It seems obvious to me that home insurance companies should be basing their rates on differences in risk of fire, and I’ve wondered why that hasn’t been happening more. California seems to be the first place, but why should it stop there?
California’s insurance commissioner has warned that more and more insurers operating in the state are refusing to issue homeowners’ policies in areas most prone to wildfires.
Although many of the affected customers can still get coverage from other insurers, Jones noted that there has also been an increase in homeowners signing up for California’s insurer of last resort of fire; the FAIR Plan.
Jones said that the problem will only get worse as insurers label more homes as wildfire risks following the most recent series of wildfires that hit the state.
Others still disagree. Something that doesn’t make obvious sense to me is that they seem to be looking at past fires more than the potential for future ones.
9 thoughts on “Market solution to the WUI fire problem may be coming”
Tough to follow actuarial tables of future fires, no?
Well, yes, actually. There are plenty of fire risk maps they could use, and they could account for firewise measures taken in individual cases. There’s some shortcomings of any maps, but they’ll be improved, and if they’re good enough for building codes, why not for home insurance?
Maybe it appears that “California is taking the lead” but is that really true, or just appears to be the case because we are not hearing about other states? When someone’s rates are raised, or they are required to do something like mowing, it doesn’t attract much attention. And if you read the below story, it’s not one to show up in insurance company press releases.
But here in Colorado you can find stories about this.. here’s one from 2013 in the Denver Post. Note that it’s actually an op-ed and not a reported story..
“Calls to several of the largest insurance companies about their approach to wildfire coverage went unanswered.
The Littles ultimately were able to acquire a policy from a different company for only a couple hundred dollars more annually, one that actually sends out private firefighters to douse their home in a fire-resistant gel in the face of an encroaching wildfire.”
My point is it’s harder than you might think to find out what insurance companies are doing other than to interview residents. And that it would be a long slow process to get enough data to find out what the insurance companies are doing across the West. Maybe the universities could form a consortium and do surveys across landowners and then compile the info? I don’t think we can know whether insurance companies are doing “enough” until we know what they are actually doing.
I live in California.\
1. California counties do not follow planning guides.
A Two exits. Some of the homes lost in October’s fires did not have two exits. When the fires came, people were trapped with no alternate exit route. I don’t know what the use permits reflected. Occupancy was granted, contrary to State Planning Guides, in my opinion.
B. Location of water for fire fighting. Visiting firemen do not know where to find water. Water tenders drive past irrigation ditches they could draft from. Or fire departments hire an out of area water hauler who has limited knowledge of the roads and water sources.
C The special district fire fighting areas are not reviewed. Some land is not taxed for fire fighting support at all. Other land is more accessible by a different fire department. Taxed by one department, served by another. More accurately underserved by anther.
C. Maps do not reflect the real world. Electronic and paper maps indicate that areas are connected. In reality, they are rock fenced, trenched and otherwise not connected.
D. The political climate does not support allowing people to tax themselves to pay for fire suppression and fire planning. The “fire tax” was defeated politically without replacement of funding. Voting rules do not favor people trying to “tax” themselves when they attempt to pay fee for service. Fenced money requires supermajority. General funds, simple majority.
2. People have a strange understanding or risk management. The belief is that Californians can afford anything as long as someone else pays for it. Has fire of flood wiped out a community? Quick, rebuild before those paying the bill recognize that they are throwing money down a rabbit hole. Expected value? Probability of loss? Cost of loss? That is someone else’s problem The real estate agent had me initial the block that says I understand that stuff.
I have mentioned these items in several public venues. For my trouble, I am branded a nervous Nellie not worth listening to.
In rural Oregon the rates are based on fire risk to a point. The areas are classed based on response time and ability (how long you can maintain a certain flow, I believe a 1000 gal/minute) the problem is if you live against USFS property it doesn’t matter. The Chetco Bar fire came off of the forest at an acre every 4 seconds. You can plan, prepare, and practice, but if you neighbor doesn’t do their part, you don’t have a chance. There are instances like the Thomas fire where it’s a sudden out break of fires under severe conditions, but more and more it’s fires not aggressively being attacked, that blow up after a few days or weeks. Why should private landowners pay extra when they don’t even have a say when a neighbor allows a fire to burn?
Yes, part of the real problem is how the FS likes fires.
In our area, Coos county, Oregon, we pay taxes to the Coos Forest Protection agency. Their policy is to put fires our as fast as possible. Works pretty well so far.
Of course it doesn’t cover federal lands. Ever heard the story about the feds calling off fire suppression efforts because it was “their” fire?
Good point about information, Sharon. Insurance companies wouldn’t want their competitors to know what kinds of data they have or formulas they use. But states regulate insurance companies and could play a role.
It would be interesting to see how proximity to federal land vs. private land affects risk to adjacent private property.
I think landowners should pay less when they have done all they could on their land, since often that is enough regardless of what their neighbors do.
Among my acquaintances (not a scientific sample) it is more a question of “if you don’t do this you can’t get insurance at all” rather than “insurance being cheaper.”