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|As thousands of structures burn in this year’s West Coast fires, insurers are increasingly reluctant to cover homes in the wildland-urban interface. Above, aftermath of the 2018 Camp Fire in Paradise, Calif. Photo: California Office of Emergency Services, Flickr Creative Commons. Click to enlarge.|
TipSheet: How Much Longer Will Insurers Cover Wildfire Loss Near You?
By Joseph A. Davis
California, Washington, Oregon, Colorado and other western states are burning cataclysmically this season.
It’s not surprising. Climate change (on top of seasonal weather patterns) is delivering higher temperatures and less rainfall in many of these areas, leaving them tinder-dry. Dry lightning and high winds have made it worse. Decades of fire suppression have left a lot of fuel.
So far this year, in California alone, there have been over 8,000 wildfires, burning more than 3.6 million acres, killing 26 and destroying over 6,900 structures.
Inevitably under the circumstances, insuring people’s homes and other structures has become an issue in California and elsewhere. But it’s complicated.
Why it matters
When your home is at risk of burning from an advancing fire, you don’t need to be told why it matters. Many people have seen their lives destroyed and lost everything.
But there are many parallel problems worsened by wildfire and the climate change that often drives it.
Evacuation, public health, smoke pollution, loss of jobs and crops, and finding the money and human resources to field armies of firefighters are a few of them.
Insurance is not simple. It is a highly regulated business and rigid regulation can easily lead to illogical — or disastrous — outcomes.
Ideally, insurance would be a free-market thing, with premiums based on real actuarial estimates of the probability of harmful events. When risks go up, we imagine, premiums go up.
Moreover, if premiums are too high or we can’t get insurance at all, we might choose not to build or buy a house in a certain place.
But the problem with wildfire is that housing and other development have intruded into wild, fire-prone areas. That vacation home surrounded by pines or charming brush? Poof. It’s just fuel when the wildfire comes through.
The biggest problems tend to happen in what they call the “wildland-urban interface.” The real estate market has for years been enlarging that interface, and as long as insurance can protect the value of the houses it finances, banks are happy for the business.
When major parts of a state are exploding
in wildfire, insurance companies want
to raise premiums or drop policies altogether.
But when major parts of a state are exploding in wildfire, insurance companies want to raise premiums or drop policies altogether.
Not so fast, say the insurance regulators.
The other reality journalists need to deal with is that state regulation can hamper good policies.
In California, for example, regulators recently decreed (with smoke already blanketing much of the state) that insurance rates could not be raised (may require subscription), in hopes of preserving what is left of the private homeowners fire insurance market. That decree will eventually expire.
Worse than hard-to-afford fire insurance, however, may be the total withdrawal of insurance companies from fire-prone areas. When California’s rate freeze expires, hard-hit insurance companies may flee.
To prevent that, the state has instituted a one-year ban on insurers dropping policies (may require subscription) in wildfire areas.
- What intrinsic properties of your local or regional landscape raise the risks of wildfire? Is it arid, thickly vegetated or steeply contoured? Have major wildfires happened in recent years?
- What recent weather or climate changes are affecting your area in ways that make wildfire risks greater?
- What are property insurance companies doing about wildfire insurance in your area? Are rates going up? Is coverage being denied in some places?
- What else are regulators in your state doing to adjust insurance coverage in places where wildfire loss risks are going up? What do they plan to do?
- What programs and support are available in your area to help homeowners and other property owners reduce the risk of fire damage to their homes or structures? How effective have these programs been?
- If you look at the wildfire situation merely as an actuary, what trends are pushing toward increased losses?
- What have your jurisdictions done to keep people from building in the wildland-urban interface? What measures are proposed?
- Does federal aid via the Federal Emergency Management Agency ever encourage people to rebuild in fire-prone areas?
- Insurance Information Institute. This group has reliable information on all parts of the insurance industry.
- American Property Casualty Insurance Association. You may want to talk to APCIA’s offices in California or Colorado.
- United Policyholders. This consumer advocacy group does not take money from the insurance industry.
- State insurance commissioners. There is an insurance commissioner (or equivalent) in each of the 50 states, although the setup varies. They have their own national association. Here’s another directory.
- Local fire protection districts. These districts typically work to reduce wildfire risks. They are often organized by state, so you may find them by simply Googling “fire protection districts” and the name of your state.
- Realtors. Local realtors, who can only get houses financed if they are insured, are tuned in to wildfire risks. But don’t assume they will share all they know. Also, check with local or regional mortgage lenders and banks.
[Editor’s Note: For more wildfire-related reporting ideas and headlines, check out SEJ’s Wildfire Issue page, including the TipSheet, “Wildland-Urban Interface — How Disastrous Wildfires Get Into Your Neighborhood”. Plus, check for our recent Reporter’s Toolbox on wildfire’s health-related concerns.]
Joseph A. Davis is a freelance writer/editor in Washington, D.C. who has been writing about the environment since 1976. He writes SEJournal Online's TipSheet, Reporter's Toolbox and Issue Backgrounder, as well as compiling SEJ's weekday news headlines service EJToday. Davis also directs SEJ's Freedom of Information Project and writes the WatchDog opinion column and WatchDog Alert.
* From the weekly news magazine SEJournal Online, Vol. 5, No. 41. Content from each new issue of SEJournal Online is available to the public via the SEJournal Online main page. Subscribe to the e-newsletter here. And see past issues of the SEJournal archived here.