My home in coastal California is insured with State Farm, both for regular coverage and for earthquake coverage.
Yesterday I received a post card in the mail from State Farm. The whole thing (almost) is worth quoting:
When and where will wildfire protection services begin?
Beginning April 1, 2021 [DRH note: this means it has already begun], Wildfire Defense Systems (WDS), under an agreement with State Farm, will provide wildfire protection services to customers with Homeowners and Farm policies in California, Arizona, Washington, Colorado and Oregon. [In light of the service, I’ll forgive the absence of the Oxford comma after “Colorado.”]
What will the service cost?
There is no additional charge to you for this service. [DRH note: Of course that doesn’t answer the question but it does answer what most customers would mean if they asked the question.]
How will this service protect your home?
If your home is located in an area with an active wildfire, WDS may visit your property to assess the threat and may take proactive measures. They’ll determine appropriate mitigation methods based on their professional judgment which may include: removing pine needles from your roof, closing up exposed vents so embers do not enter your home, clearing combustibles away from your home, setting up sprinkler systems, extinguishing active fire or smoldering embers on your property, and in some cases, applying fire-resistant gel to your home. If mitigation services are provided, the WDS crew may revisit your home once the fire risk passes to remove their equipment, return previously moved materials back to their original location, and clean the gel from your home if applied.
I’ve left off the rest of the postcard because it’s less interesting.
I’m not surprised that my insurance rate is not going up. If State Farm can spend, say, $1,000 to reduce the probability of a $300,000 loss by 1 in 200, then it’s worth it for State Farm. And of course I gain too.
READER COMMENTS
Jo VB
Apr 11 2021 at 3:39am
Not to mention all this free advertising they are getting.
Thomas Lee Hutcheson
Apr 11 2021 at 6:59am
My surprise is rather that the structures that typically burn in wildfires do have prohibitive insurance rates. I look at the pictures and ask, “How did that place get ANY coverage?” And PGE. How much was it paying for liability insurance on those transmission lines?
Not in California but what about those dams that fail? Who was the liability insurer of those assets and why didn’t it insist on better maintenance?
Same for coastal, river flooding. Why do not forward-looking insurance rate setting discourage placing some of those assets in harm’s way?
Andrew_FL
Apr 12 2021 at 2:46pm
I don’t even need to look at California’s insurance regulations to be virtually certain that what you’ve just described is illegal under them, and probably most states.
Alan Goldhammer
Apr 12 2021 at 3:10pm
Is not this covered by Federal flood insurance? I’m not sure private insurers underwrite this.
Jardinero1
Apr 11 2021 at 3:45pm
I have been selling property insurance in hurricane country for over twenty years. This type of aggressive stop loss mitigation nearly always precedes a rate increase or series of increases.
David Seltzer
Apr 11 2021 at 6:19pm
“If State Farm can spend, say, $1,000 to reduce the probability of a $300,000 loss by 1 in 200, then it’s worth it for State Farm. And of course I gain too.” Nice example. When I was teaching derivatives at Loyola of Chicago School of Business, I explained financial puts using a similar example.
Michael Markovitch
May 1 2021 at 1:41pm
We have USAA, have had it since 1980. They have also provided the same service for our house, in the same general area of coastal California where you live. Premium has gone up but little. We love USAA, too.
Read your Reason article re the economic impact of the ChiCom Flu. Have a lot of background in computer-based training and remote learning. If interested, please contact me and I can tell you about what we did. We did things the right way and we still had a lot of problems and issues before any of the systems started training students. I wasn’t surprised at all to hear of the general failure of hurriedly put together online learning schemes.
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