There is a sentence in the Foreword to the 2015 edition of the NFPA 70E Standard for Electrical Safety in the Workplace that states; “It can be debated that all of the requirements of the [National Electrical Code], when traced through a chain of events, relate to an electrical hazard…” This is likely true for every code and standard developed for the manufacturing and installation of electrical and alarm products. Therefore, electrical and alarm products manufactured and installed in compliance with an applicable code and standard significantly reduces or eliminates the potential hazards to persons and property from the use of electricity.
The insurance industry’s involvement in the development and promulgation of electrical and alarm codes and standards dates back to the very beginning of the electroindustry. In 1881, C.J.H. Woodbury of Factory Mutual Insurance reported at a meeting with the New York Board of Fire Underwriters; “…there were 65 installations of electrical light in the mills insured by the Manufacturers’ Mutual Insurance Companies of New England which were followed by 23 fires in six months, presenting a most hazardous and alarming condition of affairs.” This meeting lead to the publication of what is considered to be the very first set of adopted rules for the installation of electrical systems by a local jurisdiction on October 19, 1881. One-hundred and thirty-five years later, the insurance industry still plays a major role in electrical safety.
The insurance industry has representatives serving on committees at all levels of codes and standards development. This includes NFPA code-making panels, UL standard technical panels, and ICC code development committees. Many states and local jurisdictions have an insurance industry position on their building and electrical code councils. Lastly, the insurance industry is a major source of information and guidance to legislators and local policy makers when developing the laws and rules that regulate the construction industry.
The insurance industry has an invested interest in assuring the property they cover have electrical and alarm systems in compliance with the most recently published edition of the applicable construction codes. This is achieved through the industry’s endorsement and support of the Coalition for Current Safety Codes and the 3-year code adoption cycle. Code adoption advocacy is channeled through the Insurance Institute for Business & Home Safety (IBHS). IBHS is an independent, nonprofit, scientific research and communications organization supported solely by property insurers and reinsurers. It is also critical to the insurance industry that current codes and standards are adopted and enforced, as written, without any amendments that reduce safety requirements. For instance, the largest fire and casualty insurance carrier in the nation, State Farm Insurance, issued a letter in 2015 to the Governor of Michigan opposing proposed amendments to the state’s electrical code.
A program developed by the insurance industry that promotes best practices in code adoption and enforcement is the Insurance Services Office (ISO), Building Code Effectiveness Grading Scale (BCEGS). The BCEGS program evaluates the building codes in effect in a particular community and how the community enforces codes, with a special emphasis on the mitigation of losses from natural hazards and fire. The community insurance rating issued by the BCEGS program can result in reduced insurance premiums for property owners of up to 25%. It can also result in substantial discounts on premiums for flood insurance policies under the National Flood Insurance Program (NFIP) or Community Rating System (CRS). Additionally, the percentage of FEMA disaster recovery funding given to communities with better BCEGS ratings will be much higher than those communities with lower BCEGS ratings. Today, more than 20,800 communities participate in the BCEGS program, covering 87% of the U.S. population.
Another insurance industry program that relates to the electrical safety is the “increased cost of compliance” or “law and ordinance” coverage offered to policy holders in existing homes and buildings more than 5-years old. In the event a claim is filed to repair or rebuild a covered property, the increased cost of compliance or law and ordinance coverage will pay for the electrical equipment and system upgrades necessary to meet the most recently published National Electrical Code and other electrical and alarm standards. The National Flood Insurance Program (NFIP) also includes an increased cost of compliance coverage for all new and renewed standard flood insurance policies. Flood insurance policyholders in high-risk areas, also known as special flood hazard areas, can get up to $30,000 to help pay the costs to bring their home or business into compliance with their community's building codes and floodplain ordinance. According to the CoreLogic 2014 storm surge analysis, 6.5 million homes along 19 states of the Atlantic and Gulf Coast regions are at risk of storm surge damage. The potential reconstruction costs could exceed $1.5 trillion with more than $986 billion of that total concentrated in within 15 major metro areas.
The importance of the insurance industry on electrical safety cannot be overstated. Increased property and flood insurance premiums along with the potential decrease in FEMA disaster recovery funding can serve as a huge deterrent for a state or local jurisdiction to delay the adoption of the current construction codes or to implement code amendments that reduce the electrical and fire safety of buildings and structures. And with the availability of insurance coverage for the increased cost of compliance with newer construction codes, home and business owners have an opportunity to bring their property to the most current electrical safety standards when repairs or rebuilding occurs. It is quite clear the insurance industry is an essential partner to the electroindustry in its endeavor to promote electrical safety.