Wildfires have become an increasingly destructive and costly force in recent years, posing a significant challenge to the insurance sector.
Just last month, California’s insurance market was rattled by the news of two insurance giants halting the issuance of new home insurance policies in the state, with both State Farm and Allstate citing wildfire exposure as one the reasons driving their decision.
Recognizing the need to address insurers’ concerns, data technology firm ICEYE recently announced the beta release of Wildfire Insights, a new product that offers near real-time tracking and assessment of wildfire events.
To provide more information on the new product, ICEYE global head of insurance Stephen Lathrope (pictured) shed light on the rationale behind its development. He also delved into the challenges insurers face during wildfire events, and how ICEYE will work with insurers during the product’s beta-testing phase.
A number of countries around the world have experienced a significant increase in the frequency and severity of wildfire events in recent years, exacerbated by climate change-driven strong winds and drought conditions, and inadequate forest management practices.
In the Western United States, a spate of major wildfires in August 2020 across California, Oregon, and Washington, was followed by more West Coast fires in early September, causing an estimated $19.1bn of property damage. According to the NOAA’s database, five of the ten most costly wildfires in the US have occurred in the past five years, with the 2020 Western US wildfires the third most expensive.
All of this points to an increasingly pernicious peril that presents the global economy, communities and businesses in multiple countries, and the international insurance sector, with substantial challenges. Some insurers have retrenched from providing coverage in the worst-affected regions, arguing that underwriting wildfire risks has become unsustainable.
The genesis of ICEYE Wildfire Insights was the need for a product that would enable insurers and other stakeholders to track the progress of wildfires in near real-time, assess the level of damage in affected areas, implement mitigation strategies to control the spread of fires, and expedite claims more quickly.
While existing imaging solutions can provide updates on a fire’s footprint, they have limited capabilities and can’t provide data about the impact on properties within the footprint. Although optical imagery from satellites is now widely available, it’s only possible to capture images during daylight hours, and the technology can’t penetrate through clouds and smoke.
ICEYE’s Synthetic Aperture Radar (SAR) technology already provides near real-time data on flooding events, including at night and through cloud cover or smoke, so we were poised to transform how insurers and disaster response teams could assess wildfire damage.
When a wildfire takes hold and starts to progress, it moves rapidly. In the early stages of a fire, few people have a clear picture of what's going on, those on the ground being evacuated don't know what's happening to their properties, and only the emergency services can get close to assess the impact.
The ability to assess damage and establish proof of loss can therefore be nearly impossible when restricted access to affected areas or heavy ash and smoke make observation difficult. This will hinder the claims process and delay communication with stakeholders. It can also limit attempts to determine the likely spread of the fire and direct mitigating actions to halt its spread.
However, using the same SAR technology that we use for flood impact assessments worldwide, ICEYE can track wildfire events in near real-time and share valuable data insights with stakeholders. Not only can we provide rapid feedback during a wildfire event, and updates at subsequent 24-hour intervals, we’re also able to assess actual damage to buildings as a wildfire is ongoing. All of this enables insurers to assess their exposures and expedite claims more quickly.
To the agencies involved in protecting people and property, we can offer building-level information on what is happening on the ground and, using various data sources, determine where there are active fires and map their proximity to built-up areas.
These early warnings will become increasingly important as wildfire-prone communities seek to improve their response and resilience capabilities.
One of the primary advantages of our Wildfire Insights product is that users can assess the level of damage caused as the wildfire event is developing. Our methodology, which is based on machine learning, can determine from the available image data which structures within the wildfire footprint are intact and which have been destroyed.
These impact assessments have been verified against FEMA post-event summaries of damage and have demonstrated a good level of accuracy, proving highly beneficial to insurers who need to know about the level of support required for evacuated communities.
Families who have been evacuated from a wildfire zone may be unaware that their home is still intact. If the insurance company is aware, they can advise their client that it is possible for them to return to their property. Conversely, suppose the insurer knows a particular property has been completely destroyed. In that case, they have early warning of a large property claim, they know they will need to support an insured who has lost their home, and they are aware that they will incur the cost of alternative accommodation for a lengthy period.
As these events become more frequent and more severe, having rapid, near real-time insights into which properties have been destroyed and which are intact, rather than having to wait until the emergency services have finished their work, provides benefits including improved communications with customers, and a reduction in the cost of claims processing and provision of emergency accommodation.
We will be working with insurers to enhance our understanding of the operational applications of this product and the near real-time wildfire insights it provides, and the powerful damage reporting capability it delivers to their businesses.
For (re)insurance companies, the product offers an initial damage assessment of which properties have been destroyed and which are undamaged, which will need to be followed up with an on-the-ground loss assessment for properties that have suffered partial damage – although partial damage is quite rare with wildfires.
ICEYE’s insights can assist with this second stage by indicating where resources would be best deployed and ensuring the ongoing safety of on-the-ground personnel.
Following successful beta phase testing, ICEYE plans to roll out its Wildfire Building Damage Assessment product by the end of the year, initially focusing on the US. We are then looking to expand the product to Australia and Canada.
There is significant potential to build upon the product in the future, in devising innovative risk transfer solutions, rolling it out to further wildfire-affected regions, and broadening the range of assets we monitor and assess - for instance, for loss of automobiles, or working with farmers to assess damage to land, crops, farm buildings and machinery.
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