Several reasons exist why an insurance company in 2024 might require a wildfire preparedness compliance report for underwriting purposes:
Increased Wildfire Risk: Wildfires have become a more frequent and severe threat across many regions. This trend is expected to continue due to factors like climate change and land management practices. By requiring a wildfire preparedness report, insurance companies can assess the specific risk posed by a property’s location and mitigation efforts.
Impact on Premiums: Properties in high-risk wildfire zones or with inadequate mitigation measures might face higher insurance premiums. The report allows insurers to tailor premiums based on the actual risk profile.
Reduced Claims: By encouraging wildfire preparedness, insurance companies aim to reduce the number and severity of wildfire-related claims. A report demonstrating mitigation efforts showcases a property owner’s proactiveness in protecting their property, potentially leading to lower premiums or even discounts for some companies.
Regulation: Following the California Code of Regulations Section 2644.9 (effective October 14, 2022), some insurers in California must consider wildfire mitigation efforts when setting premiums. The underwriting report could be a way for insurers to comply with such regulations.
Here are some of the things a wildfire preparedness compliance report might cover:
- Property location: Distance to nearby forests or other potential fuel sources.
- Vegetation management: Clearing of brush, trees, and other flammable materials around the property.
- Roofing materials: Use of fire-resistant roofing materials.
- Ember protection: Properly functioning gutters, screens on vents, and other measures to prevent embers from entering the property.
- Defensible space: Creating a designated area around the property with minimal flammable materials.
- Emergency evacuation plan: A plan for safely evacuating the property in case of a wildfire.
By requiring and reviewing these reports, insurance companies can get a better understanding of an applicant’s wildfire risk and make more informed decisions about coverage and pricing. This can ultimately benefit both the insurer and the policyholder by promoting wildfire safety and potentially reducing the financial burden of wildfires for everyone involved.