In a recent article, we spoke with Chris White, COO of Anchor Point Group, a company that develops and supports science-based wildfire solutions, about how the new realities of wildfires in the United States are impacting the insurance industry. With the frequency and severity of wildfires on the rise, insurers need new tools to help them write policies that are more accurate and reflect the current level of risk.
“There is a real difference today in how the insurance industry is addressing wildfires versus how it was done 20 years ago. Wildfires have always generated claims, but insurance companies never thought it would be a big enough issue to affect them in any significant way,” said White. “The priorities had always been hurricanes and hail, but now wildfires are being re-evaluated in light of new patterns.”
With the severity and frequency of wildfires growing, can insurers rely on the same risk assessments they once used?
“We are still dealing with a couple known qualities like fire severity, flame length, and rate of spread – which can be calculated and predicted – and how it can impact communities. However, there are also less traditional factors affecting the accuracy of risk assessment; something that is generating more loss based on evidence from recent fires from Tennessee to California. Embers are causing the biggest losses,” explained White.
Traditionally, insurance companies have used parcel level data to assess risk for a home, but with the change in housing location, the movement into wildlands, and the proximity of homes within these developments, it’s time to utilize more accurate data. “These huge walls of flames that we see on T.V. don’t take out the majority of homes, it is the burning red embers,” said White. You can see this in many pictures when the homes are all burned but the surrounding vegetation is not. “This occurs in the fringes where the high-density housing is built. These suburban and urban homes aren’t built to resist external fires and once a few homes are ignited it can lead to urban conflagration or home to home fire transmission.”
As densely built housing developments encroach into wildlands, insurers must get a better understanding of risk with data-driven risk assessment platforms. Insurance companies can go beyond the typical risk assessment by analyzing the local fire environment through Anchor Point’s FireSheds and street segment data to get a 360 view of the home, the community, its history with wildfires, and how this might evolve in light of climate change and future development.
“For several years now, we’ve seen entire blocks of suburban homes being burnt to the ground because of their location, their proximity to each other, and the type of construction used. They were simply not built to withstand these fire conditions,” said White. “Risk assessments should still have a foundation of frequency and fire severity but we must recognize the changes that are occurring and calibrate to the increased loss within the ember zone. This will help to update risk, and better inform insurers who will be writing policies in the future.”
To learn more about data-driven risk assessments, click here.
