Wildfire Series Part 3: Protect Your Financial Exposure

In Part 1 (opens a new window) and Part 2 (opens a new window) of this series, Lockton provided recommendations to decrease the likelihood of catastrophic physical losses to your home and belongings due to wildfire. As your risk management advisor, we’ll help you avoid damage to your cherished possessions in the first place and lead you through the reimbursement process should a loss occur.

Unfortunately, even with risk controls, insurance premiums are steadily increasing. Blame it on claims severity, supply chain limitations, and inflation. Skilled labor shortages are also prolonging the claims settlement process which leads to higher temporary housing expenses.

Population density is another growing challenge for insurers. What was once a field is now a neighborhood with 100 new homes, furnishings, electronics, cars, collections, and more.

The other major contributing factor is called capacity. Regulators are asking insurers to withhold rate increases. As a result, many popular insurance carriers have decided to move out of risk-prone markets which reduces the total number of policies available. When demand exceeds supply, prices rise.

Ways to manage your rising premium expenses

  • Raise your deductibles and accept more risk. You may be able to lower premiums while improving your insurability today and into the future by adjusting your deductible limits. Your Lockton account team can walk you through the pros and cons of your particular situation.

  • Implement loss prevention measures to maximize premium credits. Many insurance carriers offer premium off-sets when proactive precautions are taken. Consider installing water monitoring and automatic shut-off devices, monitored fire/burglar alarms, and sprinkler systems. Remove brush fire hazards and upgrade to fire-resistant roofing. Don’t leave these credits on the table.

  • Pay premiums on time. If your policy cancels for non-payment, you will likely have to pay more to replace it and may also sacrifice valuable coverage terms. In some areas, carriers are no longer writing new policies and it might be a challenge to find homeowners’ coverage at all.

  • Consolidate coverage. When possible, place all your insurance with the same carrier. Most companies offer significant premium discounts for bundling homeowners’, auto, jewelry, collections, and excess policies. Another bonus: your account may be viewed more favorably from an underwriting perspective.

The combination of changing weather patterns and rollercoaster economics makes it hard to predict the future cost of homeowners’ insurance. The good news is that you can exercise some control over premium expenses when we implement these recommendations before your next renewal.

Lockton’s Private Risk Solutions team is here to help before, during, and after a claim. Contact your account team or a Lockton private risk consultant for more details.