Insurance Makes Us Safer
A detail from a typical Sanborn map. They were used by private insurers to assess the fire risk from nearby structures.
Insurance is more than just a safety net for dealing with unforeseen disasters after they occur; it also plays a vital forward-facing role in making our lives safer and more secure. SmartGO CEO, Peter Katz, looks at the historic role of insurance in making cities safer, helping to win the battle against urban fires. He goes on to show how insurance in the US, a multi-trillion dollar industry, advances public safety and well-being in a number of ways.
Insurance, in its essence, is a collective effort to pool resources and protect individuals, businesses, and communities from financial loss caused by unforeseen events. Its main purpose is to distribute risk across a wide group of policyholders, allowing the burden of a loss to be more manageable for those affected. While it is often associated with financial compensation after a disaster, insurance sometimes goes beyond that to promote safety and preventive measures that can reduce the likelihood of such incidents occurring in the first place.
Various innovative measures have been employed over time to mitigate risks and ensure the well-being of communities. One such example is the use of Sanborn maps in reducing fires in cities. In this blog post, we will explore the importance of insurance as a protective shield, focusing on how Sanborn maps revolutionized fire prevention and safety in urban areas.
The key on a Sanborn map identifies a wide range of building materials and construction techniques, each with a different fire-safety risk profile.
In the late 19th and early 20th centuries, urban fires were a significant threat to cities across the United States. As cities grew rapidly with industrialization, fire hazards escalated due to the proliferation of wooden structures and the limited availability of organized fire departments. Insurance companies, facing mounting claims and losses from urban fires, recognized the need to take proactive measures to safeguard their investments.
In response to this pressing need, the Sanborn Map Company was established in the 1860s by D.A. Sanborn. The company's primary product was detailed maps of cities, highlighting buildings' footprints, construction materials and even the presence of fire hydrants. The maps provided insurance underwriters with valuable insights into the risks associated with insuring specific properties.
The introduction of Sanborn maps revolutionized urban fire prevention and safety in several ways:
Risk Assessment: Insurance companies could now analyze the potential fire risks associated with a property before insuring it. By identifying high-risk areas, or buildings that are more vulnerable in the event of a fire, they could charge higher premiums or require property owners to make fire-safety improvements.
Efficient Firefighting: With detailed maps pinpointing the locations of fire hydrants and water sources, firefighting teams could respond more rapidly and effectively to fires, minimizing the extent of damage.
Urban Planning: City officials and developers began using Sanborn maps to plan safer neighborhoods and adopt fire-resistant building practices. The maps also helped in establishing building codes and fire safety regulations.
The story of Sanborn maps shows how insurance can be a catalyst for positive change and innovation in managing the danger posed by urban fires. It’s also promoted safety across other domains:
Automotive Safety: Auto insurance companies have been instrumental in advancing safer road practices through incentivizing drivers with lower premiums for maintaining good driving records. Also, drivers who have lost their licenses due to safety issues (accidents, moving violations or DUIs), are required by state departments of motor vehicles to obtain an SR-22 certificate from their insurance company. The document proves that the driver has taken the required remedial steps to qualify for state-mandated minimum insurance coverage. This “partnership” between state government and commercial insurers transfers the messy and time-consuming job of dealing with problem drivers to entities with a profit incentive for taking on the challenge. The joint program, which exists in more than 40 of the 50 US states, serves the greater good because it provides one more layer of accountability. If a driver’s policy lapses, the insurer must notify the DMV, leading to a further license suspension. This system compels problem drivers to meet their insurance obligations, reducing risks on the road and promoting safer driving behavior.
Home Security: Homeowners' insurance encourages the installation of security systems and smoke detectors, making homes less susceptible to theft and fires.
Health and Well-being: Health insurance providers often offer wellness programs, encouraging individuals to adopt healthier lifestyles and reduce the risk of chronic diseases.
Insurance is not solely about financial indemnification and recovery from catastrophic events; the examples above show that it can help to make our world safer and more secure. Fewer claims, of course, is a win/win for customers and insurers. The example of Sanborn maps underscores how innovative solutions can arise when insurers collaborate to protect their investments and communities at large.
By viewing insurance as a proactive tool for advancing the public good — as we’re doing with our outreach related to pay-per-mile and non-owner auto insurance — SmartGO is affirming its commitment to building a safer society where risks are mitigated, harms to the environment are reduced and individuals are empowered to lead more secure lives.