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Oct 19, 2010

Insulation Fire Risk – The data is in

Back in February of this year when a debate popped up in the media over the insulation program – if one loosely defines “debate” as screeching “OMG!! YOUR HOUSES ARE ALL GOING T

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Back in February of this year when a debate popped up in the media over the insulation program – if one loosely defines “debate” as screeching “OMG!! YOUR HOUSES ARE ALL GOING TO BURN DOWN”  – we thought that it might be worthwhile for someone to take their underpants off their head and have a squiz at what the data actually said.

What we found was that under every possible scenario, the government insulation program – far from increasing the rates of fire occurring from installing insulation – actually reduced the rate of fires and likely reduced the rate in a quite substantial manner.

Ultimately, the data strongly suggested that the insulation program actually made the industry safer in terms of fire risk. Some folks found that surprising since it went against the hysterics – but it’s only really surprising if you weren’t paying attention. The industry before the program was completely unregulated everywhere except in South Australia. As the program rolled out, increasing amounts of regulation aimed specifically at making the industry safer was implemented – purely in an attempt to manage some of the broad risk involved. So the initial result wasn’t particularly surprising at all when you look at the broad picture.

The original analysis was with preliminary information that was incomplete – but we attempted to control for a few issues to make a set of broad estimates that we thought would be relatively robust and accurate. Over the last week or so, the complete data has been released in various places and after crunching the numbers again with the complete data, we find that reality falls pretty much in the middle of our earlier estimates.

One of the problems we had in February was in trying to estimate the timeliness in the relationship between getting insulation installed and when a fire broke out as a result of that negligent  insulation going into your roof. If you had a dodgy installation, is it more likely that any fire would occur sooner rather than later, and if so, by how much?

That was the big question.

It’s also something we can start to answer.

What we need is the number of installations for each month of the program, as well as the number of fire incidents each month linked to the insulation program.

We can get a proxy for the monthly installation numbers from the  report of the Senate Environment, Communications and the Arts References Committee that looked into the Energy Efficient Homes package here on page 19 of the report (on page 13 of the pdf file).

It’s only a proxy because it doesn’t measure when the insulation was actually  installed, but when the money was claimed for the installation by the installer from the government.  There might be a few days or a week or so lag in these numbers – but that difference is ultimately meaningless anyway, as we shall see.

The other piece of data we need is the number of fire incidents reported by month. We can get that from the government’s Home Insulation Safety Plan website.

When we compare the two series, this is what we get – fire incidents on the left hand axis, installation claims on the right hand axis and the month on the bottom axis:

installation1

As we can see, it took a few months of growth in the installation numbers before we started to see a dramatic increase in the number of fire incidents. Similarly, when the program was stopped in February, it took about 6 months for the fire incidents to wash out of the system and return to normal.

What’s normal I hear you ask?

In previous years, around 85 fires per year occurred that were linked to insulation coming from about 65,000 installs of insulation every year. We know this because it was reported by the Department, the Hawke Report and the Australian National Audit Office report.

Over the total period from when the insulation program started until when the fire incident numbers (not the rate but the total numbers) reduced back to normal, there were 1.21 million installations completed and 197 fire incidents reported. Yesterday in Senate estimates, Martin Bowles,  Deputy Secretary of the Climate Change and Energy Efficiency under questioning from Liberal Party Senator Mary Jo Fisher, explained the numbers:

What we now know in relation to the program we have had 197 fires; 163 of those have been reported through fire brigades and the balance have been found through our inspection programs. We also know that of the 197 only 27 have caused structural damage. If we look at that in percentage terms of what was done within the program of 1.2 million homes, 197 fires roughly equates to less than 0.2 per cent—which is significantly less than what we understand to be the long-term average of those sorts of significant fire issues within insulation. If we look at structural damage, the 197 fire incidents are just that. Twenty-seven relate to structural damage of either the house or, in some cases, just the roof. It is quite insignificant in terms of the overall program but obviously significant for those involved.

So we know there was a direct relationship and a slight lag involved between installs and fires. We know that the lag effect has now washed out of the system (returning to normal fire incidence numbers) and we know that in previous years the numbers have been consistent from one year to the next, washing out the relevance of that lag in any arbitrary 12 month period. So we can compare the fire rates that occurred before the program in any given year to the full effects of what occurred under the program (over a longer 18 month time frame to bring in all possible lagged fire incidents into the program numbers)

installation2

Before the program, the industry experienced around 1 fire per every 765 odd installations – or 1.3 fires per every 1000 installs.

Under the insulation program, even though the number of total fires increased by 2.3 times, the number of installations increased by 18.7 times compared to what happened before the program. As a result, under the program the industry experienced 1 fire per every 6158 odd installs – or 0.16 fires per 1000 installs.

That makes the insulation program around 8 times safer in terms of fire incidents compared to the state of the industry before the program. Even if we take the best absolute possible estimates of what went on before the program – say, 80 fires per year off 75 thousand installs – the program is still 7 times safer in terms of fire incidents than what occurred before the program.

As we can see from the first chart – nearly all of the fires that could be caused by a negligent installation occur within the first 6 months of that installation. So we can’t see any significant evidence that fire incidents related to the insulation program are carrying over into periods beyond about 6 months after the actual installation itself.

This is something the Dept is also now across – as Dep Secretary said yesterday in estimates:

If we have a look at the fire data—we have seen that progress over the last couple of months—it tracks very closely with the installations and it has significantly reduced over the last few months. We know quite a bit about that data at the moment. We know that a lot of it tracks very closely with the installation. We know that things happened in the first short period of time after installation, and if you have a look at the statistics on the web you will see how that has tracked over time— down to a point where, from our understanding of the pre-home insulation rates and from what we have understood from the data that is out there, it is about two per 100 of the fires previous to the program actually related to an insulation issue.

It’s just a pity that everyone else wasn’t across it much, much earlier. So keep this in mind next time you see someone blowing journalistic junk out of their nether regions over fire risk and the insulation program.

The problems with the insulation program are much more complicated than simplistic twaddle over houses burning down. We might take a look at them a little later.

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