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Insurance lessons to be gained from the California wildfires

California has experienced its two most destructive wildfire seasons back to back in 2017 and 2018. The fires in 2018 alone burned hundreds of thousands of acres, destroyed an estimated 18,000 homes and structures and cost nearly a hundred human lives. The official tally on insurance claims is $9.05 billion but is still growing.

In light of these facts, there have been some takeaways from the insurance point of view. These include:

  • Building codes: This is a chance to revisit the building codes and requirements, particularly in areas where fire departments are not close. Better designs and codes will reduce losses in the future.
  • Forestry management: Governor Newsom bypassed environmental regulations to remove dead trees, but some are concerns that removing trees leads to soil erosion and upsets the natural balance. Most agree, however, that we need remove dead trees and brush to reduce the fuel load for the fires even if it threatens environmental laws.
  • Insurance company risk: Carriers need to update their risk assessment metrics and manage how they spread their risk around. Fire hydrants and fire departments qualified communities as a lower risk, but these communities have been overwhelmed and burned out nearly as quickly as higher risk areas.
  • People need insurance: Agents and brokers need to work harder to find the right insurance and carrier for clients, particularly in those living in areas where there is brush exposed urban-wildland landscapes.

A new year with the same issues?

The winter has been wetter than the past few, and many are noticing the resulting lush spring. Hopefully, this will mean that California will not have another record year for fires, but there will still be claims and disputes involving insurance coverage and liability. If this is the case, carriers and the policyholders with questions and concerns about coverage are advised to speak with an attorney.

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