California’s insurance commissioner Ricardo Lara recently announced two new actions intended to help survivors of the state’s recent spate of catastrophic wildfires who are facing unavoidable delays in rebuilding.
The Department of Insurance has asked insurers to extend additional living expense (ALE) coverage by a full year to survivors whose additional living expense benefits will expire within months. It also issued a second notice requesting insurers not to deduct the land value when settling total loss claims at full replacement cost – a practice many insurance firms are carrying out, according to the Department.
Kevin Daley, president of the Western Zone for the PURE Group of Insurance Companies, has applauded the California Department of Insurance’s efforts to improve consumer protection and encourage best practices among the state’s insurers. He told Insurance Business the severe wildfire problem in California can only be solved if “the insurance industry and the government work together.”
Daley compared California’s current predicament to the state of Florida about 25-years-ago, which found itself in a similar position following a string of brutal hurricane seasons. State legislature recognized that the burgeoning problem on their hands was not going away and so they enforced some aggressive building codes (such as mandatory storm shutters), which have helped to reduce the impact of storms across the state.
“I think they’ve done a really nice job in Florida from a legislative and a regulatory perspective. They’ve enacted building codes to make homes safer, they’re preserving capacity for insurance carriers – both admitted and non-admitted – and they’ve ultimately made it a safer environment for consumers to protect their homes by mandating certain requirements on new construction and so on,” said Daley.
“While California has also taken steps to address the wildfire issue. There are lots of building codes in highly exposed areas, especially around things like what building materials you can or cannot use - for example, not having wooden roofs in heavy brush-exposed areas. These things are relatively common sense, but they’re not always implemented. There’s still a lot more to do and we all need to work together to get where we want to be.”
A major problem in California, and elsewhere in extreme weather-prone areas, is the battle between what Daley refers to as “the wild land / urban interface”. Areas that traditionally were undeveloped wild zones are increasingly being urbanized, which is impacting the way that Mother Nature interacts with those areas. As the population expands and people are looking to live in more remote areas, this demographic shift is “almost upsetting the balance of nature,” explained Daley.
“The headline is: these fires are not going away,” Daley added. “There’s no indication that we will have anything other than a repeat of 2018 in 2019. We had an extremely wet winter, but all that means for us is that the fire season might start later – but we will certainly have one. This whole argument that ‘we’ve had two bad years in a row so now we’re due a break’ is invalid. There’s no science behind it, so Californians need to prepare for more fires.
“If the population wants to move out to and build in the more remote areas, we’ve got to be more responsible about what they can and cannot do when they get out there. We need to pull together as an industry and as a legislature to educate consumers and to provide best practices and knowledge. Our stance at PURE is that we’re all in this together. We all want to solve the problem. No-one in California wants their house to burn down. So, the more time we spend working together, the quicker we’ll reach an ultimate solution and a minimum standard of acceptable behaviour from an industry perspective.”