Ecological forestry can lower insurance premiums
Research uncovered that these practices could reduce wildfire risks for some 81,000 homes near Tahoe National Forest.
Ecological forestry, which includes prescribed burns and thinning overgrown forests, can decrease total insurance premiums by 41% for homeowners coverage, while a range of decreases was seen for commercial property premiums, according to a study by Willis Towers Watson (WTW) and The Nature Conservancy.
These practices also reduce the likelihood of extreme wildfires in communities that leverage them, in turn, providing a better opportunity for insurers to continue writing policies for high-risk areas. In late 2020, the California Department of Insurance reported that from 2018-2019, non-renewals increased by 61% for homes in ZIP codes that have a “moderate to very high” fire risk and grew 203% in the top 10 counties with the highest exposure of homes with “high to very high” fire risk.
“If we want to continue with insurance in these areas and reduce loss of life and property, we need a lot more private and public funding for ecological forestry in national and other forests,” Dave Jones, senior director of environmental risk for The Nature Conservancy and former California insurance commissioner, said in a release. “This spending really is an investment in the future of these areas.”
To explore the effect ecological forestry has on wildfire threats, WTW and The Nature Conservancy conducted a study in the watershed of the Placer Counter Water Agency in the Tahoe National Forest, which was undergoing an ecological forest restoration project. The research uncovered that ecological forestry in the watershed substantially reduced the risk of wildfire for some 81,000 homes in the area. This could potentially reduce aggregate home insurance premiums by $21 million annually, WTW reported.
“For the first time, we demonstrated insurance modeling and pricing can account for the severe wildfire risk reduction benefit of ecological forest treatment,” Jones said. “These widely supported forest treatment practices, prescribed burns and ecological thinning provide the triple benefit of improving forest health, decreasing the risk of catastrophic wildfires and providing a pathway to keep insurance available. Insurers’ models do not currently consider forest treatment, but now that we have shown it can be done, we expect insurers will begin doing so.”
The research project also tested parametric insurance based on the intensity and acreage of wildfires and found these policies could reduce both losses and premiums.
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