The short answer is yes, they could.
The California Department of Insurance reported claims from the devastating wildfires of 2018 have exceeded $10 billion and are expected to increase. Last December, a California court ruled that Merced Property & Casualty Company couldn’t meet its obligations of about $64 million in outstanding liabilities, and the California Conservation & Liquidation Office started liquidating the company.
You would think that wildfires on the coast would have a regional impact, but events like this can have repercussions on the entire insurance market, even here in the Midwest. To recoup income from damages in one part of the country, national insurance companies tend to increase insurance rates in other states. Ongoing losses from the wildfires in California are putting pressure on insurers, and it’s only a matter of time before that cost transfers to the insureds.
As more frequent and deadlier fires sweep through Western states, it’s becoming harder to get home insurance, especially on properties surrounded by forest, reachable only by backroads, or on slopes where a wildfire is likely to run. While most homeowners in fire-prone places can still get a policy, insurers often make coverage conditional on homeowners managing trees and undergrowth. And some might get denied by several insurers before finding one willing to take on the risk.
What may change is insurers’ underwriting guidelines — their decisions up front about the type and location of a property that they are willing to insure, the risk mitigation practices they may require, and potential coverage terms and limitations that would limit their exposure to loss. Often we can help our clients figure out ways to reduce their risk up front, so their property is safer and more appealing to underwriters.
The California wildfires are unlikely to have a significant impact on the larger commercial property sector. Although both the Camp and Woolsey fires impacted relatively large areas, the bulk of affected structures were single-family homes. Where we could see an impact, however, is in the cost of commercial property insurance as insurers evaluate the costs of reimbursing property owners for losses in areas that become more and more prone to widespread fires. Trends like that have previously been seen with the spike in insurance costs along coastal areas that have had a significant increase in the volume and overall severity of hurricane activity over the last few decades.
The National Fire Protection Association (NFPA) offers many tips for protecting your property, including:
As a Personal Insurance Consultant, Scott helps clients meet their personal insurance goals by thoroughly reviewing their current risk exposures and advising them on gaps in coverage.
As a Personal Insurance Consultant, Scott helps clients meet their personal insurance goals by thoroughly reviewing their current risk exposures and advising them on gaps in coverage. Once these potential short falls in coverage are identified, Scott will recommend solutions through a consultative approach, helping clients not only cover these risk exposures, but help them gain a broad understanding of what their insurance coverage can do for them. He has helped clients with personal insurance needs for 10 years, in all 50 states, and specializes in working with the complex situations of affluent clients.
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