California FAIR Plan Champions Change in 2021 – After evaluating multiple solutions, California’s insurer of last resort, the California FAIR Plan, has decided to stop using an outdated wildfire risk assessment model. Instead, it has moved towards a next-generation wildfire risk model that allows for a better understanding of the wildfire risk at the individual property level. The FAIR Plan’s new model contains features used by industry-leading wildfire model providers in the next generation of wildfire risk prediction. For example, the FAIR Plan’s new model accounts for the property-level factors that contribute to wildfire risk, such as vegetation density and fire suppression capabilities, and goes one step further by evaluating the amount of defensible space in the 30-foot zone surrounding the property known as the Home Ignition Zone.
It is time the industry moves to a model that reflects mitigation actions that reduce wildfire risk on the premises or in the surrounding areas. The FAIR Plan is championing change, moving away from the ball and chain known to industry veterans as ISO, and captures the single most important issue in the property insurance market today, risk-based pricing. Accordingly, the FAIR Plan now states that with the right model “…we can charge more accurate premiums that truly reflect a property’s risk and reward homeowners for mitigation efforts they make to harden their homes.”
The California Department of Insurance (CDI) has been urging insurers and modeling companies to factor into wildfire risk assessment the mitigation steps taken. This bold move by the FAIR Plan speaks volumes to the industry about the importance of heeding CDI’s wishes—not because this will make CDI happy, but because it’s the right thing to do for the customer.
The Insurance Institute for Business & Home Safety (IBHS) has done many studies of flying firebrands at various exteriors to test the impact of the construction material on the length of time a building can withstand radiant heat without combusting. This is another important rating feature the FAIR plan has needed for some time. Current product leadership is to be commended for using a model that incorporates both construction type and defensible space for FAIR Plan customers.
Adopting change isn’t easy for anyone, and it doesn’t happen often. So when it does, the industry listens. We applaud the FAIR Plan for making this move, and we’re encouraged that the rest of the industry will follow its lead: championing change and finding better models to support next-generation wildfire risk prediction.