Farmers Insurance Employs AI to Offer Wildfire Coverage to California Homeowners

Like hurricanes from the Gulf in Florida or ice storms in Minnesota, wildfires afflict parts of California with such regularity they’re to be expected. Too expected. After several years of record-breaking blazes—and another expected record-breaking fire season on the way—most private home insurance companies canceled existing wildfire policies and refused to sell new ones.

But now the winds appear to be shifting.

On Sunday, the Wall Street Journal reported Farmers Insurance is expecting to return coverage to over 30,000 homeowners in the Golden State following a partnership with Zesty.ai, a startup that uses artificial intelligence to assess a property’s risk of wildfire losses and calculate an insurance plan.

Some Like it Hot

Farmers has long been one of the state’s largest carriers, serving over 1.5 million California policyholders. But increased populations in increasingly fire-prone areas have introduced too much uncertainty and risk in covering certain regions.

Utilizing Zesty.ai’s technology, Farmers can now identify potential new clients in homeowners who had previously been pushed to find coverage from California’s FAIR Plan, the state’s insurance program of last resort.

The insurance giant will continue to employ a long-utilized model to assess geographic wildfire risk. But, with Zesty.ai’s tech, the process can now be hyper-targeted, pinpointing homes that may have low levels of fire risk despite being within an area designated as higher risk.

The move couldn’t happen quickly enough, after recent fire seasons have caused eye-popping damages:

• 2020 damages were calculated to the tune of $12 billion, including $2 in fire suppression costs and over $10 billion in property damage as over 10,000 structures were destroyed.
• In 2019, the FAIR Plan instituted an average price increase of 20.3%, after fires the previous two years cost insurance companies more than $23 billion, according to the California Department of Insurance.

State of Emergency: In all, 2020 saw over 9,639 fires burn over 4.3 million acres of Californian land. The state just recorded its driest January on record, sparking nearly triple the average of fires in the period and creating conditions that have experts raising red flags about the fire season to come.