What is BCEGS?

What?
Why?
When?
And what do I do?

1. What is the Building Code Effectiveness Grading Schedule?

   The Building Code Effectiveness Grading Schedule (BCEGS) assesses the building codes in effect in a particular community as well as how the community enforces its building codes.BCEGS particularly emphasizes building-code requirements designed to mitigate losses from natural hazards. BCEGS develops a relative Building Code Effectiveness Classification for each community for insurance rating and underwriting purposes. BCEGS is similar in concept to Idaho's Public Protection Classification (PPC) evaluations of municipal fire-suppression capabilities used by insurers for decades.The concept is simple: municipalities with effective, well-enforced codes should demonstrate better loss experience, and insurance rates can reflect that. The prospect of lessening catastrophe-related damage and ultimately lowering insurance costs provides an incentive for communities to enforce their building codes rigorously - especially as they relate to windstorms and seismic damage.

2. Why is BCEGS needed?

   BCEGS encourages the implementation and enforcement of effective building codes, resulting in safer buildings, less damage, and communities that suffer less damage when natural disasters occur.Insured catastrophe losses of more than $17 billion made 1994 the second-worst catastrophe year on record, with more than $12.5 billion of insured losses due to the Northridge earthquake. In 1992, catastrophe losses reached more than $23 billion, largely because of Hurricane Andrew, which resulted in more than $15.5 billion of insured losses.Serious natural disasters have recently occurred with greater frequency, and high-risk areas are becoming more populous.Windstorms: More than half the U.S. population, some 135 million people, is now living near one of our nation's coasts - the most windstorm-prone areas. Windstorms - hurricanes, tornadoes, and tropical storms - account for a majority of the insurance industry's catastrophe losses since 1986.Earthquakes: Ninety percent of the U.S. population lives in seismically active areas, and some 5,000 quakes occur in the United States each year. Four hundred of those earthquakes can cause interior damage and 20 can cause structural damage. More than six million people live in the San Francisco Bay area, home to at least ten active faults.Studies of various catastrophes, including Hurricane Andrew and the Northridge earthquake, graphically demonstrate that effective building-code enforcement reduces loss in catastrophic events.According to Best's Review, experts estimate that Hurricane Andrew's losses would have been 30% to 40% lower if Florida communities had strictly enforced their existing building codes. A study by Factory Mutual Insurance Group shows that effective enforcement of building codes in those communities would have reduced the damage to buildings by up to 55%.We can't control where people live. But we can encourage more effective enforcement of municipal building codes. BCEGS will provide that encouragement.

3. Who developed BCEGS? Where did it come from?

   The Insurance Services Office, Inc. (ISO) worked closely with the Insurance Institute for Property Loss Reduction (IIPLR) to develop BCEGS. In developing the program, ISO also tapped the expertise of the three organizations that produce model building codes - the International Conference of Building Officials, the Southern Building Code Congress International, and the Building Officials and Code Administrators International. ISO also gleaned information from more than 1,500 building-code officials. To further refine the grading criteria, ISO pilot-tested the program in 154 communities in Florida, Georgia, North Carolina, and South Carolina.This Idaho Surveying & Rating Bureau, Inc. licensed the use of BCEGS for use in Idaho.

4. What are the benefits of BCEGS?

   BCEGS helps communities by:
   • improving building codes (by encouraging the adoption of the most current codes), building departments, and code enforcement
   • promoting construction of better, more catastrophe-resistant buildings
   • reducing property losses from catastrophes
   • reducing the economic and social disruption that results from catastrophes' serious and widespread destruction

5. Where, when, and how is BCEGS implement?

   The Idaho's implementation of BCEGS began in 1997.The first step in the implementation process Idaho was your filing and the Department of Insurance's acknowledgment of the Building Code Effectiveness Grading Schedule. Our Field Rating Representatives begin evaluating individual municipalities. In August 1998 we filed BCEGS advisory loss cost credits to be applied to loss costs for personal and commercial property coverages.

6. Does BCEGS apply only to the natural hazards of wind and earthquake?

   
   The program applies to all natural hazards. Model building codes have most clearly addressed the hazards of wind and earthquake, and experts maintain that buildings constructed according to requirements of the model building codes suffer fewer losses from wind and earthquakes. If municipalities properly enforce adequate codes, losses from other perils should also decrease.

What determines a municipality's code-effectiveness classification?

1. What is a community's classification based on?

   A community's classification is based on:

   Administration of codes, including
• building-code edition in use
• modification of the codes
• zoning provisions to mitigate natural hazards
• training of code enforcers
• certification of code enforcers
• incentives for outside education/certification
• building officials' qualifications
• contractor/builder licensing and bonding
• public-awareness programs
• participation in code-development activities and the appeal process
Review of building plans, including:
• staffing levels
• qualifications
• level of detail of plan review
• performance evaluations
• review of plans for one- and two-family dwellings, multifamily dwellings, and commercial buildings
Field inspections, including:
• staffing levels
• qualifications
• level of detail of inspections
• performance evaluations
• final inspections
• issuance of certificates of occupancy
In addition, we collect underwriting information, including natural hazards common to the area, number of inspection permits issued, number of inspections completed, the building department's funding mechanism and date of establishment, size of the jurisdiction and population, and the fair-market value of all buildings.

2. What is the evaluation process?

   At the beginning of each year, we send letters to communities in Idaho requesting their participation. A detailed questionnaire is provided via our website to all building officials who are interested in having an evaluation completed. Upon completion of the questionnaire, our field representative arranges to meet at a mutually convenient time at the community site with each municipality's building officials. Our Field Rating Representatives and building officials together review and verify the community's capabilities, seeks clarification, and obtains supporting documentation, as necessary. We then tabulates the points "scored" on the various sections of the schedule and assigns a grade from 1 (exemplary commitment to building-code enforcement) to 10.

3. What classifications does the BCEGS program apply to a community?

   The BCEGS evaluates communities on a scale of 1 to 10, with 1 representing exemplary enforcement of a model building code or local building code demonstrating equivalency to a model building code.

4. Why do communities have an incentive to improve their rating?

   Any community with a classification other than 1 has many incentives to improve its classification, including:
   • the prospect of reduced injuries and loss of life, reduced property losses, and reduced economic and social disruption caused by catastrophes
   • the prospect of lower insurance rates on buildings constructed after the community improves its classification
   • pride and professionalism of the community building department to be the best it can be
   • good public policy

5. Does a city really have incentives to raise fees or taxes to improve code enforcement - other than just so the insurance industry can cut losses?

   The primary incentive for communities to commit resources to ensure proper code enforcement should be to reduce loss of life, the risk of property loss, and economic and social disruption that result from natural catastrophes.BCEGS is a useful, objective evaluation tool for assessing the resources and support available for building-code enforcement relating to natural-hazard mitigation. The BCEGS program was developed with significant input from the three model code groups and with responses to surveys sent to more than 7,500 building officials countrywide.With BCEGS, a communities is measured against objective standards, highlighting where resources can be applied to improve performance and a community's grade in the future.

6. Once an evaluation for a community's has been established, how often can the classification change?

   The plan is to reevaluate each community every ten years. If the community notifies us of a change that could affect the classification before the ten-year reevaluation, the community will be reevaluated sooner. These reevaluations have priority over other evaluations.

7. Can a community get only one classification, or can different classifications apply to different types of properties?

   Some municipalities, for example, don't adopt or enforce codes for buildings with two or fewer families, but do enforce codes for buildings with three or more families or for commercial occupancies. In such cases, separate classifications apply. We can list one- and two-family dwellings as outside the scope of this program, while all other properties receive the community's classification. The insurance manual's rules advise which classification to use for a particular risk.

8. What happens when a community is evaluated?

   When a community is evaluated, the classification automatically applies to any building receiving a certificate of occupancy in the year the classification goes into effect or later years. Once a classification is assigned to a building, based on the community classification in effect at the time the building is constructed, that classification will remain with that building - even if a community is subsequently reevaluated.

9. What happens when a community is reevaluated?

   The new classification will apply to buildings receiving a certificate of occupancy in the year the new classification becomes effective and later years. It is conceivable that as a building department improves over time, a community could have more than one classification. The applicable classification for any building would depend on its certificate-of-occupancy date.

10. To consider a specific example: what happens to buildings constructed in 1997 when a town had a classification of 5, but in 2002 the classification changes to 3?

    The classification assigned to a building will be the classification in effect in the year the building receives a certificate of occupancy. The classification that applies to a building will not change as a result of a municipality's subsequent changes in code effectiveness that result in a different classification for the municipality. The new municipal classification will apply only to buildings constructed when the new municipal classification is effective.Thus, in this example, the buildings constructed from 1997 through 2001 would receive a classification of 5, and buildings constructed in 2002 or later would receive a classification of 3.

11. How can a building department be best prepared for its evaluation? What resource materials should be available?

    Department officials should have available documentation that supports questionnaire answers. For example, officials may be asked to provide copies of employee code certifications, training records, the building-code agency's budget, number of inspections and plan reviews performed (by type - one- and two-family dwellings, multifamily residential, and commercial and industrial structures). In addition, records on the amount of time spent on public-awareness programs will help complete the evaluation.

12. Are classifications established on the basis of codes and level of enforcement in place at the time of the survey? Or has the BCEGS established classifications on an absolute scale, so that meeting certain criteria always results in the same classification?

    The classification system looks at one year's worth of documentation and effectively takes a snapshot at a particular time. The classification considers the model code in effect at that time as well as the municipality's resources and enforcement level. These are dynamic elements. Thus, a community classified in 1995 could possibly be evaluated against a different code from a community classified in 2005. For example, in 2005, a community that retains its 1995 code rather than adopting a more stringent code prevailing in 2005 would receive a less favorable classification.

13. Was the BCEGS prepared specifically for very large jurisdictions, unfairly penalizing some small cities?

    The schedule was written to assess the risk of property loss regardless of a jurisdiction's size. A structure does not stand any different chance of survival in a small community than in a large community when both share an equal commitment to code adoption and enforcement

14. How does BCEGS compare with the Public Protection Classification system for classifying communities' fire-suppression capabilities?

    The BCEGS is modeled after the insurance industry's fire-protection classification system, which assesses municipal fire departments and water supplies. The similarities include the classification scale of 1 to 10 and a reliance on recognized standards as reference points for the evaluation. The fire-protection classification system, which began in 1916, was an insurance-industry response to fire losses and has been a fundamental factor in developing insurance premiums ever since.The main difference is that changes to a community's fire department and water supply affect the potential risk to all structures in the community, while changes to a community's building department affect the potential risk only to structures built after the change.

15. How long after grading occurs will the building department become aware of its classification?

    Usually within 30 days.

16. How flexible is the process in recognizing effective local programs that may be unique and innovative? Is there a special provision in the schedule? Are innovative initiatives considered for extra credit? Or are they not considered at all?

    The BCEGS program is designed to be a performance-related program. That is, it represents the degree of the risk for property loss within a jurisdiction as a function of the community's commitment to building-code enforcement, with a major emphasis on mitigation of natural-hazard damage. Although BCEGS relies on recognized standards as the foundation for code adoption, BCEGS can recognize alternative methods of enforcing those codes. ISRB can recognizes alternative methods, if they are effective and equivalent to industry standards.

17. Is there a cost associated with the evaluation process?

    Insurers bear all of the program's costs, because insurers use BCEGS information. Municipalities and taxpayers don't incur any costs,other than the time needed to complete the questionnaire and the time spend with our Field Rating Representative.

How do building-code effectiveness classifications affect insurance pricing?

1. How does BCEGS affect insurance rates?

   The Idaho Surveying & Rating Bureau, Inc. and ISO, Inc. have filed advisory rating programs, including loss cost credits for commercial fire and allied lines, businessowners, homeowners, and dwelling lines of insurance. The credits apply to various ranges of BCEGS classifications (1-3, 4-7, 8-9, 10). Any building constructed in the year ISRB classifies a community, or in a later year, will be eligible for the program. Buildings in communities with classifications of 9 and lower (down to 1) will receive a rating credit. A classification of 10 will receive no credit. Classifications of 1-3 will receive the highest credit. Classifications of 4-9 will receive intermediate credits

2. Do separate factors apply to personal and commercial risks?

   Yes. Loss Cost-credit factors apply separately for each line of insurance.

3. Can there separate factors by territory?

   Yes. For each line, each territory will have its own rating-credit factor, based on loss information and other data specific to that territory.

4. Do insurers increase rates on buildings in communities classified 8, 9, or 10?

   No rate increases are implemented with BCEGS.

5. Why do grading-schedule credits apply only to new buildings? Why not to existing buildings?

   The BCEGS program is intended to promote a long-term reduction in catastrophe damage in classified communities. In most cases, staff turnover, model-code revisions and updates, or a lack of record keeping makes it impossible to measure a building department's effectiveness retroactively. So, with some exceptions, BCEGS will apply only to buildings receiving a certificate of occupancy in the year a community is evaluated or later.

6. Is the existing building stock treated as classification 10?

   Existing buildings are not subject to the program, and BCEGS does not affect loss costs for those buildings. The program - and potential credits based on a municipality's classification - applies only to buildings receiving a certificate of occupancy in the year ISRB classifies a community, or later. But individual properties can receive the best classification (class 1) and be eligible for associated credits if a registered design professional (architect or engineer) certifies that the structure complies with the natural-hazard provisions of a nationally recognized code.

7. How does BCEGS affect rates on existing building stock? Do rates go up for the existing building stock to balance the credits for new buildings?

   No. BCEGS does not affect existing building stock

8. What happens when community is reevaluated?

   When a community is reevaluated, the new classification applies to buildings built in the year the new classification becomes effective, or later. The previous classification continues to apply to buildings built in the period between the effective date of the first classification and the effective date of the new classification.

9. Could a building constructed according to a nationally recognized code get a better BCEGS classification than the community in which it is located?

   Yes, through an individual-building certification process. If a registered design professional inspects the building and certifies that it complies with the natural-hazard provisions of a nationally recognized code, the building will receive the highest possible classification and rating credit.

10. Can an entire community be eligible for Building Code Classification 1 through a certification by a qualified inspector, or are only individual buildings that meet the appropriate criteria eligible?

    A community's classification only applies to buildings completed during or after the year ISRB evaluated the community. In a community evaluated as class 1, only buildings constructed before the community's evaluation would need individual certification to be considered building class 1.

11. How does individual-risk certification work?

    If a registered design professional inspects a building and certifies that it complies with the natural-hazard provisions of a nationally recognized code, the building will receive the highest possible classification and rating credit.

12. If a building is certified to be in compliance with a nationally recognized code, when does the credit apply?

    Credits will only apply from the year of certification.

13. What about this situation: an insured's building does not qualify for a credit because it was built before a community received its classification, while the building next door, built by the same builder but only a year or two later, does qualify? How can you explain that?

    There is no retroactive way to determine the effectiveness of building-code enforcement that prevailed during construction of the older building. But the older building's owner can receive a credit, if a design professional certifies that the building meets the natural-hazard provisions of a nationally recognized model building code.

14. How often, if ever, will the classifications change?

    ISRB will reevaluate each community at least every ten years, and classifications may or may not change, depending on the findings. Classifications for existing buildings will not change as a result of a community's reclassification.

15. Who determines whether an individual property qualifies for the individual-risk certification?

    Each insurer will make its own determination as to the conditions under which a property will qualify for individual-risk treatment.

16. Does the year of construction ever change for a risk?

    If a risk undergoes a major renovation - and if the property owner must bring the building into compliance with current codes and receive a new certificate of occupancy or legal equivalent - the year of construction for that risk will change.