IF YOU ASK FOUR PEOPLE about the role insurance companies should play in wildfire loss reduction, you’ll get six opinions. Arguments ranging from loss coverage regardless of location to no coverage because of the home’s location—and just about everything in between—are debated as solutions to wildfire property loss and damage. If insurance was more involved in wildfire loss, some say, the problems of development, risk exposure, and preparedness would be solved.
Even as the debate continues, two insurers are helping reduce wildfire risk through their involvement with NFPA’s wildfire preparedness outreach efforts. State Farm insurance has provided NFPA with $85,000 this year to support the National Wildfire Community Preparedness Day on May 2, as well as the “Year of Living Less Dangerously from Wildfire,” a year-long campaign to strengthen wildfire understanding by residents and fire departments. Similarly, USAA Insurance has worked with NFPA’s Firewise Communities/USA Recognition Program to reward policyholders in participating communities in California with discounts, because the company sees a correlation between neighbor-to-neighbor, volunteer-based preparedness and property-loss reduction.
We need to remember that, in the end, insurance is a business that purposely exposes itself to an array of risks. The Insurance Information Institute reports that for 2014, insured losses due to natural disasters in the United States totaled $15.3 billion; thunderstorm and tornado insured losses topped $12.3 billion, and insured damages from winter storms and snow were an estimated $2.3 billion, contributing to the fourth-highest annual total on record.
These numbers are important when wildfire is added to the equation. Between 1994 and 2013, insured loss from “fire,” which includes wildfire, accounted for 1.5 percent of total catastrophe loss and is listed as “minor market losses.” During the same period, hurricanes and tornadoes accounted for 77.1 percent of insured loss. There’s little comfort in this comparison for homeowners faced with a wildfire threat, though, since we cannot assume that insurance companies will engage in wildfire risk reduction as they do with other types of losses. But, as work being conducted by NFPA illustrates, we can look for ways to positively connect insurers with wildfire risk and advance the industry’s understanding of the threat.
NFPA’s work with State Farm created the first national Wildfire Community Preparedness Day last year, and provided 20 communities (from more than 85 applications) with $500 awards. State Farm’s support this year allowed us to make awards to 65 communities, from more than 380 applications. State Farm’s support of the “Year of Living Less Dangerously from Wildfire” campaign promotes safety education, home insurance inventory steps, and community action. The homeowner insurance premium discount that USAA Insurance is providing to its members in Firewise communities ties local volunteer preparedness efforts to policy costs. USAA plans to expand the discount offer to its members in other at-risk states in the coming years.
Getting insurance more involved in wildfire loss—and in development issues, property risk exposure, preparedness, and more—can be positively accomplished. That’s a win for the industry, and for homeowners and communities.
LUCIAN DEATON manages the Firewise Communities and Fire Adapted Communities Programs in NFPA’s Wildland Fire Operations Division.