Insights for Your Industry firebreaks, and institute other measures to limit the spread of fire, withstand the effects of fire, and suppress fires where they occur. Whatever the condition of the climate or the effectiveness of the federal response, property owners and local officials have some ability over the long run to curb their exposure to wildfire. In the short term, however, there is a scramble to adjust to a new normal in the West. Property insurers, policyholders, and claims adjusters are also adjusting to new conditions created by the surge in wildfire losses. That may come as a surprise, since fire loss is the oldest peril insured under residential and commercial property policies, long known as “fire” policies before coverage for other causes of loss (“perils”) was added to them. “What was once a consistent underwriting and pricing environment has now become what is an ever-changing marketplace,” says Matthew Davis, president of GDI Insurance Agency in Turlock, California. “We’ve had to adjust our initial interactions with clients to prepare them for potential price increases and coverage limitations.” Among other things, Davis says insurance buyers need to budget for substantial premium increases over three to five years. For claim adjusters, the situation would seem to be straightforward: If something is covered by a “fire” policy, and it burns, it’s covered up to the limit of insurance (presuming it isn’t set intentionally by the insured). That’s true, but the recent rise in wildfire losses to dwellings has led to widespread indications that most were underinsured for the cost of reconstructing their homes. A recent edition of Adjusting Today5, another publication of Adjusters International, describes the various factors that PAGE 2 Wildfires Continued homeowners, their agents and brokers, and claim adjusters must consider when establishing coverage and getting the full benefit of it, should a loss occur. Those factors include: • The dollar amount of insurance established to cover a dwelling or other structure (the “limit”); • The relation of that amount to the actual cost of reconstructing a structure; • The “loss settlement” terms for applying that limit to a loss; and • The amount of additional insurance provided for costs of demolition, debris removal, and building code upgrades. Worst of Two Worlds In itself, wildfire does not raise fundamentally new questions about insurance and loss adjusting. As already indicated, fire is a well-known and widely-adjudicated property insurance peril. But the high levels of wildfire loss frequency and severity seen in the 21st century have added new dimensions to consideration of what constitutes adequate insurance coverage. E13-1026 PROTECTING YOUR PROPERTY 888.321.5200 | ai-mbc.com Sheila E. Salvatore, Editor | Editor@AdjustersInternational.com Copyright © 2022 Adjusters International, Ltd. All Rights Reserved. Insights for Your Industry® is published as a public service by Adjusters International, Ltd. It is provided for general information and is not intended to replace professional insurance, legal and/or financial advice for specific cases.
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