Calamity need not be a catastrophe

MANY PEOPLE install alarm systems only after thieves ransack their house, or spend $20 on jumper cables after paying that second or third $500 tow charge.

Likewise, there’s considerable evidence that people buy insurance after personally experiencing a disaster and then cancel their policies a few years later if they haven’t collected on them.

But the best return on an insurance policy is when no damage occurs. Society has a stake in convincing people of this, and then crafting strategies that encourage or require those at risk to purchase insurance. The nation could then avoid enormous amounts of disaster relief, such as the deficit-bloating payments in Hurricane Katrina’s wake.

Problems of interdependency make it difficult for insurers to reward people who protect their property by adding structural safeguards. An insurance company will not reward the safe homeowner with significant premium discounts if it knows that his well-maintained house could be flattened by the flying roof of a poorly built house next door.

The public and private sectors each need to shoulder more responsibility in promoting cost-effective measures to reduce future disaster losses. For starters, laws should compel public-sector agencies to evaluate major protective measures, such as flood control projects, over decades rather than years, and then commit money to those where the expected long-term benefits exceed the investment and maintenance costs.

Another obvious public-sector remedy: Enforce building codes.

Following the hurricanes in Florida last year, there was a call for ensuring that mobile homes are anchored solidly to the ground. Many of these homes did not meet this standard, despite state requirements put in place five years earlier that prescribed stronger tie-downs.

Well-enforced building codes will reduce direct property damage from the disaster as well as indirect losses that might be caused by nearby structures. Insurers would then be more likely to provide premium reductions to all properties in the area.

Of course, one reason property owners sometimes resist even simple protective actions is that they don’t have -- or don’t want to spend -- the cash.

One solution is to encourage banks to make home improvement loans with a payback period identical to the one for the borrower’s mortgage. The extra monthly charges would probably then be small. In fact, the premium reduction provided by the insurer, if rates are based on risk, could be greater than this monthly cost. This type of arrangement could reduce the devastation of the next hurricane, earthquake or wildfire and minimize the amount of money all taxpayers will have to pay to aid recovery. But this will occur only if people demand better policies from their insurers, lenders and government leaders before the latest images of poor planning’s tragic consequences again slip from memory.