Wall Street Journal — 11.05.2017
By Leslie Scism
During the worst of last month’s wildfires in Northern California, Dick Fredericks got a phone call that passed on “some magical words”: His house was safe.
The message from a private firefighting service hired by his home insurer, Chubb Ltd. CB -0.66% , was accompanied by an email with some two dozen photos, including one of the service’s firefighters pumping water from Mr. Fredericks’s swimming pool to extinguish a brush fire on his Sonoma Valley property.
Increasingly, insurance carriers are finding wildfires, such as those in California, are an opportunity to provide protection beyond what most people get through publicly funded fire fighting. Some insurers say they typically get new customers when homeowners see the special treatment received by neighbors during big fires.
“The enrollment has taken off dramatically over the years as people have seen us save homes,” Paul Krump, a senior executive at Chubb, said of the insurer’s Wildfire Defense Services. “It’s absolutely growing leaps and bounds.”
The services are complimentary to policyholders in certain ZIP Codes or states that are prone to wildfires. Some insurers require policyholders to enroll in the programs in advance, to give permission for workers to access the property and to obtain contact information.
Chubb’s service, which began in 2008, is offered in 15 states. American International Group Inc. AIG -4.59% launched its Wildfire Protection Unit in 2005 in 14 California ZIP Codes. The unit has since expanded to 385 ZIP Codes in California, Colorado and Texas. Other insurers extending services include Privilege Underwriters Reciprocal Exchange, or PURE, and USAA.
Tens of thousands of people benefit from the programs. For their overall insurance, policyholders can pay anywhere from thousands of dollars in annual premiums with these firms to more than $100,000, depending on the number and types of homes and other possessions they insure.
Consumer advocates lament that the programs mean the rich can get better fire protection, because the services mostly have been available at insurers of the well-to-do.
“Do we like the idea of a two-tier system for wealthy individuals and people with less means? No,” said Amy Bach, executive director of United Policyholders, a national insurance-focused consumer nonprofit based in California. “But do we want to see their approaches work? Yes,” she added.
The private-sector activity calls to mind the early days of fire insurance in the U.S., in the 18th and 19th centuries before municipal fire services became common. Back then, metal-plaque “fire marks” were affixed to the front of insured buildings as a guide for insurers’ own fire brigades as to which fires to put out, said spokeswoman Loretta Worters of the Insurance Information Institute.
Scott McLean, a spokesman for the California Department of Forestry and Fire Protection, known as Cal Fire, said the state has procedures in place to coordinate with the private-sector crews. They are allowed to visit properties only after obtaining permission of an incident commander.
The insurers run “intelligence” or “command” centers from which they deploy these field forces. “Our goal is to be out in front of a fire…before the fire is burning up the hillside,” said Stephen Poux, head of risk-management services and loss prevention at AIG.
The private crews seek to clear combustible items from a property: wood piles, outdoor furniture including cushions, weeds, straw floor mats and leaves in gutters. They may set up sprinklers with water available at the location, or with water they bring to the site, along with sprinkler lines and a generator to operate them.
Insurers sometimes spray a property’s perimeter with fire retardants, such as foams or gels. The may even spray the home itself, though they typically don’t take this step until a fire is closing in.
“The foam is short-lived, which is why we proactively work with members and take multiple precautions,” said Martin Hartley, chief operating officer of policyholder-owned insurer PURE.
The logistics are challenging, he said, because crews may not get access later if they have misjudged the fire’s speed.
Mr. Fredericks, the founding partner of Main Management Fund Advisors LLC in San Francisco and a former U.S. ambassador to Switzerland and Liechtenstein, said he began checking in with Chubb’s Wildfire Defense Services team as fire became a danger to the Sonoma area.
“The fire was so pervasive,” he said. “As a homeowner you want to try everything to save your home, and the first responders can’t be everywhere at once. The fact that Chubb supplemented an unbelievable effort by the first responders is probably what saved our home.”