and environmentally friendly equipment will continue and accelerate in the years ahead as businesses and other organizations upgrade and purchase new equipment.

Fast-changing technology is also bringing new exposures, and in many cases that will mean replacing equipment and paying for related expenses that are more costly and complex than in the past. To be competitive in this growing market, equipment breakdown insurers will have to outpace technological advances to develop new products and offer forward-looking coverages and services to their policyholders and the independent agents who represent them.

Some equipment breakdown insurers, for example, offer customers the opportunity to make energy-saving upgrades to their equipment and property after a covered loss. They also cover business interruption and extra expense incurred as a result of longer lead times for materials and labor. Recycling of damaged property or equipment also is a very valuable component of today's equipment breakdown policies.

Although renewable energy, energy-efficient equipment retrofitting and other new technologies are still a modest part of the market, they are growing quickly. At the infrastructure level, the power grid in the U.S. is aging and will need to be replaced and substantially upgraded.

The ripple effect will be felt in every business, organization and family homes. One result: The evolving power grid will likely result in a proliferation of “smart meters”—electronic devices with real-time sensors that monitor the consumption and quality of electricity, natural gas or water. Utilities will use the data to match power generation with usage and price the electricity on time of day, the season, or level of demand. By 2014, McKinsey & Co. predicts there will be more than 40 million smart meters in the U.S. Eventually, virtually every home and business could have its own smart meter.

Changes in the Wind

These green initiatives are creating uncertainty for business owners, many of whom are largely unfamiliar with new technologies and the risks they present. Take wind energy, for instance, which is expected to add 10,000 new megawatts of generating capacity each year for the next several years, with 3,000 and 5,000 new turbines installed in the next 12 months.

The implications are wide-ranging, beginning with manufacturing. Each turbine has thousands of component parts. The site must be prepared and the assembly and erection of the turbine is a major rigging operation. In addition, major electrical transmission systems have to be installed, and the turbines and their electrical systems have to be continuously monitored and maintained.

Aside from businesses and the turbines themselves, farmers may be approached by energy companies that want to put a turbine on their property. They need to know what their liability is and what protections they need. Other types of renewable energy and advanced equipment technologies, including solar, biomass, moving water or biofuels present their own unique opportunities, challenges and exposures.

New Equipment, Higher Standards

As equipment ages, companies and consumers will need to upgrade to equipment that may be more costly and complex. The U.S. stock of equipment, structures and other assets is becoming increasingly outdated and in need of replacement. In all three major categories—nonresidential, residential and government—the average age is at a 40-year high, according to Michael Mandel, a senior fellow at the Progressive Policy Institute.

The installation and replacement of today's equipment is often to a higher standard. In construction, for example, covered repairs or replacements for green-certified buildings may be completed according to the standards set by third-party organizations, including the U.S. Environmental Protection Agency Energy Star program and U.S. Green Building Council LEED program.

Smart Homes, Equipment that “Learns”

In the future, smart homes, office buildings and other commercial properties will begin to interact with their occupants by “learning” about their behavior and adapting in response. This “ubiquitous computing” technology, named one of the top 10 strategic technology trends of 2011 by research firm Gartner Inc., is already in place in some locations. Using software that can be run from an iPad or other mobile device, smart buildings can turn lights, heat, air conditioning and other systems off and on, either through pre-established settings or in response to the occupants' behavior.

As new technology accelerates, agents and insurers have a great opportunity to distinguish themselves in the marketplace by offering the right products and services. More importantly, they can stand out by looking ahead, anticipating change and becoming resources for businesses, industries and homeowners now and in the future.