Wildfire risk in the United States is growing more intense, frequent, and costly—driven by a confluence of climate change, prolonged drought, and expanding development in wildland-urban interfaces. At the same time, insurance coverage is becoming harder for consumers to obtain as premiums rise and some insurers exit markets or decline to write new risks
Here are five key ways technologies and revised processes are helping insurance organizations better predict and protect against these events:
1. AI-risk modeling for smarter decisions: Insurers have a wealth of information beyond historical data to use when developing catastrophe models. AI powered platforms can integrate weather patterns, vegetation states along with historical burn data to forecast wildfire frequency and severity. These models also take into account economic and public health impacts. This allows insurers to project loss outcomes more precisely as well as inform policy structures. Advanced models also incorporate mitigation efficacy – such as the impact of prescribed burns – into risk evaluations.
Using AI-powered models enables insurers to offer coverage in high risk areas by tailoring coverage to individual properties rather than rely on broad regional assessments.. Earlier this year, Verisk submitted its wildfire catastrophe model to the California Department of Insurance for review. This is in response to a new regulatory framework which would allow insurers to use catastrophe models for rate setting. The model would enable insurers to more accurately assess and price risk in wildfire prone areas.
2. Emerging tech for advanced detection and prevention: The faster a wildfire can be detected the more likely it can be contained before impacting a large area. Geospatial technologies, including satellite imagery and drone surveillance, enable near real-time wildfire detection and spread analysis. High risk areas are also deploying AI powered camera systems to help aid in the detection of new fires. ALERTCalifornia is a network of over 1,100 cameras scanning thousands of miles of landscape to detect smoke and alert firefighters.
New technologies are also supporting wildfire prevention. There are tools that assist with controlled burns helping to create a more resilient landscape. There are also solutions that connect homeowners with firefighters offering guidance on how to protect their properties such as removing debris or eliminating trees close to the house.
3. New avenues of protection with parametric insurance: For homeowners in high-risk areas who struggle to secure traditional coverage—or whose policies fall short—parametric insurance offers a viable alternative. These products provide a pre-defined payout triggered by specific wildfire related metrics. For example, a homeowner could receive their set payout if the wildfire crosses the boundary of a covered property.
Many parametric insurance providers are using AI to assess advanced data points including geospatial, spatial, and satellite imagery compiled with a variety of other metrics to better assess exposures and accurately define parameters.
4. Incentivize risk mitigation at the property level: One dollar spent on wildfire mitigation can save $7 in wildfire claims according to research. Insurers can create programs offering premium discounts or better coverage terms to homes that utilize fire prevention best practices such as fire-resistant building materials, defensible space, and ember resistant vents.
Insurance companies can also educate property owners when new technologies enter the market that could further protect their homes. Automated exterior sprinkler systems turn on when wildfires are close to a property dowsing the area in water to make it less susceptible. Smart irrigation systems ensure vegetation around the home is properly watered so it becomes less flammable.
5. Update risk models more frequently: The wildfire risk landscape is changing rapidly. Insurers who only update their models once a year are often operating with outdated data. Insurance companies should adjust exposure and risk models more frequently incorporating dynamic data feeds such as live fuel moisture content, red flag warnings, and fire occurrence trends.
Wildfire risk is a core part of the U.S. catastrophe landscape. When insurers take a technology-first mindset that emphasizes agility, transparency, and forward-looking analytics, the right changes to insurance policies and products can be made. Modernizing wildfire modeling, promoting innovation in risk transfer products, and expanding access to protection through smarter underwriting are all critical steps. As climate volatility reshapes the map of insurable risk, those who lead with data and invest in resilience will be best positioned to navigate the challenges—and opportunities—of this new era.
