Creating a Healthy Insurance Market in Wildfire-Prone California
- At the 2021 Property Insurance Report National Conference, Zesty.ai founder and CEO Attila Toth took the stage with Ken Allen, Deputy Commissioner, Rate Regulation, at the California Department of Insurance (CDI), and Keith Daly, President of Personal Lines, at Farmers Insurance.
- The three executives discussed how modern models powered by artificial intelligence help insurance providers better understand wildfire risk at the individual property level, as well as how collective action between insurance carriers, state regulators, communities, and homeowners can help mitigate wildfire risk and stabilize California’s insurance market.
- Multiple rate and UW filings leveraging Z-FIRE™, Zesty.ai's predictive wildfire risk analytics solution have been approved by the CDI and other states’ Departments of Insurance.
- The CDI has proposed new rules for mitigation and risk models which Z-FIRE™ already meets.
During this year’s Property Insurance Report National Conference, Attila Toth, Zesty.ai founder and CEO, joined Ken Allen, Deputy Commissioner, Rate Regulation, at the California Department of Insurance (CDI), and Keith Daly, President of Personal Lines, at Farmers Insurance, for a discussion on how wildfires are impacting the nation’s largest Property & Casualty insurance market and what collective action can be taken to mitigate risk and increase availability of insurance in the market. Farmers is the second largest writer in California and this panel offered a unique, first-hand look at how the insurance leader has worked with Zesty.ai to answer Commissioner Lara’s call for innovative solutions that increase access to insurance while offering a transparent consumer experience for homeowners and agents across the state.
The increasing frequency and severity of wildfires has gravely impacted availability of insurance in the California market. However, there is growing understanding of how predictive risk models like Z-FIRE™ can help wildfire risk mitigation at the individual property and community levels. As seen in joint research between Zesty.ai and IBHS, mitigation efforts range from vegetation management in multiple defensible zones to hardening homes leveraging fire-safe building materials and components, such as ember-resistant vents.
As discussed in the panel, and as emphasized in the CDI’s newly drafted rules on the topic, it's not enough to simply tell a homeowner what their home’s wildfire risk score is based on a “black box” model. Carriers giving their customers a clear understanding of what factors influence their risk score, as well as what actions they can take to potentially lower their score may result in lower risk for both the property owner and carrier. It is that level of transparency and education that the CDI is calling for as a means to encourage consistent mitigation efforts at both the property and community levels.
At Zesty.ai we agree that transparency is critical for creating a healthy insurance market in wildfire-prone states and that is why we have built Z-FIRE™, a modern risk analytics solution that is already compliant with the draft regulations recently outlined by the CDI.
Farmers, which since inception has been committed to serving the California market, suffered major wildfire losses in 2017 and 2018. That led the carrier to seeking out additional solutions for assessing wildfire risk. Zesty.ai was introduced to Farmers Insurance through the 2019 Zurich Innovation Championship as one of the winners among the more than 450 startups from 49 countries around the world. After rigorous actuarial evaluations, Farmers saw great promise in Z-FIRE™’s ability to enhance its understanding of wildfire risk at the individual property level. The carrier also recognized Zesty.ai’s ability to provide reason codes along with risk scores as a key advantage for their agents and customers. In early 2021 the CDI approved Farmers’ filing that uses Z-FIRE™, and according to the Wall Street Journal Farmers could now offer coverage to at least 30,000 homes that were previously deemed too high risk.
Following Keith Daly’s talk on how Farmers is using Z-FIRE™ to understand wildfire risk in California, Attila Toth gave the audience an in-depth look at how Z-FIRE™ works. Zesty.ai built Z-FIRE™ on top of the world’s largest repository of wildfire loss data as well as 15+ data sources including aerial imagery and local weather data. Looking at property-specific factors that influence risk, such as building materials, parcel slope, and more gives insurance providers a much better understanding of what their true risk exposure is and enables them to have a data-driven dialogue with their customers.
The overarching takeaway from the discussion is that creating a healthy insurance market for California requires collective action between insurance, government, and consumers of insurance — and above all else, transparency is key for success. Thanks to the regulatory momentum behind Z-FIRE™, insurance carriers in California and beyond are now able to confidently cover more homes with premiums that truly commensurate that individual property’s risk, while giving their customers a clear understanding of what informs their home’s risk score and how they can potentially lower it.
Zesty.ai offers access to precise intelligence about every property in North America for insurance and real estate customers. The company uses aerial imagery, permit, transaction, weather and IoT data, combined with artificial intelligence (AI) to turn more than 200 billion data points into comprehensive digital records and property-specific risk scores. Zesty.ai provides a constantly updated database of real estate information that impacts a property’s value and associated risks including the potential impact of catastrophic events like wildfires, hail storms, and floods. In an increasingly digital world, Zesty.ai brings properties into a new digital age that enables real time transactions and powerful predictive analytics. Visit https://zesty.ai for more information.