New wildfire mitigation tech insurance pros should know
Risk management experts can now capitalize on scientifically supported insights into wildfire mitigation, monitoring, reporting and response.
One of the most notable aspects of the 2019 California wildfire season was the introduction of scheduled intentional power outages by utility companies when fire conditions were forecast. This was meant to minimize or eliminate ignition risk from downed powerlines. These preemptive power shutoffs by Pacific Gas and Electric Company (PG&E), Southern California Edison (SCE), and San Diego Gas & Electric (SDG&E), occurred in approximately 30 counties in California for approximately 23 days total.
The shutoffs initially affected around 800,000 customers or about 2 million people. Stanford University’s Michael Wara, an expert on electricity policy in California, estimated the total costs of the blackouts were somewhere between $1.8 billion and $2.6 billion.
Displeased residents
The shutdowns drew widespread criticism from residents as well as government officials. Many businesses and residents complained of either being misinformed or not informed when shutdowns would occur.
In response, the state of California developed programs to protect utility companies and consumers in the advent of future wildfire events; a bill was passed, which created a $21 billion state-run insurance pool to act as a cushion for utility companies against future wildfire claims.
Tech-driven mitigation
As wildfires continue to scorch California, startup InsurTechs and existing tech companies have been working to develop innovations addressing extreme-weather disasters. Investors have stepped in to help fund emerging efforts around “cleantech,” a term used broadly to describe technology seeking to manage human impact on the environment.
Some startups are ambitiously looking to tackle wildfires head-on. Chooch AI, an artificial intelligence (AI) company based in San Francisco, is using a system that analyzes satellite images every 10 minutes to identify where new wildfires may have broken out. The company is currently in talks with Cal Fire as it adapts its system to look for wildfires, which it hopes to go live sometime next year.
Drone technology also has been useful to firefighters for years. But as technology develops, drones are getting smaller and more powerful. They have better payload options and can go where humans cannot. An aerial view provides a quick assessment of the situation and allows fire crews to see through smoke and identify hot spots.
Another mitigation technology worth following is distribution fault anticipation (DFA), which uses predictive algorithms to assess electric systems and identify potential equipment failures. Described as a “paradigm shift” for the way utilities operate, it provides real-time situational awareness of the circuit and situation degradation.
Supporting the mission at hand
The original purpose of the technology was to prevent costly power outages and accidental electrocution from downed powerlines. It turns out, however, that the elements that cause outages in the system also start wildfires. PG&E began testing the technology in 2019. The evaluation phase is scheduled to be completed this summer.
One novel application of fire protection that is ready and in use today is an environmentally safe biodegradable fire-fighting foam used for pretreatment and suppression around property and building perimeters. When a fire is imminent, foam is applied from private fire trucks appointed with state-of-the-art equipment.
The insurers’ role
Weather extremes can be further managed by custom policies that address such elements as temperature rise and wind surges. Parametric insurance is an innovative coverage prompted by an index. It’s an increasingly attractive enhancement to traditional insurance policies.
To develop a parametric solution, a policy is structured with certain events plainly stated in order for coverage to be triggered. For example, if one component in a supply chain is affected by weather, manufacturing processes can be delayed. Therefore, an index can be established representing a minimal basis risk relative to actual business performance.
Wildfires are a rapidly growing challenge. We know that predicting wildfire-related risk requires understanding more than just fire history, frequency and severity. We can now utilize solutions that are scientifically supported and peer-reviewed to provide powerful insights into wildfire mitigation, monitoring, reporting and response.
It is only with continuous improvement that we can keep up with this ever-changing threat.
Scott H. Steinmetz, P.E., (scott.steinmetz@agcs.allianz.com) is regional head of MidCorp at Allianz Risk Consulting (ARC), a division of Allianz Global Corporate & Specialty®.
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