Another historic wildfire season leads insurers, lawmakers to make changes
In the aftermath of the worst wildfire in state history, California regulators are looking to take urgent steps to protect residents.
One question has arisen across California in recent years: can we call it “wildfire season” if it goes on for much of the year? According to The Weather Channel, wildfire season for much of California has traditionally been May through October. However, experts are now saying that wildfire season is no longer a season, but a risk present to Californians throughout the year.
After wildfires roared through California’s Wine Country last year to the tune of approximately $9 billion in insurance claims, 2018 did not leave California residents and business owners with a reprieve. In November, the Camp Fire destroyed nearly 15,000 homes and businesses across Northern California.
Around the same time, the Woolsey Fire broke out near Malibu in Southern California, rolling over another 1,500 homes and businesses. Combined, both fires burned nearly 300,000 acres, according to CBS News.
With this kind of widespread damage, lawmakers, insurers and other observers are realizing that wildfires require consistent risk management, not just a few months of preparation. We need to work together to attack this persistent exposure head-on. That’s why homeowners are reviewing their insurance policies, lawmakers are passing legislation to help protect residents, and some insurers are upping their games when it comes to risk assessments and technology.
Related: What insurers need to know about California’s fire, insurance overhaul
Sparking change
Lawmakers have been working to ensure consumer protections in the wake of the wildfires. For example, one bill proposed in California would block insurance companies from canceling policies of homeowners in or close to formally declared emergency areas for one year following a fire, according to Bloomberg. The proposed legislation would also call for insurers to report wildfire risk data and availability of policies to the state insurance department.
Additionally, California Governor Jerry Brown signed a bill into law that requires insurers to conduct replacement cost estimates for homeowners every other year. Brown also signed a separate bill into law requiring insurers to let homeowners know if their policies will truly cover their home’s replacement cost, according to Insurance Journal.
In the meantime, insurers are taking action of their own. For example, my company, which insures wineries in California and across the United States, has launched a new drone program for wildfire risk assessments. With this new tool, we are capturing more information that not only improves accuracy in risk assessments, but also helps winery owners better understand their risk exposures, and in turn, recognize and create defensible space from wildfires and take preventative measures to avoid other risks.
Related: Will insurance claims go digital in 2019?
Using a drone operated by a licensed pilot, we can conduct thorough aerial property surveys for vineyards that span hundreds of acres. With this viewpoint, we can create orthomosaic maps of the properties we are assessing, as well as view 3-D models. This helps us better identify scheduled and unscheduled property, while gathering additional information on building square footage, property boundaries and even tank volumes.
The aerial view also gives us a unique perspective on defensible space, vegetation and plant health that can help greatly in predicting how a wildfire could spread on the property. Finally, we are able to share all of these materials with our insureds to help them understand their assets and risk exposures and how best to ensure they are covered and protected.
The impact of tech development
What would once take hours or even days on land to assess an 800-acre winery, now takes only about 20 minutes to an hour with the help of the drone. This eye in the sky helps us to make sure we are not missing structures or equipment that may not have been spotted via a land assessment. Unfortunately, after the 2017 and 2018 wildfires, too many insured homeowners and business owners are finding themselves inadequately covered for such a loss. And without the right tools and the right insurance partner, it’s easy for a policyholder to overlook some of their exposures.
A winery for example, may have several buildings onsite and all must be insured to include updates to the structure, proper inventories of contents and more. For a winery, a wildfire can take out vineyard estate dwellings, irrigation systems, pump stations and entire grape harvests. After last year’s fires, we saw claims filed on property and equipment like grape sorters and destemmers, tanks, irrigation systems and dwellings. We also received claims for business interruptions.
Related: Five technologies changing claims
In terms of assisting in wildfire prevention, drones can help identify property elevation, and analyze the steepness of the slope of hillside properties that may be more susceptible to wildfire. The drone also allows us to see what areas of the property are well-watered and which might be too dry.
The aerial view assists in identifying healthy vegetation as well as plant life that may be drying out. As a result, it provides us with information we need to recommend a property owner remove certain areas of brush or limit trees for fire safety purposes, among other things.
Although just entering the scene as a risk assessment tool, drones have been used by insurers since 2015 mainly for purposes of adjusting claims. According to projections in a recent report from Deloitte, the use of commercial drones could save the insurance industry $7 billion a year. For insurers, Deloitte found that drones allow for faster claims assessments, fewer field adjusters on the ground, and collection of valuable evidence to counter fraudulent claims.
Plus, they help keep employees, who may have previously had to enter a hazardous area during a claim adjustment, safer. Deloitte sees many opportunities for insurers with drones, including in areas of risk assessments, natural disaster monitoring, claims and fraud prevention. It will be interesting to see what impact drones, operated by the insurance industry and stakeholders, will have on wildfire mitigation.
Looking ahead
Many news outlets are reporting that after these wildfires, homeowners and business owners in wildfire regions will be challenged to find insurance coverage. That may be true as many insurers are looking at paying out costly claims — costly despite the fact that many of these policyholders were underinsured.
To help manage the situation and a scene of mass non-renewals and cancellations as allowed by law, agents and brokers can assist policyholders and their insurers in understanding their risk and insurance coverage. Over the past fifteen years, the escalating effects of disasters like the wildfires, hurricanes and floods have highlighted the importance of having adequate insurance coverage and having policies reviewed and updated regularly.
Agents and brokers can be the driving force to make that happen. However, even with the best insurance and scientifically-backed risk mitigation plan, wildfires can bring down a business, or an entire community. The only way to truly be prepared is for policyholders to have quality comprehensive coverage that’s up-to-date and an insurance partner they trust.
Related: P&C insurance industry lessons learned in 2018
Larry Chasin is president and CEO of PAK Programs, which provides insurance programs for wineries, vineyards, breweries and other beverage facilities. Contact Larry Chasin at larryc@pakprograms.com.