S.C. May Include Insurers On Code Panel

It was drafted based on recommendations from a stakeholder group convened by the Department of Labor, Licensing and Regulation to propose revisions to the building code statute.

The Alliance of American Insurers, which represented insurers on the stakeholder group, said it sought and was granted inclusion of a recommendation to include an insurance representative on the state Building Code Council.

"This is only the second state where we will have an insurer on the panel," said Keith Lessner, Alliance vice president of safety and environment. "Given the things we're seeing about availability and affordability in coastal areas, and given all the interest we're seeing in premium credits, we think it's important to have an insurer there."

He said the level of understanding about the insurance industry is sometimes lacking on such panels and that the codes also affect the insurance industry.

Insurers, he said, can help those considering building code propositions to understand how the codes are used by insurers and how the codes and changes in the codes affect insurers. "It's also important that they understand how the codes will affect rates," he said.

"There is a perception that if you change a regulatory requirement, insurers will save a bundle of money," he explained. "But the fact is that rates are affected by many things that work their way through the rating process and combine with other factors."

He continued that, "Just because a building code change would not typically show up in rates the day after you passed the bill or even a year after, doesn't mean it won't have an impact."

Conversely, he said, building codes can serve as a useful underwriting tool in helping insurers price their business. Insurers have an interest in the differences between building codes "in the same way they have an interest in drunk driving laws and enforcement of seatbelt laws," Mr. Lessner said.

Another advantage of having insurers represented on the panel, he said, is that "it will put on the building commission another vote that is representative of the public interest as opposed to a vested interest."

Parties with the strongest vested interest are builders, who see [building codes] as affecting their cost, and regulators, "who bow to political pressures which up to this point have been the builders," he said.

When it comes to the argument of cost versus safety for consumers (such as those that might arise over wind-borne debris protection codes for coastal structures), he said, insurers bring a more balanced perspective because "they are representing their policyholders."

Though increasing the cost of a home has disadvantages, providing protection has advantages, he said.

Debates on these issues between homebuilders and the insurance industry can be long and fierce. Ultimately, however, "when homeowners find these kinds of protection desirable, homebuilders will end up making money from them and end up supporting them. But there is an educational process which has to be gone through and it's slow and painful," Mr. Lessner said.

The Building Code Council, Mr. Lessner said, is comprised of "a cast of characters" that includes a variety of engineers representing the different elements in the code, like mechanical gas and plumbing as well as a structural engineer.

The big change in the panel, he said, was that four engineers were replaced with two, a structural engineer and an engineer appointed by the state engineer. The only other addition is the inclusion of the insurance industry.

Others on the panel include a handicapped person to represent the handicap code as well as representatives for homebuilders, architects, fire marshalls, code enforcement and home inspectors, he said.

The bill has been referred to the Committee on Labor, Commerce and Industry, but no hearing date has yet been set. However, he said he is "confident that some version of the bill will pass this session."