Op-Ed:  When it comes to wildfires, the insurance industry is behind the curve


As we saw in San Diego recently, wildfires are inevitable, but wildfire disasters are not. We can’t control the natural world, but we can control the built environment and the economic incentives that put us at risk.

Since the deaths of 19 firefighters in Arizona last year, the attention has been on the longer and hotter fire season and home-building patterns in the Western U.S. But the risk is nationwide. Since 2007, for example, Florida, Georgia, Arizona, New Mexico, Utah, California, Texas and Colorado have seen the most destructive fires in their histories.

Much has been said about the land-use policies that allow people to build in hazardous environments and the federal wildfire policy that subsidizes the risk most people face for living in the so-called wildland urban interface.


Less scrutiny has been devoted to the insurance industry, which is behind the curve in addressing the wildfire danger. Additionally, people living in hazardous areas must assume a greater share of risk management for their behavior.

The insurance industry is not more active for two reasons. First, losses from wildfire make up only 2% of total property and casualty claims. Tornadoes and hurricanes account for much bigger losses.

But there are compelling reasons for the industry to be paying greater attention to fire. More houses are burning. More than 2,200 houses were destroyed in the 2012 fire season. During the 1980s and ‘90s, fewer than 1,000 homes burned annually. Residential exposure for the nearly 2 million Western U.S. properties categorized at very high or high risk is estimated at $377 billion.

Every year more people are moving to the red zone where fire risk occurs. And the federal government is signaling that it is going to start cutting back from the $1 billion it spends annually suppressing wildfires. That will effectively increase the risk to both homeowners and insurance companies.

Second, the insurance industry is highly regulated by state commissions, and changes are not easy to make. Consequently, insurers take the path of least resistance and rely on voluntary measures to change homeowner behavior. But we can get only so far with education and optional actions. We also need to leverage the market — through better pricing in the insurance industry and through regulations by state governments — to level the playing field for insurance companies and encourage consistent action at the local level.

State insurance commissions need to work with the industry to set statewide policies that encourage better protective measures at key decision points — when structures are built and purchased as well as when rebuilding is considered after a fire. At these key times, owners need to think about insurance and what it will take to become insured. In some cases, state legislatures need to provide clear direction to the insurance commissions to take action.


State insurance commissions should require insurance agencies to raise prices where risk is high and discount rates for homeowners who have proactively managed their structures and property to be more fire-safe. For instance, premiums should increase for those who have wood shingle roofs and live in a high-risk area. Or counties could create high-risk wildfire zones that come with a blanket higher insurance premium. This is being done in some places but not in enough.

Conversely, offering explicit financial incentives to make a house more fire-resistant is essential. Some actions could be easily implemented. For instance, inspections can be done when structures are built and purchased or when rebuilding to ensure that a builder or property owner has taken actions such as installing fireproof roofs, covering vents with wire mesh to keep out embers, using double- or triple-paned windows and moving flammable objects like propane tanks 30 feet from a building.

This would require insurance agents to conduct inspections and be well trained, and for local governments to establish certification programs.

One area where the insurance industry has been proactive is in initiating research. Its trade association, the Institute for Business and Home Safety, burns up buildings under controlled conditions, and the results can inform building codes. Policymakers at the state and local levels need to leverage this kind of evidence-based change to require better standards for new construction and affordable retrofits.

The real estate industry also needs to be better educated about the value of wildfire-resistant construction and landscapes, so it can use safety as a selling point while also educating the consumer about risk mitigation.

Fire season has just begun. Until we deal with the complexities of the human systems that create these problems, we are committing ourselves to a repeated cycle of disaster.


Toddi Steelman is co-director of the Fire Chasers Project at North Carolina State University and executive director of the School of Environment and Sustainability at the University of Saskatchewan.