Wildfires’ impact could drive up policy prices

By Ann McCreary

Property owners seeking new homeowners insurance policies may find it more difficult and expensive, depending on their location, as a result of the past two summers of wildfires in the Methow Valley and surrounding areas.

While fires were actively burning in the region, many insurance companies imposed a moratorium on writing new policies in areas impacted by wildfires, according to local insurance agents.

“As soon as they knew the area was evacuated” companies imposed moratoriums, said Judy McAuliffe of Libke Insurance Associates in Twisp. “All of the Highway 97 corridor got it.”

Now, as the fire season is winding down, most companies appear to be accepting new applications. However, homeowners seeking insurance for houses in some specific areas of the Methow Valley may find they have to shop around and pay a higher premium.

“A lot of companies have decided they’re just not going to write in specific areas, so it’s a lot harder to get insurance,” said Melinda Bourn, owner of Melbourn Insurance Agency. “Some are declining to write [policies] altogether, and others are choosing to write at a higher price.”

The changes appear to be specific to a couple of housing developments in the Methow Valley at this point, Bourn said.

“The two areas that are getting difficult that I’m seeing in the last few weeks are Pine Forest and Edelweiss,” she said.

“I’m not saying you can’t get any insurance at all, it just may not be as cost-effective as before,” Bourn said. “We can find a market, but it may not be what people want to pay.” In some cases insurance premiums are two or three times higher than in the past, she said.

Bourn said she’s spoken with colleagues in other areas impacted by wildfire, such as Chelan and the Okanogan Valley, who report similar problems finding insurance for homes in areas deemed at higher risk from wildfire.

“Every company is reviewing outlying areas to determine if this is an area they want to continue writing in,” Bourn said. “Certain areas are not profitable due to the wildfire threat.”

Insurance underwriters have told her their companies use information provided by firms that analyze wildfire risk for specific areas and even individual properties. One of the firms that conducts these analyses is called Verisk Analytics, which evaluates insurance risks.

The company uses remote sensing and digital mapping technology to “determine the impact of three factors that contribute to wildfire risk: fuel, slope and access,” according to the Verisk Analytics website. That information is available “at the address level,” the company said.

“I’m aware of two companies using something very much like this. They’re adopting this in many states, primarily the West Coast,” Bourn said.

A senior underwriter for Safeco Insurance, one of the principal companies used by Bourn, explained to her in an email how the company is handling policies in some wildfire-prone areas.

“Rather than stop doing business in some of the areas where we have a high wildfire potential, they have implemented an exposure assessment in the quoting system to manage the business we are writing in those areas.

“It impacts a small percentage of the business (no more than 5 percent), so you will likely not see it happen frequently, but you may quote some risks that won’t be offered a market to help manage the new business we are acquiring in those areas,” the underwriter said.

Unprecedented experience

Bourn said the scale of disaster and loss experienced during the past two summers is unprecedented in her experience. “I’ve never gone through what we’re going through, and I’ve been in insurance since 1979.” She said insurance companies are probably responding to a second summer of devastating wildfires in north central Washington.

“After two years they’re going to analyze and look at the losses they’ve experienced. It’s going to make it a lot more difficult for sure, this second wildfire year,” Bourn said. She is the insurance agent for two homeowners whose houses were completely destroyed in the Twisp River Fire, both of whom are collecting insurance.

Insurance companies are also looking at the bigger picture, Bourn said. “There were 1,400 homes lost in California. They’re not just looking at our area but looking at the West Coast and everything we’ve been experiencing,” she said.

The temporary moratorium on new policies and the decision by some companies not to write policies in certain areas means that acquiring new insurance policies has been slower in some cases, which has impacted some real estate transactions.

“People can’t get financing unless they get insurance. They’ve got deadlines for closing dates. In some cases this is the last piece of the puzzle” in a real estate deal, Bourn said.

“My office had some slowings in closings because of the moratorium, but nothing that was a tremendous problem. It was a short-lived issue,” said Dave Thomsen of Coldwell Banker Winthrop Realty.

Safeco and other companies have initiated new proactive programs to protect the properties they insure by developing wildfire defense programs, Bourn said.

Safeco began its defense program last year. In an announcement of the program, the company noted that more than twice as many acres of land in the United States were consumed by wildfire in the first three months of 2014 compared to 2013.

The Wildfire Defense Program provides crews to remove overgrown vegetation, fuel tanks and trash from property insured by Safeco. The crews may also use temporary sprinkler systems or fire engines, and will even apply fire-blocking gel to protect homes, according to a company release.

The crews are contracted through Wildfire Defense Systems Inc., a company that provides insurance companies with  wildland firefighting crews and equipment for fire prevention and suppression.

“During the wildfires when they were getting really close to town, I probably had 10 calls from the Wildfire Defense Program trying to reach owners,” Bourn said. A Gold Creek client insured through Safeco “had three to four trucks each year” at their property when the fires were threatening.

“The companies feel if they have one home they can save, it will save them money,” Bourn said.