More areas could lose fire insurance due to wildfire risk

More areas could lose fire insurance due to wildfire risk

27 January 2018

Published by https://www.dailyrepublic.com/


USA- By Todd R. Hansen FAIRFIELD — Damage from the October wildfires has exceeded $9 billion and assessments continue, according to the California Department of Insurance.

The state reports that fires destroyed more than 14,700 homes and 728 businesses. Additionally, 43 people died in the fires, the deadliest in state history.

Those fires, along with the blazes in Southern California, are exasperating an issue that is already spreading through areas considered to have a higher risk of wildfires – the inability of homeowners and businesses to get fire insurance, or at the very least, affordable insurance.

Solano County Supervisor Monica Brown represents areas that were scorched by the Atlas Fire. The three homes lost in Solano County were located in her 2nd District and burned as hundreds of residents were forced to evacuate.

“No where are we as devastated as poor Napa and Sonoma counties,” Brown said in a phone interview Friday.

However, she is concerned that insurance problems being experienced in other areas will make their way to Solano County.

“Over the past two decades, wildfires have caused a significant damage and loss of life in what is called the ‘wildfire urban interface’ areas where homes are intermixed with (or are) in the vicinity of wildland vegetation,” state Insurance Commissioner Dave Jones wrote in a letter to Brown. It is dated Jan. 19.

“Insurers are increasingly using computer models to determine a ‘fire risk score’ for homes they insure or are asked to insure in the wildland urban interface areas. More than half of the counties in this state have at least 25 percent of their homes with a fire risk score of high or very high risk, according to models used by the insurers,” the Jones letter states.

Jones wrote that those models will certainly be updated with 2017 fire information.

“Areas where insurance availability has not been a problem are likely to begin seeing insurance availability challenges, particularly those counties hit by the 2017 fires,” Jones wrote.

Jones warned, however, that it will not only be areas where fires occurred that will experience the difficulty of getting insurance. It will also include any area viewed as having a higher risk of wildfires.

“The result is that homeowners throughout California are likely to find it increasingly difficult to get private insurance coverage for their homes with traditional homeowners’ insurers,” the letter states.

Some insurers are dropping out of the business of underwriting wildfire policies.

A report issued in December by the Department of Insurance outlines the issues and discusses possible solutions. That could start with an effort to standardize the models by which insurers grade fire risk.

The report noted that the state agency has received an increasing number of complaints from state residents stating that insurance companies have not renewed policies or spiked premiums based on information that the property owners contend is not always accurate.

“As part of (Insurance Department’s) participation in the Governor’s Tree Mortality Task Force . . . (policyholders) have expressed concern that wildfire-risk models are not accurate and do not take into account mitigation done by the homeowner or the community,” the report states.

The recommendations listed in the report cover a number of layers, several of which have the support of the insurance industry.

The first of those recommendations is for the Legislature to create a framework within which insurers will, under certain conditions, offer homeowners’ insurance in the wildland-urban interface areas as long as the property owners take necessary mitigation steps to reduce the risk of fire.

That framework, the report states, should “also permit the insurer to avoid the requirement of offering homeowners’ insurance in the (interface areas) if the insurer instead offers a ‘difference in conditions’ policy or a ‘premises liability’ policy,” the report states.

A difference in conditions policy is one that provides expanded coverage for some perils not covered by standard insurance policies. A premises liability policy is one in which the property owner has a level of accountability for accidents and injuries on their property and buys a specific policy to cover those specific risks.

The recommendation states that premium credits should be given to policyholders who do mitigate for fire risk, and should provide for an appeals procedure before “an adverse decision” is finalized.

A stabilized rate structure is recommended “to ensure that homeowners’ insurance rates and premiums are adequate, but not excessive, for the true wildfire risk.”

“While there are still areas of disagreement with insurers on the degree of the problem and how to solve it, based upon our interaction with them, there appears to be some areas where insurers, consumers and stakeholders agree,” the report states.

“For instance, in the insurance industry trade group letter to the (governor’s tree mortality group), insurers agreed that: (1) mitigation/risk-reduction activities should be factored into wildfire risk models, and (2) a tiered-risk analysis/assessment would also be appropriate, and (3) a legislative-based mitigation insurance framework would also be appropriate,” the report states.

In a related effort, the California Forest Watershed Alliance sent a letter to California congressional representatives seeking wildfire legislation that includes a “comprehensive wildfire funding fix and . . . improvements in forest management.”


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