Wildfires have caused tremendous destruction throughout the country, and California has been especially hard hit. As a result, insurance premiums have increased steadily, and some companies are denying coverage for high-risk areas.
There have been some strategies proposed to minimize the impact of wildfires and subsequently reduce high insurance costs.
Increase in wildfires
According to the Forest Service U.S. Department of Agriculture, there has been an increase in the intensity and size of forest fires in the western part of the country over the years. In fact, there has been a three-fold increase in the number of wildfires over the last 40 years. These not only destroy more homes and other structures, but they also result in high damage expenses.
Factors considered in insurance pricing
As a result of the wildfire increase, there is also an increase in insurance premiums. When determining a homeowner’s property insurance premium, the insurance company considers the risks related to:
- History of claims in the area
- Property value
- Wildfire risk
Wildfire is a big factor, as studies show that climate change has increased their prevalence.
Strategies to reduce the number of wildfires and subsequent destruction
One way to reduce insurance costs is to take steps to reduce the incidence of wildfires. The Nature Conservatory as well as federal and state land agencies are focusing on forestry management practices such as forest thinning and prescribed burning. These improve the health of the forest and reduce the amount of organic material that can burn.
The Insurance Journal also discusses a proposal by the California Commissioner that would reduce premiums for homeowners who take active steps to prevent wildfires on their properties.