Why insurance needs to support fire and rescue (hint: It’s good business!)

J.D. Power recently published a report on the state of the Property and Casualty Insurance industry. The report highlights that while the insurance industry has evolved over the years, the pace of change in P&C insurance is rapidly increasing.  Insurance is now less about serving the needs of traditional business, and increasingly about navigating and responding to social, political and economic changes.  

But, the insurance industry is a goliath of an institution. “Responsive” and nimble “navigation” are not words that come to mind when describing insurance.  And acting on socio-political-economic changes is not just about being “responsive”.  It is also inherently about being responsible.  

In Reimagining Capitalism In A World on Fire, Harvard economist Rebecca Henderson argues that 

“Business has a compelling economic reason for solving the big problems. It will be much easier to make money in a world in which the climate is relatively stable, in which the coasts are not underwater… [in] a world with significantly less poverty and inequality. 

As a result, the responsibilities of firms have changed dramatically… not to abandon shareholder value but rather to embrace the idea that firms also have a duty to support the health of the natural, social, and institutional systems on which capitalism relies.” (Henderson, 2022, https://mbrjournal.com/2020/12/23/reimagining-capitalism/)

Increasingly, businesses must learn to be responsible to be competitive.  Not only is it good for shareholders, but as the world witnesses rapid change unfold before us on instant-media, it increasingly also addresses the expectations of consumers.

Let’s start with the obvious.  Fire and rescue services are first.  They are literally the very first responders, which means that they are also very often the first to observe social, political and economic trends.  No group better tends to the pulse of our society, and fields the impact of changing tides, than the fire and rescue service.

It makes good business sense.  The insurance industry has a vested interest in local fire departments, who protect against loss of life and property.  Without fire departments that are adequately trained, equipped and staffed, losses would be much greater, increasing the cost to insurance.

It makes insurance more nimble.  Think of the fire service as millions of feelers on the ground.  They are the eyes and ears at an insurance event.  They are the hands that reach out and touch insurance customers.  To really get a pulse on your customers, the issues impacting them on the ground, and the moments that initiate the use of P&C insurance, talk to the fire and rescue service. Insurance companies should be directly supporting fire departments, volunteers and the communities that they support.  In turn, they should explore the resources that are already present from the moment the loss occurs, not just from the moment that they receive a claims report.

It is responsible.  As consumers we purchase insurance to protect us against the costs and liability of an unexpected event.  Those costs almost always necessarily include emergency response and hazard mitigation, the need for which is often created by an insured person, on insured property.  Emergency costs include the response to and hazard mitigation for that which we may be liable, which is exactly the purpose of insurance.  Community taxes should not pay for the costs of insurable individual events.  Community taxes should pay for fire department response to community services and events, like fire department equipment, training, and response to public emergencies.  And for the upcoming generations who are increasingly evaluating companies for their social and political ownership, responsibility matters.

Once established to protect against loss of life and property, the fire service is increasingly called upon as our nation’s safety net, shouldering the burden of unresolved structural problems like unequal access to healthcare, pandemics, drug epidemics and inadequate health insurance system.  The fire and rescue service are the neighbors who help us in times of need.  They see inside everyday lives when people cannot afford their medication or adequate insurance, when a community is being ravaged by drug use, or when a geography cannot sufficiently heat or cool their homes. 

Meanwhile, according to the National Fire Protection Association (NFPA), 82% of fire departments in the United States are entirely or mostly volunteer.  The National Volunteer Fire Council (NVFC) reports that the number of volunteer firefighters reached an all time low in 2020 while fire department calls have more than tripled.  Why the disparity?  One reason: the public expectation of the fire department’s greater response capabilities and the demand to provide a broader range of services.  Another reason: the inability to meet the training needs and the resources as a result.

So, how can insurance align themselves with the fire service and utilize this resource?  How can insurance be socially, politically and economically responsible?  How can insurance support and help sustain the local communities where their customers live and prosper?  One way is by reimbursing fire and rescue departments through cost recovery.  In 2022, New York joined almost every other state in the U.S. by codifying cost recovery for the fire and rescue service, stating: 

When volunteer fire departments have to turn to taxpayer funding for services that would otherwise be covered by insurance, it can affect their ability to procure necessary personnel, equipment, and supplies. (Lawmakers Announce the Inclusion of the EMS Cost Recovery Act in the NYS Budget, n.d.)

It isn’t enough to proverbially support the fire service through paybacks to state fire associations, though that certainly has its purpose and value.  Cost recovery restores resources directly to the communities that use them.  And it has immediate value.  It provides training and updated equipment to help volunteer departments meet their demand in near real-time and helps retain firefighters.  In turn, this is felt by individuals, and helps them protect themselves, their property and their communities.  And, afterall, isn’t this what insurance is all about?