Industries, businesses, schools, municipalities and homes are“going green” with new energy technologies. It's likely the trendtoward more efficient and environmentally friendly equipment willcontinue and accelerate in the years ahead as businesses and otherorganizations upgrade and purchase new equipment.

Fast-changing technology is also bringing new exposures, and inmany cases that will mean replacing equipment and paying forrelated expenses that are more costly and complex than in the past.To be competitive in this growing market, equipment breakdowninsurers will have to outpace technological advances to develop newproducts and offer forward-looking coverages and services to theirpolicyholders and the independent agents who represent them.

Some equipment breakdown insurers, for example, offer customersthe opportunity to make energy-saving upgrades to their equipmentand property after a covered loss. They also cover businessinterruption and extra expense incurred as a result of longer leadtimes for materials and labor. Recycling of damaged property orequipment also is a very valuable component of today's equipmentbreakdown policies.

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

The ripple effect will be felt in every business, organizationand family homes. One result: The evolving power grid will likelyresult in a proliferation of “smart meters”—electronic devices withreal-time sensors that monitor the consumption and quality ofelectricity, natural gas or water. Utilities will use the data tomatch power generation with usage and price the electricity on timeof day, the season, or level of demand. By 2014, McKinsey & Co. predicts therewill 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 businessowners, many of whom are largely unfamiliar with new technologiesand the risks they present. Take wind energy, for instance, whichis expected to add 10,000 new megawatts of generating capacity eachyear for the next several years, with 3,000 and 5,000 new turbinesinstalled in the next 12 months.

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

Aside from businesses and the turbines themselves, farmers maybe approached by energy companies that want to put a turbine ontheir property. They need to know what their liability is and whatprotections they need. Other types of renewable energy and advancedequipment technologies, including solar, biomass, moving water orbiofuels present their own unique opportunities, challenges andexposures.

New Equipment, Higher Standards

As equipment ages, companies and consumers will need to upgradeto equipment that may be more costly and complex. The U.S. stock ofequipment, structures and other assets is becoming increasinglyoutdated and in need of replacement. In all three majorcategories—nonresidential, residential and government—the averageage is at a 40-year high, according to Michael Mandel, a seniorfellow at the ProgressivePolicy Institute.

The installation and replacement of today's equipment is oftento a higher standard. In construction, for example, covered repairsor replacements for green-certified buildings may be completedaccording to the standards set by third-party organizations,including the U.S.Environmental Protection Agency Energy Star program andU.S. Green Building CouncilLEED program.

Smart Homes, Equipment that “Learns”

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

As new technology accelerates, agents and insurers have a greatopportunity to distinguish themselves in the marketplace byoffering the right products and services. More importantly, theycan stand out by looking ahead, anticipating change and becomingresources for businesses, industries and homeowners now and in thefuture.