Wildfire Mitigation Matters. Who’s Counting?

After evaluating multiple solutions, the state’s insurer of last resort has selected a new wildfire risk model to better understand and mitigate wildfire risk at the individual property level. The new model contains two popular features from the next generation of wildfire risk assessment providers.

Similar to other leading providers, it accounts for individual property-level factors that contribute to wildfire risk, such as vegetation density and fire suppression capabilities, combined with geospatial artificial intelligence, or geoAI. The FAIR Plan speaks to the needs of the entire insurance industry by saying, “We can no longer rely on 30-year-old technology to understand modern climate phenomena.” It is time the industry moves to a model that reflects mitigation actions which reduce wildfire risk on the premises or in the surrounding areas. Echoing Black Swan’s cry for accuracy, the California Department of Insurance (CDI) has been urging insurers and modeling companies to factor into wildfire risk assessment, the mitigation steps taken to reduce vegetation in the Home Ignition Zone. Some carriers already extend discounts to consumers who implement loss control measures. This will be a new capability for the FAIR Plan.

FAIR Plan’s new wildfire model selection also includes the impact of investing in fire-resistant building materials. Most insurance companies already use construction type as a rating variable. For the FAIR Plan, this is an important add-on. The Z-FireTM model is unique when compared to leading model providers in that it uses building construction material in determining the wildfire risk score. If construction type were also used to determine the base rate, rating adjustments would be required as an actuarial standard.

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