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Show AAB The Salt Lake Tribune OPINION Sunday, November 21, 1999 Sellingthe Average American Joe on Strict Building Codes No Easy Job BY HOWARD KUNREUTHER FOR THE LOS ANGELESTIMES experts. If these arrangements were in place, there would be a clamor by The tragic earthquakes in Tur- key and Taiwan finally have property owners disaster-resistant for more structures, be purchased or refinanced is certified as energy efficient, it quaiifies for a larger mortgage loan. A second type ofloan is one thatis folded into mortgage payments for financing energy conservation improvements. brought to the public's attention simply because it would save building codes as a way ofreducing property damage and loss of In the case ofnatural disasters, whatis becomingclear is that fu- life in a natural disaster. This isa gage payments — $130 in the above example. There is precedent for using problem that affects the United States, and not only in earthquake age property owners to adopt the current systern is not work- and society. Under provisions of the 1992 Energy Policy Act, if the home to By more actively involving both the insurance industry and the importance of well-enforced country. In 1992, Hurricane Andrew caused more than $15 billion worth ofinsured damagein Flori- da. them money ontheir total mort- financial institutions tc encour- measuresthat benefit themselves promoters ofwell-enforced building codes, we have a better chance of encouraging property owners ing. institutions demand safer Wharton School, University of Pennsylvania and co-director of the Wharton Risk Management Howard Kunreutheris with the and Decision Processes Center. SAY AMEN! Coveringreligion is a religion for Reporters Peggy Fletcher Stack and Bob Mims ture damagecosts are likely to be higher than it is today, and that financial to structures and developers and contractors to build them. Every Saturday in The Trib as It has been estimated that at least 25 percent of those losses could have been averted had structures met existing building codes. A confluence of forces is re-sponsible for the lack of enforcementof building codes. Contractors and developers have economic incentives to build less expensive homes because theysell more easily. The problem is compounded because many individuals living in hazard-prone areas believe that disasters will not happen te them. For example, many’ residents affected by the flooding from Hurricane Floyd this year in midAtlantic states commented that they had feli no need to purchase flood insurance because they couldn’t imagine the water rising tothelevelsthatit did. In addition, when it comes to Mon-Wed only! ZTMonwedont strengthening their property to reduce future losses, people often don’t feel it is a good investment. They don't see the protective measures as increasing the value of their houses over the life of their properties. One way to help the enforcementof building codesis to offer med | divided drawers, side property owners economic incentives so they will demand that their structures be constructed to withstand future earthquakes or othernaturaldisasters. door & TaX included! A constructive step in this di- rection is to involve insuranceindustry and mortgage lenders as partnersto provide incentivesfor the adoption ofcost-effective lossreduction measures. ~ CONTEMPORARY ROOM GRO adjustable mirror and § bench. By coupling insurance with loans for safer structures, property owners wouldthen lobby for better protection and well. enforcedbuildin; les becauseit makes economicsense. For example, suppose you could improve the design of a house so that would sustain $30,000 less in claims from earthquake insurancethan without the new design. ppose that experts estimate severeearthquake will oc: a area oncein 100 years. 111521058 Plump arched pillow aes rolled arms andvelvet cover with oak trim. Includes sofa, loveseat, cocktai table and two end tables. (Tables similar to shown) Pome look with wood bun feet, a rel toss pillows. Includes Sofa and Loveseat. inclu ofa, |a cocktail table and two End tg and accentpillows. ates into a 1 in 100 ance aa ir. An insurer whoi s charging a premiumforearth: quake insurance based on risk should want to reduce the annual cost by $300 (1/100 x $30,000) to a property owner whoadoptedthis measure. Supposethecc for improving 5 $1,500. The the house design be reluctant property ownei to incurthe costs. However, if the $1,500 were translated into a 20-year loan at tached to the mortgage at an annual interest rate of 10 percent, then the annual payment would be Natural set includes table and 4 chairs! only $170. This cost is $130 less thanthe$300 savings in the insurance premium. How could banks andinsurers work more closely to encourage property owners to de id im, proved building design? Current Available in natural, w' le natural, or green natural. 7 piece $499.99 Thefinest in leather furniture. Includes Leather sofa, chair and loveseat. itr 10 658810049 illustration 40” round coutnry style! table with naturalfinish, all wood construction _ with 2 side chairs. (Extra chairs available) ly, banks require homeownersin: verage as a condition In earthquake-prone areas, there should be sound reasons to add this coverage as a condition for loan The insurance industry also CURIO includes table and chairs! should want to workclosely with contractors and hireinspectors to ensure that the appropriate mea: sures were installed before they lowered premiums. State insurance regulators Cherry finish on select hardwoods, § lass shelves, 2 joors, lighted interior and mirrored back. 320710090 would haveto set premiumsthat reflect the future risk of damage based on the best judgment of Submitting Material For Opinion Pages People interested in submit ting commentary pieces for The Salt Lake Tribune opinion pages may send themone of three ways: Similar wo illustration wik8087 12 @ Type them and sendthemto Randy Frisch, Editor of the Edi torial Page, The Salt Lake Tri bune, 143 South Main, Salt Lake City, UT 84107 @E-mail the articles to rfrisch@sitrib.com. @ Transmit themviafacsimile machine to 801 237-2 Authors should include biographical information with their submission and a_ telephone number where they can be COUNT ON VALUE,.;COUNT ON TRUST USE YOUR GRANITE CREDIT CARD. Most Major Credit Cards Accepted. reachedby editors. 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