How Cincinnati’s Approach Combines the Best of Data and Personal Connection

Insurance Journal’s Pamela Simpson interviewed Dorothy Sarna, National Loss Prevention Program Director of The Cincinnati Insurance Companies, to explore the carrier’s approach to underwriting high net worth home insurance in California, Oregon, Montana and other states experiencing increased incidents of wildfires. At the time of this September 2020 interview, more than 3 million acres had burned in California and severe fires were igniting throughout the Pacific Northwest as extreme heats and winds carried dangerous embers into numerous rural areas over the Labor Day weekend.

Dorothy Sarna has over 30 years of experience in risk management and loss prevention, building her wildfire expertise through training with the National Interagency Fire Center, National Fire Protection Association and FireWise USA. Since joining Cincinnati Insurance in 2015, Dorothy has concentrated on risk management and loss prevention for high net worth properties in the Western region of the US.

What are the characteristics that would define a high net worth property?

At Cincinnati, our definition of a high net worth home is one that is occupied as a primary home and is insured for $1 million or above. That figure is based on replacement cost of that home, not the market value, as our coverage provides for the replacement of the home in the event of a total loss.

As a result of the catastrophic wildfires prevailing in California over the last few years, has Cincinnati set restrictions on insuring high net worth individuals’ homes in California?

As a result of all the recent fire activity, we have more claims data available to us, enabling us to take a more data-driven approach to the process. Rather than create restrictions, we implemented new underwriting guidelines to help us evaluate the acceptability of the wildfire risk. First, we evaluate the risk based on how it models for wildfire. Once we get the model indicator, we look at other characteristics that can determine if the home could survive a fire. These factors include construction materials, topography, access, defensible space and the condition and extent of managed landscaping. Those characteristics help us determine, in conjunction with the model, whether or not we think we should accept or decline the risk.

Can you elaborate on the risk modeling techniques utilized by Cincinnati for the properties in these high-risk areas?

The model that we subscribe to combines data from highly accurate geocoding and spatial analysis with risk modeling based on the national hazard and risk model to arrive at a prediction of severity and frequency. In addition to providing a score for severity and frequency, the model then takes into consideration the individual exposure – vegetative fuel, potential for crown fire, wind speed, wind direction, smoke direction, road, network, firebreaks, structured density, fuel islands and more. Wind characteristics and the availability of fuel have become significant factors in modeling. Winds carrying embers into an area with fuel islands or onto properties with flammable vegetation or debris can devastate a community. We saw this with the Woolsey fire in southern California in 2018 where nearly 100,000 acres were burned, destroying over 1,600 structures as embers blew into the area due to Santa Ana winds.

In addition to modeling individual risk, we are also managing our risk at a company level. We engage in very proactive portfolio management to continually analyze the overall risk level of this business line.

During a risk mitigation or loss prevention inspection at a high net worth home located in a wildfire high-risk area, what type of guidance or solutions are being offered?

If a home is in a high-risk area, we have associates who conduct in-person inspections – all with over 20 years of experience in evaluating brush and wildfire exposures. First and foremost, we want to help the homeowner create defensible space around their home. We help them evaluate the possible fuel sources at different intervals – immediately surrounding their homes, then increasing that analysis to 30 and 100 feet and up to 200′ if possible. We are concerned about vegetation, debris and overhanging trees and strongly suggest those be trimmed or removed. Fuel also includes lawn furniture, toys, play sets, pergolas – any amenities that are combustible.

We also look at construction and original year built of the home. Current building codes specify closed vents and eaves, non-combustible construction, roof and attachments, but older homes often have building characteristics that do not meet code and embers can land on or near the home, catch on fire, or enter through a vent, causing a home to ignite from within. Homes with any combustible exterior siding, roof, deck areas or overhangs are also very susceptible to damage due to direct flame contact or embers.

Are there any other wildfire-related services that Cincinnati provides high net worth homeowners that independent agents should know about?

We’ve contracted with Wildfire Defense Systems, a leader in providing emergency response and suppression services to policyholders during active fires. When a fire is threatening one of our policyholders, WDS deploys federally certified firefighters, who are trained and experienced in structure protection and wild land firefighting. When access is permitted, these responders can clear vegetation, suppress hot spots, set up temporary sprinkler systems or, if necessary, apply gel or retardant to prevent the fire from igniting the structure.

They are our eyes and ears during these emergencies. WDS sends me updates and photos after they visit each home. With that information, I am able to reach out to a homeowner and say, “I just heard from WDS, your home is fine.” The relief I hear on the phone after conveying information to a policyholder about their home is the most rewarding part of my job.

And throughout this process, I’m communicating with the insurance agent as well, because they’re the ones that have the relationship with the client. It is really important to keep the agent informed of the situation as it unfolds so they can support their client during a very difficult time. Should damage occur, I immediate engage our claims associates. We’ll remain in contact with the homeowners and work with them through the entire process of putting their lives back together.

As a final question, how would you respond to concerns that the insurance industry can’t sustain continued annual losses from the wildfires in California?

As an industry, we have a history of finding innovative ways to help policyholder reduce and manage risk. Cincinnati launched a non-admitted program in California through The Cincinnati Specialty Underwriters Insurance Company, which allows us another avenue to underwrite high risk business in California.

We want to continue to support the independent agents who work with us and to keep offering solutions to the policyholders in these high-risk locations. We know that we have to constantly evaluate our approach, and to do so, we are investing in the best technology and investing in our staff so that they understand from an underwriting and risk management perspective, how to remain abreast of the developments around wildfire risk. Finally, we continue to educate homeowners on the measures to take to reduce the risks to their property surroundings and structures. Truly, we serve our agents and their clients best through a combination of exemplary tools and people.

For more information on Cincinnati’s wildfire program visit www.cinfin.com.