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How Not to Manage Your Reputation

The other day I wrote about how BP CEO Tony Hayward caught some heat for suggesting that food poisoning, not a reaction to chemical dispersants, was the culprit behind the illnesses that have befallen workers involved in the oil spill clean up.

Well it turns out that unfortunate comments have become a bit of a habit for Mr.

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Hayward and Newsweek took the time to compile some of the “best” ones.

On April 29, The New York Times reported that Hayward, apparently exasperated, turned to fellow executives in his London office and asked, “What the hell did we do to deserve this?” (A possible answer might be the company’s 760 safety violations over the last three years. ExxonMobil, in contrast, has had just one.)

On May 14, Hayward attempted to persuade The Guardian that “the Gulf of Mexico is a very big ocean. The amount of volume of oil and dispersant we are putting into it is tiny in relation to the total water volume.”

Only a few days later, he told Sky News that “the environmental impact of this disaster is likely to be very, very modest.” That might surprise the many scientists who see the spill as a true environmental calamity, the full extent of which remains unclear.

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Obviously it’s bad enough for BP that they haven’t been able to stop the leaking oil.

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Their stock price is taking a beating and they have become an object of ridicule and disdain (as exemplified by this series of satirical billboards). But a CEO that can’t stop putting his foot in his mouth is certainly not helping. As they saying goes,”If you don’t have anything nice to say, don’t say anything at all.”

New Option for Gulf State Homeowners Insurance

Usually when we discuss news of homeowners’ insurance in Florida and other hurricane-prone areas, it is to report how yet another insurer has pulled up stakes and decided to stop writing policies in the region. But yesterday’s announcement from Travelers that they will begin a pilot program to write policies in Certain Atlantic and Gulf states bucks that trend. The news came as part of an initiative to raise awareness of catastrophe preparedness that was started by The Travelers Institute, a kind of think tank group created by Travelers to further the discussion of public policy topics of particular importance to the insurance community. 

The pilot program brings Travelers into the homeowners’ insurance market in these high-risk areas, but with an important condition — the company will be writing policies for those homes that meet specific natural disaster resistant building standards. As an added incentive, qualifying homes will be eligible for a 35% hurricane premium credit.

Eric Nelson, Travelers’ vice president of personal insurance, explained that the company wants to educate consumers about the value of these standards, which include recommendations for reinforced concrete framing, wind-resistant roofs and impact-resistant glass, so that they ask for these features when building or retrofitting a home.

“Homes built to meet these stringent standards are better able to withstand severe weather, reducing property losses and saving lives, and we want to promote and raise awareness of these smarter building practices,” said Nelson. “Building stronger homes is a key principle of the Travelers Coastal Hurricane Wind Zone Plan, our proposal to improve the availability and affordability of catastrophic wind coverage in communities along the Gulf and Atlantic coasts. We hope this initiative and meaningful premium credit will encourage homeowners, builders and building officials to adopt these disaster resistant standards.”

For homeowners in high-risk areas, Travelers’ program seem like a reasonable alternative to state-run pools and exorbitantly high premiums. Of course, it will take some effort (and money) to meet these fortification standards but in the end it is about managing the risk proactively, which can’t be all bad. And with so many insurers choosing to leave these states, perhaps programs like this will give insurers the incentive to come back and hopefully bring lower insurance premiums with them.

New Research Reveals Some Gulf Coast Property Elevation Levels to Be Dangerously Low

As Claire Wilkinson of the III brought to my attention the other day, a new study from the Institute for Business & Home Safety has revealed some disturbing realities about how vulnerable the Gulf Coast remains to flood risk. The study details the destruction that Hurricane Ike cause last year.

According to the report:

it is possible to build homes that can withstand extreme hurricane conditions, but also points out that steps must be taken to improve building standards and products in order to better protect coastal properties. The key findings and recommendations stemming from the research conducted by the IBHS engineering team are supported in the following pages through examples of construction failures and successes and comparisons between building code-plus and traditional construction techniques. The research also led to recommendations for strengthening the built environment through public policy and building code changes.

Three specific proclamations are also laid out: (1) Current elevation requirements in surge-prone areas are not high enough, (2) new research is needed to assess actual performance of roofing products and systems in order to improve material production and installation specifications, ad (3) Water intrusion must be better managed – through a combination of structural improvements and more realistic testing.

Claire succinctly offers some more insight into the report’s results:

As well as providing flood insurance, the NFIP establishes base flood elevation (BFE) levels for properties. All but a handful of properties located closest to the coast on the Bolivar Peninsula, Texas and even built to the highest elevation requirements, were washed away during Hurricane Ike. By contrast, the study found that 10 homes on the Bolivar Peninsula designed and built under the IBHS Fortified…for safer living program, survived the storm with minor damage. The Fortified homes had outdoor decks at 18 feet that were destroyed, but the homes themselves which were elevated to 26 feet, survived. According to IBHS, most homes in coastal areas are built to or slightly above 100-year BFEs.

Hopefully, these structures will not be tested with hurricane-force winds and storm surges this hurricane season. Still, such findings make it all the more necessary for those on the Gulf Coast — including businesses, legislators, regulators, engineers and scientists — to remain vigilant and continually strive for better protection.

Hurricane Ike Study