By Phil Zinkewicz

In the well-known musical "Easter Parade," starring Fred Astaire and Judy Garland, there is one scene in which Garland and actor Peter Lawford are caught in an unexpected rainstorm. Lawford quips: "Ah, you can't trust those weathermen. They said it was going to rain today. If they said it was going be sunny, I'd have brought my umbrella."

This is just one indication of how weather forecasters have taken a bad rap over the years. In fact, it's not easy to "predict" weather; usually the best meteorologists can do is interpret certain signs that indicate weather patterns. The problem is that recently those signs have become even less predictable than the patterns themselves.

"Weather patterns are changing and we're seeing more severe weather in general, even if the number of full-scale hurricanes is level," says Steve Murray, senior vice president of Bankers Insurance Group. "Flooding is simply a greater threat than ever before."

That in itself is a serious situation, but in fact natural catastrophes overall are becoming more and more unpredictable. The devastation in terms of loss of life and property damage when a natural catastrophe strikes is even a greater concern today than in the past. Climatic changes that have taken place all over the world in the last decade have driven home the realization that unexpected natural catastrophes are a threat to all communities here and abroad. But if we are becoming less proficient at predicting catastrophic occurrences, at least we can become more aware of how to mitigate the chances of injury, death, and property damage should a natural catastrophe occur.

Mission Possible

Mitigation is the mission of the Institute for Business and Home Safety (IBHS), based in Tampa, Florida. IBHS is well known in the property/casualty industry because it is sponsored by some of the most prominent underwriters in the business. But outside the industry, the organization enjoys little recognition or support. Representatives of IBHS are trying to increase its visibility and generate more support for its efforts.

IBHS is a 501 (c) 3 organization similar to the Insurance Institute for Highway Safety (IIHS), which has received a good deal of coverage in the general press. Whereas IIHS concentrates on monitoring the performance of vehicles in crash tests, accumulates data, and makes recommendations regarding auto safety, IBHS operates in the area of building construction. Specifically, IBHS is involved in mitigation efforts to lessen the damage that results from natural catastrophes.

"Our mission is to reduce injuries, deaths, property damage, and economic loss due to catastrophes," says Harvey Ryland, president and CEO of IBHS. "If we can prepare homeowners and business owners to deal with catastrophic occurrences, the whole community benefits. This is especially essential for small businesses, which are the backbone of any community. If someone loses a home, it can be rebuilt. But when a business goes under, the entire community suffers. In addition, the owners of businesses that fail because of a natural catastrophe can become depressed and turn to substance abuse or even family abuse. We don't just look at property. We examine every contingency."

Key role of agents

Ideally, the best time for families and businesses to take steps to reduce their vulnerability to natural hazards is before disaster strikes, Ryland says. Realistically, though, people are more likely to take mitigation seriously after a disaster hits. "We need to redouble our efforts to identify and capitalize on opportunities for claims adjusters and insurance agents to promote mitigation during response and recovery operations," Ryland says. "As they help clients get back on their feet, claims adjusters and agents are uniquely positioned to encourage the public to rebuild their homes and businesses in ways that can prevent them from being victims of future natural hazards.

"Obviously, the timing of introducing mitigation concepts and providing how-to information to policyholders is very delicate in view of the emotional trauma caused by a disaster," Ryland continues. "However, experience shows that, when the message is properly presented with sensitivity, adjusters and agents can be a valuable and effective resource in urging steps to reduce future losses. Unfortunately, there is a very narrow window for these kinds of efforts because interest in mitigation usually fades with time and all too frequently things are put back together in the same place and in the same way they were before the disaster."

It should be noted that the IBHS is not a lobbying group, nor does it attempt to influence either insurers' pricing decisions or purchasers' buying decisions with respect to homeowners and business insurance. Its education efforts, however, can and do motivate insurers to offer economic incentives to insureds who take those extra steps to mitigate potential losses from natural hazards. In addition, some insurers have adopted IBHS mitigation programs to assist local communities that need information about catastrophe mitigation.

Mitigation in action: One insurer's story

On the economic incentive side, consider Bankers Insurance Group, based in St. Petersburg, Florida, which offers Florida homeowners discounts if their residences qualify as "fortified homes." "Fortified" homes and "fortified" businesses are concepts of IBHS, and a "fortified" seal of approval for a structure is akin to the Underwriters Laboratories (UL) seal we've all come to accept as signifying a safe product.

"The IBHS 'Fortified Florida' program, which premiered in the Tampa Bay area, presents construction criteria for new, single-family homes to qualify as 'fortified' and therefore more resistant to damage from hurricanes and other natural forces," Murray explains. "The IBHS guidelines, which Bankers communicates to its agents who represent homeowners in Florida, as developed will ultimately help to save lives, prevent injuries, and reduce the financial devastation that Florida's severe weather can cause. While safety is the primary goal of the program, there are certainly economic benefits too, particularly when it comes to insuring the home."

Ryland says the Fortified Florida program is the pilot for similar programs IBHS expects to launch along the East Coast.

Murray says Bankers has already obtained Florida Department of Insurance approval of discounts for construction features including, but not limited to, hip roof design, reinforced garage doors, storm shutters, and all-masonry construction. As an example of the savings a policyholder can enjoy, Murray says that a standard brick, stone, or masonry house in a coastal area, with a deductible of $500 and a 2% hurricane deductible, would generate an annual premium of $2,240. In contrast, a house in a coastal area with the same deductibles, but with the additional "fortified" construction features listed above, would pay an annual premium of $1,746, a savings of $504, or 22.5%.

In addition, Murray notes, "Our underwriting guidelines may be relaxed for fortified homes--that is, in areas of the state where we wouldn't normally write policies, we may be able to make exceptions for fortified homes. This is clearly an advantage to the homebuyer, because otherwise it can be difficult to obtain homeowners insurance in some parts of Florida." It undoubtedly will also be an advantage to independent agents who have been scratching their heads in recent years trying to find markets to insure their coastal clients.

Another advantage fortified homes offer, Murray says, is that lower deductibles may be available. For example, for policies that cover wind damage, the deductible is usually 2% of the covered amount. This means that on a $350,000 home, the deductible is $7,000--a significant out-of pocket expense if the home is damaged by wind. "With our exceptions for fortified homes," Murray explains, "the policyholder may be able to get a flat deductible of $500 for wind damage. That's a pretty significant savings." Murray says Bankers will continue to research additional discounts and follow the insurance department's lead in making more credits available. "We'll make every effort to create insurance incentives that will support the Fortified Florida program," Murray asserts. "We certainly want to do our part to encourage new home buyers to purchase fortified homes."

Challenge: existing structures

The Fortified Florida program addresses the problem of homes that are being rebuilt and homes that are purchased new, but what about existing structures? The IBHS considers this a critical issue that must be addressed.

"Only about 2% of structures in the country are new. The other 98% are existing," Ryland says. "Retrofitting is much more expensive when a home is already built. We've identified what we call our 'Ten Most Wanted List,' which are the most frequently found 'villains' in home structures. One villain on the list is inadequate roof decking. To put a new roof deck on an existing structure would cost about $5,000. It's not very likely that a homeowner is going to incur that expense to mitigate against a disaster that hasn't happened. But what if the homeowner could achieve the same results for $50? We've found in our research that a certain type of glue gun that can be purchased in most hardware stores can retrofit a roof as effectively as if a new roof had been put on with wood screws. That's the kind of information we need to disseminate to the public on a larger scale."

That, Ryland says, is exactly what IBHS intends to do. In addition to the hundreds of books and pamphlets available from IBHS, the organization has embarked on a video news release (VNR) campaign. "We've found that television is the best way to reach the average consumer," Ryland comments. "So we offer these VNRs to news shows to get the word out."

Safeco on board

One company that is using IBHS printed and published materials as well as IBHS research to provide catastrophe mitigation assistance to small communities is Safeco. Ed Todd, a spokesman for the insurer, says two programs are currently under way. One is called "Protecting Our Kids"; the other is "Fire Free." Says Todd: "We did our first 'Protecting Our Kids' program in Portland in October of 1998. We found a day care center in the area and involved our local agents as well as Safeco volunteers. The purpose of the program is to find ways to make day care centers safer for the children in the event of a catastrophe without having to change the physical structure of the building. These included very simple things such as providing special safety latches on doors and closets so that, in a catastrophe, things don't fall out and injure the children. Also, we use special bolts to affix things on walls, such as pictures, more securely. We bracket refrigerators and other heavy appliances. Then we held an open house after the fact to demonstrate to parents how these procedures can be applied to the home at very low cost. So far, we've run a total of eight projects in Oregon and Washington."

Safeco's "Fire Free" program was started in the summer of 1996. It educates people on how to prepare for unexpected brush fires and mitigate the potential damage. "In this program, we have our agents working in partnership with community leaders and police and firefighter representatives," Todd says. "In both of these programs, we use the information we obtain from being a member of IBHS."

We may not be able to do anything about the weather. But with the knowledge and resources available through IBHS, we can prepare for some contingencies. *