With competitive insurance policies, you can be kind to the planet without having to fork out excessive cash.

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Insurers have never exactly been at the cutting edge of corporate virtue. But global warming has changed that.

According to a report released last year by the Insurance Working Group of the Geneva-based United Nations Environment Program Finance Initiative, one of the big concerns for insurance companies is that climate change may result in more natural disasters.

It's just another reason why insurance companies are now becoming proactive in their product offerings designed to reduce climate change.

In 2007, Queensland-based Australian Insurance Holdings launched ibuyeco - car insurance that is 100 per cent carbon neutral.

Under this scheme, you can check out how much carbon your car generates on the ibuyeco website.

By filling in the make, model and year of your car, along with how many kilometres per year you drive, it works out how many tonnes of carbon your car emits. Then, depending on the car's green rating and where you park it, you're given a quote for your insurance.

A partnership between ibuyeco and Greening Australia ensures that the policy is carbon neutral, with native trees planted for each tonne of carbon released (the number of trees depends on the location).

Associate director of ibuyeco, Jonathan Kerr, says doing something about the environment is not the only draw card.

The premiums are also competitive, which means that policyholders can be kind to the planet without making excessive payments.

The average Australian drives up to 15,000 kilometres in a year, which means their vehicles emit three to four tonnes of carbon. Offsetting that adds just another $30 to $50 to the premium, he says.

"As a group, we wanted to do something in the environment. Being in the car insurance business, we were aware that cars are the biggest emitters of carbon,'' Kerr says.

"And the average Australian who wants to do the right thing doesn't want to have to pay a lot of money to carbon offset.''

Australian Insurance Holdings competitor Suncorp Metway has also moved into this space through its GIO brand. While not carbon neutral, their offer is still effective.

GIO will replace a fridge or dishwasher lost in a fire or through storm damage with one that has a minimum three-star rating. Or in the event of damage to a house, the insurer will provide $2,500 for the installation of a rainwater tank or solar heating, even if your home didn't have it in the first place.

With car insurance, GIO will provide a 10 per cent discount for hybrid vehicles.

"What we're trying to do is be practical,'' says Lyndell Fraser, GIO's executive general manager of personal insurance. "There is nothing worse than preaching at people."

It's still early days in the green insurance market, but the niche will get bigger as more insurers move in to stake out territory.

And that can only be good news for policyholders, and the Earth.