Reducing wildfire risk is a collective effort
Insurers and customers are revisiting how to reduce their exposure to wildfire risk, says the I.I.I, as recent fire victims begin the recovery process.
On Wednesday, Nov. 20, 2019, PG&E Corp. cut power to more than 370,000 homes and businesses in Northern California in an effort to curb wildfire risk, Bloomberg reported.
This latest attempt in a series of planned blackouts comes as the region remains under “red flag” warnings from the National Weather Service due to strong wind gusts raising the risk of a blaze igniting.
The area is still grappling with the damages caused by recent fires and last year’s Camp Fire in Paradise, Calif., which killed 85 people and caused $8.47 billion in insured losses in Butte County as of May 2019, according to the California Department of Insurance (DOI).
Now, a year after the deadliest and costliest wildfire in U.S. history, insurers and customers are revisiting how to reduce their collective exposure to this risk, says the I.I.I.
Reducing wildfire risks
“While our research has been in the works for the last year because of California’s catastrophic wildfires in 2017 and 2018, the wildfires we’ve seen in recent weeks makes these findings all too real and timely,” Sean Kevelighan, CEO of the I.I.I., said in a release. “The increased severity of these wildfires stems in part from too many people residing in harm’s way. Builders and residents need to focus on how to be more resilient, or reconsider altogether whether to place homes in certain areas.”
In its newly released white paper, “Fighting Wildfires with Innovation,” the I.I.I explains how building codes that incorporate fire-resilient construction, such as fire-resistive roofs, can help protect new builds from wildfire damage. “For example, an analysis found that 51% of houses in Paradise, Calif., built with the state’s updated 2008 building codes survived the 2018 Camp Fire; in contrast, only 18% of houses without the updated building codes survived,” the paper states.
Furthermore, the I.I.I’s paper explains how insurers are encouraging customers to harden their homes by creating “a defensible space around a structure” that can “reduce the risk of embers and surface fires spreading and igniting the structure.”
The I.I.I also addresses the regulatory challenges insurers face, including hurdles around setting property insurance premium rates.
“Instead, insurers are often required to rely only on their own historical loss data to set prices, regardless of what the anticipated future risk might be,” the paper says. “This could result in underpricing of wildfire risks in some areas since there might be as yet little historical loss data for catastrophic losses — even in high-risk areas. Some have argued that the cumulative effect of these and other regulations may be creating an unsustainable financial environment for insurers that seek to offer property insurance in high-risk areas since they cannot accurately price risk.”
Rebuilding after a disaster
Survivors of the fires that engulfed parts of Northern and Southern California in October know too well the hardship of rebuilding and reestablishing life after a disaster.
To help victims recover as quickly as possible, California Insurance Commissioner Ricardo Lara issued an emergency notice to property and casualty insurers asking they expedite claims handling for fire victims. Among other requests, Commissioner Lara asks that insurers provide victims with a minimum of four months of advance payment of Loss of Use, Fair Rental Value or Additional Living Expenses as well as expediting payment of vehicle damage claims and more.
“I have met with many wildfire survivors since taking office, and they need immediate help to start the rebuilding process, not red tape and unnecessary paperwork that adds to their problems,” said Commissioner Lara in a statement. “These expedited claims handling procedures will give policyholders the help they need, and I urge insurers to do the right thing for these survivors.”
Read more about Commissioner Lara’s request on the California Department of Insurance’s website.
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