3 ways P&C insurers can get more creative about wildfire risk

by Jen Smoldt on November 26, 2018

california wildfires

On the heels of tragic wildfires, some California residents and business owners will face another crisis—getting wildfire coverage—and making sure it’s adequate and affordable. As an insurer, agent, or broker, how do you rise to this challenge? The challenge of helping Californians rebuild and safeguard their homes and businesses, while protecting your own interests. There’s no doubt, insurance plays a key role in California's economy and resilience as wildfire risk continues to evolve. In August, California Governor, Jerry Brown, stated about fighting wildfires in California: “We’re in for a really rough ride...and we have to apply all our creativity to make the best of what is going to be an increasingly bad situation.” He knew—we all knew—there would be more fires in 2018. Little did we know that those fires would be “historic” again, or as Governor Brown recently declared, "This is not the new normal, this is the new abnormal."

Megafires are the trend

When will California wildfires cease to be historic on an annual basis? According to research by our friends at GenRe, the severity of wildfire events is likely to continue. Their article, entitled “Wildfire probabilities aren’t what they used to bebut what are they?,” reveals that it’s not so much the frequency of events (with the number of wildfires being fairly consistent since the 1980s), but rather, the size of the event, with “megafires” an emerging trend:

“Thinking of 2017 and 2018 as ‘1 in 20’ events may seem extreme; thinking of them as ‘1 in 5’ is almost too frightening to accept. No one knows the right answer, but we believe that long-term historical answers are unlikely to be the right ones.” -Ira Kaplan, GenRe

While it’s clear this new normal isn’t normal at all, what’s still really hazy is how to solve the wildfire problem. How can insurers have confidence when underwriting wildfire risk in California, or anywhere in the West? How do we (insurers and solutions providers) get more proactive with alerts, so insureds know to get out of harm’s way well in advance? Together, we play a big role in solving these problems—in helping insurance do what it was meant to do: protect society. But, at the same time, how do you protect, or better yet, grow your portfolio when wildfire risk is fueled by the perfect recipe of climate change and urbanization? At SpatialKey, we don’t have all the answers, but we want to be part of the solution. And, we do have ways—better, more creative ways—of helping insurers write and respond to wildfire risk right now.

There’s more to underwriting wildfire than meets the eye 

Case in point, the Breckenridge, Colorado, property shown below was denied coverage last year by a well-known insurer, most likely due to the fact that there had been a nearby fire in the area (dubbed the “Peak 2” fire). On the surface, it’s understandable why an insurer would decline coverage, afterall an event had just occurred and the structure is sandwiched between national forests with an abundance of downed beetle-kill trees in a high-altitude desert (at 10,000 feet with likely 0 percent fuel moisture)...I mean come on. But, on the other hand, could taking more factors into consideration be cause for re-evaluation?  

4 Barney Ford Drive Breckenridge

Aerial view of 4 Barney Ford Dr., Breckenridge, CO. In 2017, this property was denied coverage by a well-respected insurer.

Could a closer look at the data have been cause for re-evaluation? Considerations such as:

  • proximity to the nearest fire hydrant is less than 100 feet from the garage

  • proximity to the nearest fire station is approximately 1-2 miles

  • the building itself is surrounded by roads on 3 sides

  • satellite imagery shows evidence of active tree clearing and mitigation efforts surrounding the structure

Data from wildfire data provider, RedZone, digs deeper and tells a more complete story about why this seemingly high-risk property actually scores low for wildfire risk (see image below), including hazard layers that show risk from smoke, floating embers, as well as frequency and severity. Adding more data points to the equation, along with contextual information gleaned from geospatial analytics, enables insurers to adequately assess and price for the risk—or, in this case, opportunity—at hand.  

4 Barney Ford latest

Using SpatialKey’s underwriting solution, along with data from RedZone and HazardHub, provides insurers with a more complete view of why this seemingly high-risk mountain property actually scores low for wildfire risk, despite a nearby fire in 2017.

3 ways to use data & analytics to get more creative about wildfire risk

The only way to grow (and safeguard) your portfolio may be to get more creative, or innovative, about how to approach wildfire risk. Here are three actionable ways to do that:

1) Underwriting: Reconsider your wildfire data. 

Sustained winds caused 2017’s California wildfires to strengthen and spread (similar to the recent California fires exacerbated by Santa Ana winds), yet some incumbent models didn’t account for smoke and wind-driven embers. Wildfire data provider, RedZone, is breaking the old-school approach to modeling wildfire by going beyond direct flame impingement to assess the risk of ember showers and smoke damage, as well as frequency, severity, and history factors that contribute to greater scoring reliability and accuracy. Additionally, HazardHub data (also seen in the screenshot above), provides distance to fire station and distance to hydrant information. Layering RedZone and HazardHub data together, within a geospatial analytics solution that provides contextualization of the surrounding landscape, can provide insurers with a more comprehensive understanding of a location’s wildfire risk.

WATCH THE ON-DEMAND REDZONE WEBINAR 

2) Claims: Eliminate the guesswork with regular fire perimeter updates.

Advancements in NASA’s satellite imagery coupled with geospatial technology are providing insurers with up-to-date event perimeter data. Instead of guessing how a fire has grown and which insureds are impacted, insurers can get regular fire boundary updates. As Doug McCune, Chief Product Officer at SpatialKey, explains, “During this heightened wildfire season, it’s important for insurers to have accurate and up-to-date wildfire perimeter data—something that has historically been a challenge with wildfires. By integrating with NASA’s Visible Infrared Imaging Radiometer Suite (VIIRS), we’re able to provide detailed updates multiple times a day to our insurance clients, allowing for faster and more accurate wildfire perimeters than any other source.”

NASA woolsey and hill fires

Shown above is NASA fire perimeter data from the recent Woolsey and Hill fires. This data has built-in buffers set at 1, 2, and 3 miles from the perimeter. Using SpatialKey, insurers can overlay their portfolio data to understand which insureds are inside the perimeter and apply buffers to understand the impact.

3) Portfolio management: Layer multiple views to gain a more comprehensive understanding of risk, along with actual exposure.

Often with wildfires there’s been a lack of consumable data, with insurers resorting to hand-drawn boundaries or custom shapefile creation. Now, insurers can gain a much more accurate and comprehensive understanding of exposure by overlaying the latest fire perimeter data, including multiple models such as previously mentioned RedZone, GeoMac, and NASA data, with their portfolio data to visualize exposure, apply buffers and filters, and understand TIV and/or policy exposed limits.

Bottom line: wildfire risk is evolving. But, so are the solutions to fight this growing hazard. So if you’re approaching a new world of wildfire risk the old way, the solutions are here now to help you get a bit more creative.  

Watch our on-demand webinar with RedZone to learn more about wildfire risk assessment and selection, or reach out to us.  

LEARN MORE ABOUT OUR NEW WILDFIRE EVENT SITE

Topics: California Wildfires, wildfire risk, wildfire data

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