One of the largest
car-insurance companies in the country and a smaller Midwestern auto insurer
are refunding hundreds of millions of dollars to their policyholders, citing a
dramatic drop in accident claims from Americans hunkered down in their homes, The
Wall Street Journal reports.
PathogenRX, a parametric insurance policy
developed by broker Marsh, Munich Re, and technology firm Metabiota, is designed
to provide business interruption insurance in the event of a pandemic, Insurance
When the coronavirus outbreak forced the
cancellation of Wimbledon it looked like game, set, and match against the All
England Club. It turns out, The Times reports, that the club has
insurance that covers infectious diseases and is putting together a claim
potentially in excess of £100 million.
World insurers told
governments on Monday that making them pay out on losses suffered due to the
coronavirus that were not covered by policies risked destabilizing the
insurance industry, Reuters reports.
Insurance brokers say viruses and pandemics are specific
exclusions in many such policies, which are often included with standard
property and casualty coverage. But whether COVID-19 is the basis for a
business interruption claim remains an open question as government leaders and
the plaintiffs’ bar wrestle over the issue.
COVID-19 could produce a big increase in social inflation,
according to A.M. Best. The reason: expectations that businesses will sue their
insurers in an attempt to access their business interruption coverage for
losses relating to the coronavirus pandemic.
infected 8,000 people and led to millions of dollars in business-interruption
insurance claims – including a $16 million payout to a single hotel chain. As a
result, The Washington Post reports, many insurers added exclusions to
standard commercial policies for losses caused by viruses or bacteria.
The Federal Emergency Management Agency (FEMA)
announced that it will extend the grace period to renew flood insurance
policies to help policyholders affected by the coronavirus (COVID-19) pandemic.
FEMA said it would push back the grace period from 30 days to 120 days.
First responders are preparing for raging wildfires that they
expect will consume thousands of acres and drive some residents from their
homes in upcoming months. But this year, CNBC reports, preparations have
stalled. The coronavirus pandemic has hit the country’s already strained
emergency services, raising concerns over inadequate disaster relief during
peak fire season.
Florida’s Chief Financial Officer has ordered the Division of Risk
Management to fulfill workers’ compensation claims for frontline employees who
work for the state, the Tampa Bay Times reports. But the order doesn’t
include similar workers in the private sector.
By Max Dorfman, Research Writer, Insurance Information Institute
A new report by Zurich North America, in collaboration with DuPont and the nonprofit Institute for Social and Environmental Transition (ISET-International), examines the ever-increasing risk of wildfires in California. Based on a study utilizing Zurich’s Post-Event Review Capability methodology, “California fires: Building resilience from the ashes” draws from research and interviews with those affected by the fires in addition to civic and nonprofit representatives involved in risk reduction, response and recovery. The report seeks answers to why these fires have become so hazardous, and the ways in which communities can become more resilient.
The Deadliest Fires Yet
Fires are becoming more frequent in California, with an increasing number of people living closer to affected areas. The state suffered the largest and most destructive wildfires in state history in 2017 and 2018. The 2018 Camp Fire alone claimed the lives of 86 people and devastated the town of Paradise.
With this danger in the “wildland-urban interface”—essentially where hazardous wildlands meet homes and businesses—residents and business owners need to understand their risk. Education is essential to protect these areas. “Education is one of the first steps to help residents take necessary precautions against wildfires,” said Marcel Milani, Global Strategy Leader, Resilient Construction, DuPont. “Once business and homeowners understand what’s at risk, and that they are in control of building site retrofits that could save their property and their lives, they will invest in change.”
California is Taking Steps to Limit the Next Big Fire
California has developed Fire Hazard Severity Zone Maps to demonstrate the areas that have the greatest probability and intensity of potential wildfires. These maps help show which homes need to meet Chapter 7A of the California Building Code, which requires homes be built to certain fire-safe standards. Paradise which has experienced multiple fires since 2008, provides an important example of why this is so significant. Homes built in compliance with Chapter 7A codes tended to fare better than those built before 2008, when the codes were put in place. Of the 350 homes built to the Chapter 7A code in Paradise, 51 percent survived compared to 18 percent of the 12,100 homes built before 2008.
However, in some cases, the rising cost of homes and increasing population leads to communities that, according to the report, are “disproportionately of lower socioeconomic status, elderly or otherwise more vulnerable.” The costs of fire-resistant structures mean fire-resistant homes likely need to be built alongside retrofitted buildings. Indeed, the report found that perceived cost was one reason 7A codes were not adopted. And for vulnerable populations, there needs to be help. “Reducing the costs of retrofitting homes and buildings to fire-resistant standards would be a step in the right direction,” said Karen MacClune, Ph.D., Executive Director for ISET-International. “Providing funding or low-cost loans for the most vulnerable would support them to take action.”
Pushing the Conversation Forward
Despite California instituting new building codes and statewide fire hazard mapping, the study recommends that further practices need to be undertaken. Other key takeaways from the report include:
There needs to be more data on benefits and costs of mitigation that could in turn help set priorities
There continues to be development in high-risk areas, further amplifying the risk and danger of these fires
Many Californians impacted by fire are slow to take actions to reduce their risk
There needs to be more preparation for a fire’s aftermath
Mechanisms are required to ensure adequate insurance
All of this leads back to the core concept of resilience.
“With resilience, it’s about minimizing impact, avoiding impact or shortening impact. Our job as an insurance provider is to make someone whole after an event,” said Ben Harper, Head of Corporate Sustainability at Zurich North America. “Proper resiliency planning differs based on the customer and the region, among other variables. But it shares a common thread: action before an event.”
Homeowners insurance non-renewals were on many listeners’ minds during last week’s Insurance Information Institute (I.I.I.) radio satellite media tour (SMT) on the aftermath of the 2017-18 California wildfires.
With 20 media outlets throughout the state participating, I.I.I. CEO Sean Kevelighan, Head of Media and Public Affairs Michael Barry, and Director of Strategic Communications Janet Ruiz were on hand to answer questions from journalists.
As the frequency and cost of California wildfires increase, it’s getting harder for homeowners in fire-prone areas to buy and keep insurance. In August 2019, the California Department of Insurance released data showing insurers are non-renewing an increasing number of residents in areas with high wildfire risk.
The guidance the I.I.I. provided to Californians faced with this dilemma included:
If your insurer says they won’t renew your policy, ask them to reconsider. Your situation may involve factors they don’t know about.
Try another insurer. The insurance market is competitive, and insurers don’t profit from not writing business. Risk appetites and underwriting vary.
When all else fails, California’s Fair Access to Insurance Requirements (FAIR) plan is available as an insurer of last resort, after “a diligent effort to obtain coverage in the voluntary market has been made.”
The I.I.I.’s speakers also emphasized during the SMT that property owners can make their homes more resilient to wildfires by mitigating their own risks; how California’s insurers disbursed nearly $25 billion to their customers to help them recover financially from the 2017-18 wildfires; and how state regulators are working with insurers to price accurately the risks of covering homes in wildfire-prone communities.
Within hours of I.I.I.’s SMT, California Insurance Commissioner Ricardo Lara announced mandatory protections from insurance non-renewals extending into new areas of Northern and Southern California. The one-year moratorium covers residential policies in ZIP codes adjacent to recent wildfire disasters. The law cited by Commissioner Lara (Senate Bill 824) protects homeowners adjacent to a declared wildfire emergency who didn’t suffer a total loss — recognizing the disruption non-renewals cause in communities after wildfire disasters.
Below is a list of the participating radio stations and podcasters who taped the I.I.I. conversations for either broadcast or streaming in January 2020:
KCAA 1050-AM/KRLA 870-AM/KSPA 1510-AM Los Angeles/KDIA 1640-AM/KFAX 1100-AM Radio San Francisco-Oakland-San Jose “Bill Martinez Live”
Business Radio X-IND Podcast National, “The Mark Bishop Podcast”
KOCI 101.5-FM Los Angeles/Liberty Express Radio Network-AM/FM Radio Syndicated “School for Startups”
KSZL 1230-AM Radio Los Angeles “America Tonight with Kate Delaney”
KMET 1490-AM Los Angeles – KEST 1450-AM Radio San Francisco-Oakland-San Jose, “Talk! With Audrey”
Transformation Talk Radio-Online Podcast National, “The Dr. Pat Show”
KVTA 1590-AM Radio Los Angeles, “The Kim Pagano Show”
KSTE 650-AM Radio Sacramento-Stockton-Modesto, “The Chad Benson Show”
By Janet Ruiz, Director of Strategic Communications, Insurance Information Institute
On October 30 the National Weather Service issued its first-ever extreme red flag warning for Southern California and expects hurricane-force winds to continue until the first weekend in November. On October 31, 19 million people remained under red-flag warnings in the area. Thom Porter, head of Cal Fire, said that at least 20 separate wildfires broke out in Southern California on October 30.
In Northern California the Kincade Fire is 60 percent contained after burning for a week. Evacuees are now returning home. I watched the Kincade Fire from the northern side on Mt St. Helena. Airplanes and helicopters made their way in and out of the fire non-stop and firefighters were able to keep the fire out of the towns of Windsor and Healdsburg.
Here’s a photo from my back yard:
According to the LA Times, an intense surge in pre-deployed firefighting resources prevented the fire from destroying homes so far. Officials say the preparations for the winds have given them a fighting chance that they didn’t have last year, when the Woolsey fire — one of California’s most destructive on record — burned more than 1,000 homes and resulted in three deaths. Officials have said the battle against that fire was hampered by a lack of resources.
Legislation passed in Sacramento, first signed by Gov. Jerry Brown and then made permanent under Gov. Gavin Newsom, has allocated millions of dollars to pre-position firefighting resources during severe fire weather.
When you return home it is important to start the claim process right away.
Contact your agent or company to find out:
What’s covered under your homeowners or business policy – Fire is a covered loss
How to get additional living expenses and temporary housing – Keep receipts
Coverage for property, contents, outbuildings and loss of use – Take photos of damage
A timeline for the claims process
How to get estimates for rebuilding
Write down your questions and be sure to get them all answered. The claims adjusters are your financial first responders and are here to help you recover and rebuild!
Financial information such as bank, savings and retirement account numbers and recent tax returns
Unfortunately, though, if you are told to evacuate it will be too late to search the house for all this stuff. When authorities tell you to leave you must leave immediately. The fire could be on you in moments.
California endured the largest and most destructive wildfires in state history in 2017 and 2018. The aftermath has left many wondering whether catastrophic wildfires will be the new normal for California and other fire-prone states, and, if so, what can be done. As the 2019 wildfire season progresses, there is a sense of urgency in the discussions among homeowners and business owners, policymakers, insurance companies and community leaders about how to change the paradigm in which wildfire-prone areas manage and respond to wildfire risks.
The Insurance Information Institute was fortunate to get an opportunity to speak with someone who is on the front lines of wildfire response. Frank Frievalt is the Fire Chief at Mammoth Lakes Fire Protection District and part of the Western Fire Chiefs Association (WFCA). He is leading the insurance section of the WFCA’s Wildfire Initiative. The WFCA has recently formed a partnership with ISO and Interra to help better understand wildfire risk for communities.
I.I.I.: Many are concerned that the severity of wildfire events in the United States will only increase. Do you agree? If so, what do you think some of the major factors for this increase are?
FF: What we currently have is an alignment of factors. We have 100 years of 100 percent fire suppression policy, so fuel loadings are off the scale in environments where fire is part of the natural ecology. We have growth of houses built in the Wildland–Urban Interface (WUI) fueled by market forces (there is an estimated $250 billion in assessed home valuation in the 11 western states). There is the weather piece – the data is pretty clear that we are having a shift in climate which is not likely to change quickly. You also have ignitions which are mostly caused by people, and unless people’s general behavior improves remarkably, I don’t see any reason why the contributing factors are going to change.
I.I.I.: Tell us about the Wildfire Initiative and how you see a partnership between the WFCA and insurers developing?
Frank Frievalt: After becoming the Mammoth Lakes Fire Chief in late 2012 I began to notice a disconnect with ISO’s FireLine risk assessment ratings for structures in WUI communities and the Defensible Space guidelines we use in the Western Fire Service. I set out to understand how ISO’s FireLine worked and reached out to ISO.
The main thing that we need to do is get technical facts empirically validated about mitigations for structural hardening that will deter ember reception at the structure. That’s how we’re losing most of the structures, it’s not direct flame contact. Once we have them identified and validated then we have to look into how these mitigations can be applied actuarially. We’ve been working with ISO who are really open to closing the knowledge gap.
Part of our goal is to have fire services and the insurance industry stand shoulder to shoulder and look at the mitigations that actually change the needle on outcomes, because we have the same goal – the protection of life and property.
I.I.I.: What are some of the public policy missteps that you see in relation to wildfire mitigation?
We’re only now coming to understand that the federal policy of 100 percent fire suppression will guarantee significant fuel loading and once the fire is established it’s going to burn extremely hot.
California has the most robust WUI code in the country; but that’s not a common situation. Fire Chiefs we collaborate with in the West are frequently opposed by developer and even local government interests when attempting to incorporate more stringent WUI codes.
We really cannot approach the present WUI problem using past approaches from the fire service, insurance industry, or legislation; we are experiencing conditions that are significantly different from the past both as individual variables, and synergistically among each other.
I.I.I.: What do you think about recent wildfire legislation in California?
FF: Anytime there is a social disruptor people get frustrated and call their legislator, and then we start to see reactive-based legislation that is quickly passed, but frequently lacks the necessary detail to implement, track, and manage it.
About 11 months ago there was a flood of this type of legislation that hit California. AB 1516 is one of the most significant pieces but it needs to be followed closely and massaged. It calls for a risk model advisory group and we are working with legislators on that.
The success of public policy requires public buy-in. No public policy is effective that’s just purely enforcement related. The best work that’s going to be done is not by my firefighters or insurance agents – it’s going to be done by Mr. and Mrs. Smith annually and diligently maintaining proscribed defensible space, maintaining structural hardening (mostly retrofits), and then federal, state, and local government works on fuels management which is on the perimeter of communities.
We have got to get a connection with what we’re doing in defensible space inspections and what we’re doing in risk modeling. If my defensible space requirements are the same as the insurance company’s requirements to retain insurance at an affordable rate, then we increase our level of public buy-in to the mitigations that matter.
I.I.I.: Could you suggest a practical list of mitigations for homeowners?
FF: This is not the definitive list, we are still working to come up with that, but here is what I can offer now:
*Window assembly (an unintended consequence of the energy efficiency push led to vinyl windows, which melt and drop out making the building exposed to embers – windows are a big issue)
It’s vitally important the we collectively (and that includes I.I.I.) get involved in measuring the most cost-effective retrofit mitigations for these items. New houses can be built to new code but older houses need to retrofit.
Preliminary studies are indicating that structures built to the 2008 WUI code, and those that had a successful first WUI inspection had a 30 percent less loss to wildfire.
I.I.I.: Can you talk about the role emerging technology plays in mitigation and firefighting?
FF: This area is moving remarkably fast, perhaps too fast; we have a situation where technologies are seeking problems to solve rather than a situation where problems are seeking the best technical tools toward solutions. We need to focus on asking the right questions first. That said, I believe that big data analysis, real-time modeling at the parcel level, hyperspectral imaging, full-scale ember laboratory experimentation, and converting hazard mitigations to actuarial risk are among the top technological leverage points emerging in the WUI discussion.
I.I.I.: Any thoughts on the future of fireproof houses?
FF: I’m not sure the “fireproof” house is plausible in the literal sense. A concrete box would not burn, but it doesn’t have much curb appeal either. The future of survivable houses in the WUI will exist in the shared space between fiscally and socially acceptable risk, market forces on development cost/sales, and the level of effort communities are willing to put into prevention of, and response to, the wildfires that are a natural part of the western ecosystem.
I.I.I.: What are some of the public education efforts of the initiative?
FF: The public education will be secondary to where the science leads us. Whatever we settle on, the public education message must be consistent in content, and recognition, between the fire service and the insurance industry. The terminal objective of public education is to induce informed decisions that encourage behaviors beneficial to the public good. If we fail to send a consistent message, public education efforts will be fragmented and lack credibility; we will have failed to serve the public good.
California residents are grappling with the most deadly and destructive wildfires in the state’s history this November.
To help those affected, the Insurance Industry Charitable Foundation (IICF) is facilitating a collective industry relief response. To help with a tax-deductible contribution to the IICF California Wildfire Relief Fund, please click here.
Additional ways to aid victims of the Camp, Woolsey and Hill fires can be found here.
The Camp Fire in Northern California has become the most destructive and deadliest wildfire in state history, with a death toll of 42 to date. In the southern part of the state, firefighters are battling the Woolsey Fire, which has taken two lives so far. Up to a hundred people are still missing, according to local authorities.
I.I.I.’s California representative Janet Ruiz had advice for residents impacted by fires in this CNBC article.
Many insurers have deployed mobile units to assist homeowners with filing claims and to distribute debit cards for living expenses.
Below are the top 10 homeowners insurers in California.
The III’s Michael Barry briefs our membership every Wednesday on key insurance related stories. Here are the top stories this week:
Northern California’s Pawnee Fire began on Saturday, June 23, and is threatening hundreds of homes in Spring Valley (Lake County). Meanwhile, the Creek Fire started on Sunday, June 24, and prompted evacuations near Happy Valley and Igo (Shasta County).
Catastrophe risk modeling firm RMS puts insured and reinsured losses stemming from the December Thomas fire in Southern California at somewhere between $1 billion and $2.5 billion, reports the Artemis blog.
The fire, which started on December 4, became the largest in California history and was followed by devastating mudslides in burned areas stripped of vegetation.
RMS estimates include losses from burning or smoke damage to personal and commercial lines and insured losses due to business interruption and additional living expenses. They don’t include automobile and agriculture losses, or damage related to the recent mudslides.
The I.I.I. has Facts & Statistics on wildfires here.