How Cincinnati’s Method Combines the Better of Knowledge and Private Connection
Insurance Journal’s Pamela Simpson interviewed Dorothy Sarna, director of the Cincinnati Insurance Companies’ National Loss Prevention Program, to investigate the carrier’s approach to high net worth home insurance in California, Oregon, Montana and other states where wildfires have increased. At the time of this September 2020 interview, California had burned over 3 million acres and severe fires ignited across the Pacific Northwest as extreme heat and winds carried dangerous embers to numerous rural areas over Labor Day weekend.
Dorothy Sarna has more than 30 years of experience in the field of risk management and loss prevention and builds her expertise in the field of forest fires through training at the National Interagency Fire Center, the National Fire Protection Association and FireWise USA. Since joining Cincinnati Insurance in 2015, Dorothy has focused on risk management and loss prevention for high net worth real estate in the western US region.
What characteristics would make a wealthy property?
At Cincinnati, we define a high net worth home as a primary home and are insured for at least $ 1 million. This number is based on the replacement cost of that home, rather than market value, as our cover is for home replacement in the event of a total loss.
In the wake of the catastrophic California wildfires in recent years, has Cincinnati placed any restrictions on insuring the homes of high net worth individuals in California?
Due to the recent fire activities, we have more damage data available so that we can make the process more data-driven. Instead of creating restrictions, we have implemented new underwriting guidelines to assess the acceptance of the forest fire risk. First, we evaluate the risk using the modeling for forest fires. Once we get the model indicator, let’s look at other characteristics that can determine whether the house could survive a fire. These factors include building materials, topography, access, defensible space, and the condition and extent of the landscaping being managed. These characteristics, in conjunction with the model, help us determine whether to accept or reject the risk.
Can you explain the risk modeling techniques that Cincinnati uses for the real estate in these high risk areas?
The model we subscribe to combines data from highly accurate geocoding and spatial analysis with risk models based on the national hazard and risk model to provide a prediction of severity and frequency. The model not only provides an assessment for severity and frequency, but also takes into account individual exposure – vegetative fuel, canopy fire potential, wind speed, wind direction, smoke direction, street, network, outbreaks of fire, structured density, fuel islands and more. The wind characteristics and the availability of fuel have become important factors in modeling. Winds that carry embers into an area with fuel islands or onto land with combustible vegetation or debris can destroy a community. We saw this with the Woolsey Fire in Southern California in 2018, which burned nearly 100,000 acres and destroyed over 1,600 buildings when embers blew into the area from Santa Ana winds.
In addition to modeling the individual risk, we also manage our risk at company level. We operate very proactive portfolio management in order to continuously analyze the overall risk of this business area.
What kind of guidance or solutions are offered during a risk reduction or loss prevention inspection of a wealthy home in a high risk forest fire area?
When a home is in a high risk area, we have staff to do personal inspections – all with over 20 years of experience assessing brush and forest fire exposure. First and foremost, we want to help the homeowner create a defensible space around their home. We help them evaluate the possible fuel sources at various intervals – immediately around their homes, and then increase this analysis to 30 and 100 feet, and if possible up to 200 feet. We are concerned about vegetation, debris, and overhanging trees and we strongly recommend pruning or removing them. Fuels also include patio furniture, toys, play sets, and pergolas – all conveniences that are flammable.
We also look at the construction and the original year of construction of the house. Current building regulations stipulate closed ventilation slots and eaves, non-combustible structures, roofs and attachments. However, older homes often have non-regulatory building characteristics and embers can land on or near the home, catch fire, or enter through a vent. to ignite a house from the inside. Homes with combustible cladding, roofs, decks or overhangs are also very susceptible to damage from direct contact with flames or embers.
Are there any other forest fire-related services Cincinnati has high net worth homeowners that Independent Agents should be aware of?
We have an agreement with Wildfire Defense Systems, a leading provider of emergency and suppression services for policyholders in active fire situations. When a fire threatens one of our policyholders, WDS deploys state-certified firefighters who are trained and experienced in structural protection and fire fighting in wild country. If access is allowed, these responders can clear vegetation, suppress hot spots, set up temporary sprinkler systems, or, if necessary, apply gel or retarder to prevent the fire from igniting the structure.
They are our eyes and ears in these emergencies. WDS sends me updates and photos after they visit each home. With this information, I can go to a homeowner and say, “I just heard from WDS that your home is fine.” The relief I hear on the phone after giving information about their home to a policyholder is the most rewarding part of my job.
And during this process I also communicate with the insurance agent because they have the relationship with the customer. It is really important to keep the agent informed of the current situation so that they can assist their client in a very difficult time. If there is any damage, I will get in touch with our claims settlement officer immediately. We keep in touch with the homeowners and work with them throughout the process of restoring their lives.
As a final question, how would you respond to concerns that the insurance industry cannot sustain the ongoing annual losses from the California wildfires?
As an industry, we have historically found innovative ways to help policyholders reduce and manage risk. Cincinnati has started an unauthorized program in California through the Cincinnati Specialty Underwriters Insurance Company that gives us another opportunity to write a high risk business in California.
We want to continue to support the independent agents who work with us and continue to provide solutions to policyholders in these high risk locations. We know that we need to constantly evaluate our approach. To do this, we invest in the best technology and in our employees so that they understand, from an underwriting and risk management perspective, how to keep pace with developments relating to forest fire risk. Finally, we continue to educate homeowners about the measures that need to be taken to reduce the risks to their property environment and structures. We best serve our agents and their customers through a combination of exemplary tools and employees.
For more information on the Cincinnati Wildfire Program, please visit www.cinfin.com.