Category Archives: Wildfires

Insurance, Evac Plans
Are Key for Wildfire Safety, Resilience

The formation of nine large wildfires this week—three in Washington, two in California and Oregon, and one each in Idaho and Montana—highlight the importance of having an evacuation plan and the right coverage.

“Insurers are fulfilling their traditional role as the nation’s financial first responders as thousands of Americans evacuate in the West,” said Triple-I CEO Sean Kevelighan.  “Wildfires are actively burning millions of acres, and as we are seeing these regions becoming more populated, it will be critical to focus on rebuilding communities in a more resilient manner, as well as make changes to public policies that are hindering the ability to clean and remove tinder which are fueling the devastation.”

Triple-I’s Resilience Accelerator demonstrates the power of insurance as a force for resilience.  It does so by telling the story of how insurance coverage helps governments, businesses, and individuals recover faster and more completely after catastrophes.  The Resilience Accelerator also links to HazardHub, an organization that assesses the wildfire risks individual properties face nationwide.

The National Interagency Fire Center (NIFC) reported yesterday that 1.95 million acres have burned in the U.S. during 2021. California’s Antelope, Dixie, McFarland, and Monument Fires grew by thousands of acres over the past few days, the NIFC added. 

Oregon’s Bootleg fire, which has been burning along the Oregon and California border since July 6, continues to challenge firefighters while new blazes emerge.

“We are running firefighting operations through the day and all through the night,” said Joe Hessel, incident commander. “We are looking at sustained battle for the foreseeable future.”

A standard homeowners insurance policy covers wildfire-caused property damage to a home’s structure and its outbuildings (e.g., garage), as well as the personal belongings housed on the premises.  A renter’s insurance policy covers the renter’s personal belongings. If a residence has been rendered temporarily uninhabitable by a wildfire, standard homeowners and renters insurance policies provide additional living expenses (ALE).

Triple-I offers the following tips to those who live in a wildfire-prone community.

  • Have an evacuation plan
  • Check with your insurer to see if you’re eligible to collect ALE. Some states allow ALE claims to be filed in the event of mandatory evacuations. Be sure to save hotel and restaurant receipts
  • File a claim with your insurer as soon as you are aware of damages to your property
  • Take photos of damage prior to making repairs
  • When making either temporary or permanent repairs, save receipts to give to your insurance claim adjuster
  • Only use licensed contractors to make repairs and beware of contractor fraud
  • Fire-damaged autos are covered under the optional comprehensive coverage on your auto policy

RELATED LINKS:

Article: Wildfires: Insurance and Recovery Resources

Video:  Triple-I Tips During Evacuation Orders

Is California Serious About Wildfire Risk?

Wildfire is a critical risk facing California, but at least one insurance industry leader argues that the state government isn’t taking it seriously enough.

“Yes, the governor has committed some $2 billion dollars to wildfire budget items,” writes John Norwood of Norwood Associates LLC in an Insurance Journal Op-Ed piece. “These include $404.8 million to hire staff and purchase firefighting equipment; $1.128 billion for forest management, such as thinning and prescribed burns; and $616 million to community investments.”

The details can be found in the Wildfire and Climate Change Fact Sheet provided by the governor’s office.

“However,” the Op-Ed continues, “if you compare that commitment of dollars to the list of other budget allocations the governor has just signed, it appears the administration and the Legislature determined the wildfire problem was only as worthy as some of the lower-priority budget allocations, like cleaning up trash ($1.5 billion) and paying-off delinquent water and electrical bills ($2 billion).”

Norwood is one of California’s top legislative advocates and managing partner of Norwood Associates.  He is considered the leader in the state’s insurance, financial services, and small business sector.

Rising insurance costs

Wildfires over the past five years have burned millions of acres in California, destroyed entire towns, wiped out well over 10,000 homes, killed scores of residents, and blanketed the state with unhealthy air.

“California homeowners and businesses are paying five- and six-figure premiums for property insurance, and that is only when they can find insurance at any price,” Norwood writes. “California’s largest industries – agriculture  and wine production – are being devastated by the lack of available insurance.”

And yet, he continues, “the $2 billion dollars committed to wildfire risks doesn’t even make it into the top five issues in the state based on the budget allocation committed to the fight.”

Role of reinsurance

Reinsurers — which insure insurers — are crucial to how the world handles natural disasters. As the frequency and severity of small-scale disasters increase, they’re having to pay more attention. S&P Global observes that “around one-half of the reinsurers we rate reduced their exposure in absolute terms, with very few players taking on additional catastrophe risk.”

It adds that this “de-risking trend” among reinsurers has been particularly visible in North America in recent years.

Without reinsurance, primary insurance rates must rise as properties in some areas become uninsurable.

Norwood argues that availability and affordability of property insurance are unlikely to change until the global reinsurance market believes California is serious about addressing its wildfire risks and there are demonstrable results in reducing the number and severity of wildfires in the state.

Without the reinsurance market backing California property/casualty insurance companies, there will continue to be an availability crisis in the state for property insurance and prices for such coverage will continue to increase substantially to the detriment of California’s homeowners and businesses.

As Nat Cat Losses Mount,
A Resilience Mindset Matters More Than Ever

Insurance is essential for individuals, businesses, and communities to recover quickly from natural  catastrophes – but perils have evolved to a point at which risk transfer, though necessary, isn’t enough to ensure resilience.

Triple-I CEO Sean Kevelighan said during a that better insured communities recover more quickly but “the long-term resilience of both the communities impacted by natural catastrophes and of the industry itself depend on preparedness and improved risk mitigation.”  He was one of three panelists participating in the webinar.

“Something’s Got to Give”

Insured U.S. natural catastrophe losses totaled $67 billion in 2020 after an Atlantic hurricane season which included 30 named storms, record-setting wildfires in California, Colorado, and the Pacific Northwest, and a severe derecho in Iowa. This year’s hurricane season looks to be more severe; the Bootleg wildfire in Oregon – so large and intense it has begun to create its own weather and is affecting air quality as far east as New York City – isn’t  expected to be fully contained until late November; and these disasters are taking place on the heels of devastating winter storms in the first quarter.

As Kevelighan put it in his panel remarks, pointing to a 700 percent increase in insurer loss costs since the 1980s, “Something’s got to give.”

“As the country’s financial first responders,” he said, “insurers are not just responsible for providing relief to the communities affected by natural disasters, but also planning for potential catastrophes to come.”  

One of the ways insurers do this, he said, is by building the industry’s cumulative policyholders’ surplus—the amount of money remaining after insurers’ collective liabilities are subtracted from their assets. At year-end 2020, the U.S. policyholders’ surplus stood at a record-high $914.3 billion.

Mitigate and educate

The role of the insurance industry has grown beyond merely taking on risks to educating the public, regulators, and corporate decision makers on the changing nature of risk and driving a resilience mindset characterized by a focus on pre-emptive mitigation and rapid recovery. Triple-I and a host of other insurance industry organizations have played a key role in promoting public-private partnerships and using advanced data and analytics to understand and address hazards in advance.

For example, Triple-I’s online Resilience Accelerator provides access to data and risk maps that empowers the public to assess and prepare for risks specific to their own communities.

This webinar, co-presented by The Institutes’ Griffith Foundation and the Insurance Regulator Education Foundation, included panelists Hanna Grant, Head of the Secretariat, Access to Insurance Initiative; and Dr. Abhishek Varma, Associate Professor, Finance, Insurance and Law, Illinois State University. It was moderated by James Jones, Executive Director, Katie School of Insurance and Financial Services, Illinois State University.

Webinar highlights:

Unethical Contractors Emerge After Disasters; Know How to Avoid Them

Natural disasters create opportunities for unethical contractors, and consumers need to be on the alert.

Post-disaster repair scams typically start when a contractor makes an unsolicited visit to a homeowner and pressures the homeowner to pay the contractor their insurance claim money – then disappear without doing the work.

Triple-I is teaming up with the National Insurance Crime Bureau (NICB) during the NICB’s Contractor Fraud Awareness Week (July 12-16) to educate the public about such frauds and how to avoid them.

Before hiring any contractor, consumers affected by a natural disaster should call their insurer. There’s no need to rush into an agreement. Homeowners should inspect all work and make sure they are satisfied before paying. Most contractors will require a reasonable down payment, but no payments should be made until a written contract is in place.

The NICB offers these tips to homeowners before hiring a contractor:

  • Be wary of anyone knocking on your door offering unsolicited repairs to your home. 
  • Be suspicious of any contractor who rushes you or says the government endorses them.
  • Shop around for a contractor by getting recommendations from people you trust.
  • Get three written estimates for the work and compare bids.
  • Check a contractor’s credentials with the Better Business Bureau.
  • Always ask for a written contract that clearly states everything the contractor will do.
  • Never sign a contract with blank spaces because it could be altered afterward.
  • Never pay for work up front and avoid paying with cash; use either a check or credit card.

The NICB Post-Disaster Contractor Search Checklist explains the contractor hiring process step by step.  Anyone with information concerning insurance fraud or vehicle theft can report it anonymously by calling toll-free 800-TEL-NICB (800-835-6422) or submitting a form to the NICB.

“Acting as communities’ financial first responders, insurers rebuild damaged homes, cars, and lives after a natural disaster,” said Triple-I CEO Sean Kevelighan.  “The Insurance Information Institute is proud to join forces with the NICB to educate consumers and communities about how to best prepare and recover economically.”

“Victims of disasters are under tremendous stress as they are often pulled from their homes, fight heavy traffic attempting to get to safety, all while leaving their home and belongings behind,” said NICB President and CEO David Glawe. “When they go home, they are exhausted and strained, a time when they are most susceptible to these fraudulent schemes.”

RELATED LINKS:

Article: Insurance Fraud

Facts & Statistics: Insurance Fraud

Dear California:
As You Prep for Wildfire, Don’t Neglect Quake Risk

It’s important for people living in earthquake-prone areas to remember that standard homeowners and renters insurance don’t cover most earthquake damage.

For this reason, Janet Ruiz, Triple-I’s California-based director of strategic communication, advises people in the state to consider buying a policy that, at a minimum, covers the structure, building code upgrades, and emergency repairs.

“You can also get coverage for additional living expenses and personal property, and some companies even cover damaged swimming pools or masonry veneer,” Ruiz writes in a recent Op-Ed in The San Diego Union-Tribune.

As the South Napa and Ridgecrest earthquakes – in 2014 and 2019, respectively – recede from memory and wildfire readiness and resilience seem the more immediate need, Ruiz reminds Californians that even relatively mild tremors can inflict costly damage. She therefore encourages residents to reduce their risk through education, mitigation, and insurance.

There are a number of earthquake insurance providers in California. Many participate in the California Earthquake Authority (CEA), but some non-CEA insurers also provide options to help protect Californians from financial loss.

“CEA offers premium discounts to policyholders who have retrofitted, or strengthened, their older homes to help them better withstand shaking,” Ruiz writes.

In a separate Op-Ed, CEA CEO Glenn Pomeroy advises on retro-fitting older homes to be more quake resistant and resilient. Older homes – especially those built before 1980 – are more susceptible to earthquake damage because they predate modern seismic building codes. According to U.S. Census data, more than 53 percent of the housing units in San Diego County fall into that category of being built before 1980 and could be in need of retrofitting.

Seismic retrofitting can be straightforward and often not as expensive as homeowners might think. Depending on the type of retrofit needed, the work can usually be done in a couple of days, with costs ranging from $3,000 to $7,000.

“Compared to the potential cost of repairing an earthquake-damaged home,” Pomeroy writes, “spending a smaller amount of money to help prevent damage can help avoid a much bigger repair bill after an earthquake. Whatever the cost, it is a relatively small price to pay to protect the value of your home and, more importantly, make it safer for your family.”

Particularly important as the need for pandemic social distancing continues, Pomeroy points out, “Homeowners can remain inside their dwelling as workers do the job without entering the residence.”

Cost of Lightning-Caused Claims Soared Due to 2020’s U.S. Wildfires

By Loretta Worters, Vice President, Media Relations, Triple-I

For the fourth consecutive year, the number of lightning-caused U.S. homeowners insurance claims decreased in 2020, even as the average value of those claims has more than doubled since 2017, according to Triple-I’s analysis of national insurance claims data. 

Lightning-related homeowners insurance claim costs nationally rose dramatically due to a series of lightning strikes across Northern California in 2020.  The average cost per lightning claim in California was $217,555 in 2020, while the national average for this type of claim was nearly $29,000.

Triple-I also found that:

  • More than $2 billion in lightning-caused U.S. homeowners insurance claims were paid out in 2020 to 71,000-plus policyholders
  • The average cost of a lightning-caused U.S. homeowners insurance claim increased 141 percent between 2019 and 2020 (from $11,971 to $28,885) and 168 percent from 2017 to 2020 (from $10,781 to $28,885)
  • The average number of lightning-caused U.S. homeowners insurance claims decreased by nearly 7 percent between 2019 and 2020 (from 76,860 to 71,551)

The wildfires in California and elsewhere damaged homes which had to be either repaired or rebuilt with more expensive construction materials. The National Association of Home Builders reported that, between mid-April and mid-September 2020, lumber prices soared more than 170 percent nationwide, adding $16,148 to the price of a typical, new single-family home.

The August Complex Fire, started by lightning strikes in August 2020, was the largest in California’s history, as defined by acres burned, according to the California Department of Forestry and Fire Protection (CAL FIRE). It spread across 1 million acres and impacted seven counties.

State-by-State Numbers

Florida – which has the most thunderstorms— remained the top state for lightning-caused homeowners insurance claims in 2020, with 6,756, followed by Georgia (4,686), Texas (4,675), and California (4,233).

Homeowners Insurance Coverage

Damage caused by lightning, which results in a fire, is covered under standard homeowners insurance policies.  Some policies provide coverage for power surges that are the direct result of a lightning strike, which can cause severe damage to appliances, electronics, computers and equipment, phone systems, electrical fixtures and the electrical foundation of a home.

In recognition of Lightning Safety Awareness Week, June 20-26, the Triple-I and the Lightning Protection Institute (LPI), a national organization that establishes standards for specifying and installing lightning protection systems and promotes lightning safety, encourage homeowners to install  lightning protection systems in their homes. 

“When we think of lightning safety, we should make a distinction between personal safety and property protection,” said Tim Harger, LPI’s Executive Director.  “Personal safety is what we do during a storm and the safest place in any lightning event is within a structure protected by a properly designed, inspected and certified lightning protection system,” he said.  “Installing lightning protection systems in our homes or businesses is an action we can take before a storm that can mitigate against property damage.”  

Bracing for Another Brutal Wildfire Season

Wildfires in California and across the West are starting earlier and ending later each year.  The ongoing drought worsened last week, with every part of the state in moderate drought or worse.

After a 2020 fire season that Janet Ruiz, Triple-I’s California-based director of strategic communications, called “anything but normal,” this year’s season may be even worse.

Warmer spring and summer temperatures, reduced snowpack, and earlier spring snowmelt create longer, more intense dry seasons that make forests more susceptible to wildfire. The fire season’s length is estimated to have increased by 75 days across the Sierras and seems to correspond with an increase in the extent of forest fires across the state.

“Hots are getting hotter”

California Gov. Gavin Newsom recently expanded a drought emergency declaration while seeking more than $6 billion in multiyear water spending.

“The hots are getting a lot hotter in this state, the dries are getting a lot drier,” he said. “We have a conveyance system, a water system, that was designed for a world that no longer exists.”

California Insurance Commissioner Ricardo Lara has called for property insurers across the state to play a larger role in boosting wildfire preparedness among homeowners and businesses by providing more wildfire mitigation incentives. He spotlighted eight insurance companies in the state and the California FAIR Plan, which offer discounts to policyholders that have taken adequate steps to harden homes and mitigate wildfire risk.

This group represents only 13 percent of the state market, and Lara hopes the figure will rise significantly this year.

“Insurance companies support and echo Commissioner Lara’s call for mitigation,” Mark Sektnan, vice president of American Property Casualty Insurance Association (APCIA), said in a statement on behalf of APCIA, the Personal Insurance Federation of California (PIFC), and the National Association of Mutual Insurance Companies (NAMIC).  “Insurers are working with scientists and modelers to further the science of understanding how to better mitigate wildfire risk and understanding the value of various mitigation programs and efforts. While we cannot stop wildfires, we are learning how to mitigate the risks and are moving towards understanding and quantifying the value of individual and community mitigation. Insurers encourage homeowners, renters and businesses to get their property and finances ready for wildfires, as we are facing another dry, hot summer.”

Mostly caused by people

As much as 90 percent of wildland fires in the United States are caused by people, according to the U.S. Department of Interior. Some human-caused fires result from campfires left unattended, the burning of debris, downed power lines, negligently discarded cigarettes and intentional acts of arson. The remaining 10 percent are started by lightning or lava.

The Insurance Institute for Business and Home Safety provides recommendations for reducing the likelihood of your home catching fire, including noncombustible siding, decking and roofing materials; covered vents; and fences not connected directly to the house. In addition, combustible structures in the yard such as playground equipment should be at least 30 feet away from the house and vegetation 100 feet away.

But given weather, climate, and population trends, more than individual planning and risk transfer through insurance will be required to head off wildfire risk and bounce back from events. Innovation and a resilience mindset on the part of governments, businesses, homeowners, and communities will need to take hold.

Want to learn more about wildfire mitigation and resilience? Register for “Wildfire Ready: How Do You Prepare Your Home and Finances for Wildfires?” on May 20 at 10 a.m. (PT)

White House, FEMA Resilience Officials
Speak at Triple-I Event

Caitlin Durkovich, special assistant to President Biden and White House National Security Council senior director of resilience and response, discussed the administration’s climate and resilience priorities at Triple-I’s National Town Hall (highlights video below. Click here to view full event).

She and Paul Huang, acting associate administrator of resilience for the Federal Emergency Management Administration (FEMA), met virtually with Triple-I CEO Sean Kevelighan and Michel Léonard, Triple-I vice president and senior economist.

“Resilience is a very important theme of this administration and of the priorities we have,” Durkovich said, elaborating that this includes preparation for and response to both natural and man-made events. The objective is to learn from every incident “so we don’t just bounce back but bounce forward.”

Referring to the administration’s infrastructure and clean-energy goals, she said, “We’re anticipating what the  world is going to look like 20 to 30 years from now, given the life span of our built infrastructure.”

Durkovich noted that there are several longstanding hazard-mitigation and hazard-response programs spread across multiple agencies.

“I think we have the opportunity to bring at least the federal community together to look at some of those programs and think about how we can modernize them, just like we’re modernizing infrastructure,” she said.

This will help communities “build back better” after an event.

But it’s going to take more than federal government to bring this about. Communities will have to be very involved, she said, adding, “It’s not just state and local planners, but it’s infrastructure owners and operators, it’s the finance side of the house, who are needed to work through some of these hard challenges before, so after an emergency, when money becomes available, you’re ready to make some significant changes.”

And as we invest in electrified transportation infrastructure, she said, “we have to make sure that infrastructure is resilient to power outages, to storms, and when we’re in the middle of a mass evacuation it can accommodate hundreds of thousands of people.”

Despite having to think about everything that could go wrong (what she described as “healthy paranoia”), Durkovich was upbeat: “It’s amazing to be having these conversations about designing resilience in at the beginning, instead of bolting it on at the end.”

FEMA’s Paul Huang echoed Durkovich’s enthusiasm for a “whole of government” and “whole of community” approach to resilience.

“We’re going to have to rethink how we do things,” he said.  “We have programs that have always been around. They’re good programs, but it’s not enough.  We have to think bigger and more creatively.”

Huang talked about a new FEMA program, Building Resilient Infrastructure and Communities (BRIC), that support states, local communities, tribes and territories in developing hazard-mitigation projects, reducing the risks they face from natural disasters.  “We’re hoping to see new ideas from industry, working with local and state government, to say, ‘This is something we can try together in partnership to get a bigger bang for our buck.’ “

Californians Warned About Mudslide Risk
as Winter Bears Down
on Wildfire Areas

California Insurance Commissioner Ricardo Lara is alerting citizens to review their insurance policies in order to protect themselves and their assets in anticipation of winter weather bringing the possibility of  floods, mudslides, debris flows, and other disasters to recent wildfire burn areas throughout the state.

The commissioner issued a notice to insurers reminding them of their duty to cover damage from any future mudslide or similar disaster caused by recent wildfires that weakened hillsides. In particular, the United States Geological Survey (USGS) has projected increased likelihood of debris flow for fire-scarred areas of the state in the event of heavy rainfall.

Many Californians may not be aware that homeowners’ and commercial insurance policies typically exclude flood, mudslide, debris flow, and other similar disasters—unless they are directly or indirectly caused by a recent wildfire or another peril covered by the applicable insurance policy. For insurance purposes, it’s important to understand the difference between “mudslides” and “mudflow.” 

Mudslides occur when a mass of earth or rock moves downhill, propelled by gravity. They typically don’t contain enough liquid to seep into your home, and they aren’t eligible for flood insurance coverage.  In fact, mudslides are not covered by any policy. 

Mudflow is covered by flood insurance, which is available from FEMA’s National Flood Insurance Program (NFIP) and a growing number of private insurers. Like flood, mudflow is excluded from standard homeowners and business insurance policies—you must buy the coverage separately. 

The California Department of Insurance has posted a fact sheet for consumers to answer questions about what their policies cover.

Mudslides Often Follow Wildfire; Prepare, Know Insurance Implications

As wildfires continue to burn in California, Oregon, Colorado, and elsewhere – and people pray for precipitation to help firefighters in their efforts – another threat looms: mudslides.  

Wet weather is in Oregon’s forecast, and the Marion County Sheriff’s Office warned that mudslides and falling trees will be a big concern with so much burned land in the county. Areas that could be seriously affected include Mill City and Gates, where much of the towns have been destroyed by wildfires

The sheriff’s office said people need to pay attention to what happens around them and listen to alerts from local authorities. 

“We’re really concerned about as those high winds pick up, some of those coming down and creating more hazards along the roadway, more than we would see in a typical windstorm,” Sgt. Jeremy Landers with the Marion County Sheriff’s Office said.  

He added that it’s important that people have a plan in place in case the weather becomes dangerous. 

Santa Cruz County, Calif., also is preparing for mudslides in the aftermath of the CZU Lighting Complex fire in August. Carolyn Burke, senior civil engineer, said during a special meeting of the Santa Cruz County Board of Supervisors,  “The only effective means of protection” is early warning and evacuation. 

The fire in the Santa Cruz Mountains burned 86,509 acres – and while Cal Fire on September 22 said it was 100% contained, risk remains of fires igniting and the subsequent danger of mudslides when rain comes. Rainy season there has a history of starting from September to November. 

In Colorado, cooler temperatures, rain, and snow have helped suppress the fires that have been  raging across that state. Alaska Incident Management Team Incident Commander Norm McDonald wrote, regarding his team’s work on the Grizzly Creek Fire, “While our assignment ends with the Grizzly Creek Fire at 91% containment, we realize there is still much work to be done and the ramifications of this fire will be long-lived with the potential for mudslides and flooding.”  

For insurance purposes, it’s important to understand the difference between “mudslides” and “mudflow.” 

Mudslides occur when a mass of earth or rock moves downhill, propelled by gravity. They typically don’t contain enough liquid to seep into your home, and they aren’t eligible for flood insurance coverage.  In fact, mudslides are not covered by any policy

Mudflow is covered by flood insurance, which is available from FEMA’s National Flood Insurance Program (NFIP) and a growing number of private insurers. Like flood, mudflow is excluded from standard homeowners and business insurance policies—you must buy the coverage separately.