Homeowners Insurance - Fire Prevention

The National Fire Protection Association, a nonprofit organization devoted to fire safety, states in its September 2007 report that U.S. fire departments responded to 1,642,500 fires in 2006. That is one fire every 19.2 seconds.

The damage from fire is heartbreaking. In 2006, fire claimed some 3,245 civilian lives and resulted in more than $11 billion in direct property loss. That puts fires ahead of hurricanes ($5.4 billion a year), floods ($5.2 billion a year), and earthquakes ($4.4 billion a year) for direct annual losses. The U.S. Fire Administration, a federal agency, reports that the indirect costs of fires—including medical expenses, lost business, temporary lodging, and psychological damage may be ten times larger than the direct costs. No wonder fire insurance is the central feature of homeowners insurance.

Fire insurance was the first form of homeowners insurance. It was the brainchild of Nicholas Barbon, an English physician, economist, and businessman who helped with the rebuilding efforts after the Great Fire of London in 1666, which had destroyed more than 13,000 homes. He began to offer fire insurance in 1667. In 1680 he founded London’s first fire brigade, designed to prevent another disaster and, of course, minimize the risk to his insurance operation.

The first American insurance company, founded in Charleston, South Carolina, in 1732, also offered fire insurance. Inventor, printer, entrepreneur, and signer of the Declaration of Independence Benjamin Franklin helped popularize fire insurance by introducing perpetual insurance in 1752 through the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. With perpetual insurance, the insured makes a one-time deposit with the insurance company. In return, the insurer promises to pay any claims for fire loss in perpetuity. If the policy is cancelled, the insurer returns the entire premium to the insured. For the model to work, the insurer must earn enough of a return on the deposits to pay for losses and operations.

Following the model of Barbon’s Fire Office, Franklin’s company sought to minimize losses through fire prevention. The company also followed strict underwriting guidelines, refusing to insure wood-frame homes and other buildings that posed fire risks. Franklin also invented several items to reduce the risk of fire, including the lightning rod and iron furnace stove.

Today the National Fire Protection Association, the U.S. Fire Administration, local fire departments, and schools are working to prevent fires. Although the number of fires increased 2.5 percent in 2006, the number of civilian fire deaths decreased a dramatic 11.7 percent, the lowest total since the NFPA started using its current survey methodology in 1977-78. The biggest improvements occurred in residential safety. The number of civilians who died in residential fires declined 14.2 percent overall, to 2,620. The number of people who died in one- and two-story homes declined 16.1 percent. Amazingly, residential fire deaths are down 57 percent from the all-time high of 6,015 reported in 1978.

The one of the biggest reasons for the change in fire-related deaths has been the decline in the prevalence of smoking. According to the Centers for Disease Control, the prevalence of smoking among adults has declined from 42 percent in 1965 to 20.8 percent in 2006. Technology has also had a huge impact on residential fires. Smoke detectors, upholstery and mattresses that are resistant to cigarette ignitions, child-resistant cigarette lighters, and reduced ignition cigarettes have all contributed to the decline in residential fire fatalities.

To reduce fires further, the National Fire Protection Association, a nonprofit provider of fire safety information, recommends five strategies:

1) More and better fire safety education, including common causes of fatal home fires

2) Increased use of smoke detectors

3) Wider use of residential sprinklers

4) Additional ways home products fire resistant

5) Address the fire safety needs of high-risk groups, including the young, older adults, and the poor

Despite the gains that have been made, fire remains a leading killer, especially of the old, the young, and the poor. Several of the steps that can prevent fires are low cost and easy to do, such as installing smoke detectors, and making sure existing ones have charged batteries. The cost/benefit ratio could not be higher.