Strong Pillars

Insurance agents have a role in those preparations. Agents are the insurance industry's main presence on Main Street and can be a guiding voice on disaster mitigation and cleanup for both their customers and the community they serve.

The relationship between an agent and his or her customer is more than just selling coverage and collecting premiums. Agents serve as risk managers to their clients, providing policyholders with advice and guidance on ways to reduce the risks they face, which can lead to reduced costs for insurance coverage and, most importantly, minimized damage post-storm. As customers build or rebuild, agents can offer suggestions to help them better protect themselves and their property the next time disaster strikes.

It can be surprising how even small changes can have a considerable effect in disaster mitigation. The Insurance Institute for Building and Home Safety (IBHS) has conducted tests of many different types of natural catastrophe in its state-of-the-art facility in South Carolina. In doing so, the IBHS has shown how simple, inexpensive changes—such as having a door swing out instead of in, the size of nails used in roofing or adding straps to help better connect the roof to the structure—can significantly reduce the damage caused from extreme weather. Taken together, these simple steps can make the difference between dealing with minor repairs or having a home completely blown away.

If disaster strikes, agents should also work with their policyholders to ensure that any rebuilding is done in accordance with local building codes—hopefully, stronger and safer than before. Some communities will allow a structure, often those built before a building code was established, to be rebuilt as it was. This can sometimes be less expensive, but it also means the building is just as likely to be wiped out by the next storm as it was by the last one. The same can be said for home expansions or repairs without a storm. Any change to a structure has the potential to affect its exposure by creating a weakness that could affect the entire structure.

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Again, the same message holds true at the broader community level. A community that allows for building without considering mitigation may be increasing the losses should disaster strike. Given their experience in risk and loss exposure, insurance agents and brokers can be a force for change in their communities and beyond by promoting safer building and safer building codes, and making sure those codes are enforced. Enforcement can sometimes be an afterthought when it comes to building codes, but without the resources to ensure building codes are being adhered to on an ongoing basis, the codes themselves are worthless. 

Although the federal government has no official role in building codes or code enforcement, the increasing number of natural disasters and the ensuing need for federal aid has become a recurring issue on Capitol Hill. The money needed to assist communities stricken by disaster, often a figure in the billions, has increasingly drawn scrutiny from lawmakers concerned that funds are being granted before the need can be truly assessed and that the money is used inefficiently.

Although few lawmakers are willing to sacrifice their careers by stopping federal aid legislation, more have been willing to slow the process in recent years by seeking to add restrictions or offsets in other parts of the budget for the disaster funds. Budgeting in the hopes that a disaster won't happen and then being forced to pass emergency spending bills is an ineffective way to ready ourselves for disasters, and lawmakers should instead focus on ways to mitigate disasters.

Just as an insurance company may offer discounts as an incentive to ­policyholders who take steps to reduce their risk of loss, the property-casualty insurance industry and others are working with lawmakers to have Congress take a similar approach. Rather than attempting to impose its will on building standards, Congress should help increase mitigation by encouraging building code adoption and enforcement by the states.

NAMIC is a founding member of the BuildStrong Coalition, a group of national business and consumer organizations, companies and emergency management officials dedicated to promoting stronger building codes. Together with the Independent Agents and Brokers of America and the Council of Insurance Agents and Brokers, NAMIC works to promote disaster mitigation through the Safe Building Code Incentive Act.

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Introduced as H.R. 1878 in the U.S. House of Representatives by Rep. Mario Diaz-Balart (R-Fla.), and S. 924 in the Senate by Robert Menendez (D-N.J.) and Charles Schumer (D-N.Y.), these bills encourage the adoption and enforcement of a model building code through increased post-disaster grant money. It is not a mandate; states aren't required to comply, but the Safe Building Code Incentive Act would provide more funding to states that have acted responsibly to prepare themselves.

At a time when every dollar of federal spending is put under a microscope, the Safe Building Code Incentive Act can reduce the need for federal disaster aid without imposing on states' rights or increasing federal spending. The additional grant money would come from existing funds, meaning it would not require any additional money from taxpayers.

States adopting enhanced building codes could see enormous savings. A 2005 National Institute of Building Sciences' study concluded that for every $1 spent on mitigation at the federal level, the American taxpayer saves $4 in disaster assistance. More specifically, a study conducted last year by Milliman found that had the Safe Building Code Incentive Act been in place during the past 25 years, federal disaster spending would have been reduced by an average of $500 million annually.

To give a more specific example, in the aftermath of Hurricane Katrina the Louisiana State University Hurricane Center found that a stronger building code like that outlined in the Safe Building Code Incentive Act—which has since been adopted in Louisiana—would have reduced wind damage by 80 percent, cutting losses in the state by approximately $8 billion. In neighboring Mississippi, losses would have been reduced by an estimated $3.1 billion. 

We know that safer building codes will help our communities better survive natural disasters. We know that Congress can encourage the states to act, and in doing so potentially reduce federal spending without having to impose a mandate on the states. NAMIC, the BuildStrong Coalition and a host of others have been supporting the effort to pass the Safe Building Code Incentive Act in Washington, but we need that same support from the pillars of the community standing in support when lawmakers head home.