Does insurance influence home development on fire-prone lands?

Blog Post created by michelesteinberg Employee on Aug 9, 2016

000450.jpgA recent white paper by Montana-based Headwaters Economics asks whether insurance rates and policies influence new development on fire-prone lands, as well as whether they have a role in reducing risk from wildfires in existing developed areas. In examining available data, trends, media reports and interviewing industry experts, they find that insurance today has little influence on new development, but a potentially large and growing role in reducing risk to existing properties.


The conclusions on Headwaters' web page give a good overview of the issues and challenges that insurers face when coping with the risk of property loss and damage to wildfires. The paper is brief and easy to read, and loaded with references to articles, data and studies. I found those references within the PDF document easy to link out to so that I could read some more and determine whether I agreed with the researchers' conclusions. Interesting to me were industry and popular media articles that focused on whether fire departments could access homes and even drew the conclusion that new construction was less insurable than existing property because it was being built on more and more marginal fire-prone land. There were many fewer media references to the value of standards in home construction and the home ignition zone.


I found good news in the section of the white paper that addressed the question of whether and how insurers could influence risk reduction to existing properties. Insurance companies themselves as well as their industry communications arms such as the Rocky Mountain Insurance Information Association (RMIIA), the Insurance Information Institute (III), and the Property Casualty Insurers Association of America (PCIAA) are referencing sound construction, non-flammable roofs, and well-maintained defensible space via landscaping in their consumer literature and, in some cases, in their underwriting decisions. Firewise principles as well as industry-supported activity like State Farm's sponsorship of Wildfire Community Preparedness Day and USAA's provision of Firewise discounts for its members in several western states are noted among the examples of this trend and the ability of insurers to influence risk reduction.


Read more about the findings, the challenges, and trends to watch on Headwaters Economics' website.


Photo credit: Cheryl Blake. Cedar Fire, San Diego County, California, 2003.


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