Tag Archives: california

Keeping an Eye on Consumer Privacy

The pandemic has caused many predictions for 2020 to be spectacularly wrong. One exception is that data privacy and compliance will become even more important, specifically because of the introduction of the California Consumer Privacy Act (CCPA). 

For carriers that work with consumers in California, the legislation created a list of compliance considerations. Californians now have the right to know what information companies have, request that it not be sold and request that it be deleted unless it is in conflict with another law (very important to note that last piece for our highly regulated industry). Businesses must also provide a link that says, “Do Not Sell My Information,” which enables the consumers to make their opt-out request. 

Let’s take a look at three of the many concerns related to CCPA:

  • Data Breaches: Protecting a consumer’s private and sensitive information should be a top priority, as data breaches have become more common and have resulted in damaging headlines and expensive settlements. Given the nature of our industry and the amount of personal information exchanged, insurers are a prime target for cyber attacks, and we will certainly see them fall victim to data breaches.
  • Identify Theft: Insurers need to be certain that they are not responding to these consumer requests without reasonable verification that the consumer making the request is the actual consumer in question and not a bad actor trying to steal consumer information.  
  • Compliance: Carriers should consider hiring a compliance vendor or outside counsel well-informed on CCPA to make these situations more navigable. These partners act as a referee, offering valuable third-party input to verify that a safe and compliant process is in place. This partnership can provide a paper trail (if needed) to document that the required data usage and privacy notices were communicated to consumers. If trouble arises, it can be advantageous to have an independent third party defending you.

See also: CCPA: First of Many Painful Privacy Laws  

Working With Technology Partners

Since CCPA’s initial rollout on Jan. 1, insurance carriers that conduct business with Californians have been trying to reach full compliance before enforcement actions are scheduled to begin on July 1. For most, working with a technology partner, especially a data-as-a-service (DaaS) company, can be monumental in navigating the ins and outs of the new compliance standards. Here at Jornaya, we recently extended our compliance product suite to assist companies in meeting the requirements of the CCPA, as well as potential future state and federal regulations.

As CCPA goes into effect, plenty of other states are looking to it as a blueprint for creating their own data privacy laws. Nevada, New York, Texas and Washington are just a few states where legislators are starting to follow California’s lead by introducing privacy bills.

Creating Better Customer Experience

These laws are trying to provide transparency about what data is being collected on a consumer and how it is being collected and allowing the consumer to be in the driver’s seat as to how that data is going to be used. 

Privacy regulations, like the CCPA, are simply about doing the right thing for the consumer. And the consequences of not paying attention and not doing the right thing by consumers with regard to their privacy can be devastating, not only in terms of potential legal action but also in the loss of consumer trust and associated sales. 

Disclaimer: Any and all content provided (material, information, graphics, etc.), and any other versions and variations of the content (e.g. in .pdf via email or otherwise) is provided only for general information. It is not intended to serve as, or as a substitute for, legal or compliance recommendations; to advise or infer to be used in any particular way by you or your company, and not intended to be used as a basis for making business/commercial decisions.

Grasping the Perils of Extreme Weather

In 2018, extreme weather had a devastating impact on certain states – primarily driven by increasing severity, rather than frequency, of catastrophic events. LexisNexis Risk Solutions‘ recently released, fourth annual Home Trends Report highlights the impact that the 2018 extreme weather events had on insurance losses. A staggering 56% of all catastrophe claims come from just four states: California, Colorado, Florida and North Carolina.

States hit by Hurricanes Florence and Michael, the California wildfires and severe hail saw the most catastrophic losses. Claims in these states are also up to 56% from the 36% of claims these states accounted for in 2017. The latest Home Trends Report underscores the growing need for insurers to understand and respond to by-peril loss trends and the potential for climate change and extreme weather to drive these losses.

While fire losses have continued to increase since 2012, catastrophe claims accounted for nearly 40% of fire losses in 2018 – the highest in a decade and a significant jump from the previous high of 15%. As a result of hurricane devastation to North Carolina and Florida, 2018 was also the worst year on record for wind claim severity, up 15% from 2017. Hurricane devastation also led to a costlier September in North Carolina, with loss costs 17 times more than a typical September. While Colorado was unaffected by the hurricanes and wildfires, the state ranked the highest in loss cost overall for 2018, as well as the highest over the six-year period (2013-2018) that the study tracks. In terms of hail, Texas continued to top the nation for claims, representing 29% of total volume.

See also: The Future of Home Maintenance  

The report highlights some of the challenges that home insurance carriers face in managing by-peril risks, including increasing severity and unpredictability of weather-related patterns and their impact on catastrophic claims. The report also underscores how it is imperative that home insurance carriers collect, analyze and use aggregated by-peril data to help generate a deeper understanding of the risks associated with a particular location and of how to price future policies accordingly. For the long term, aggregated by-peril data can enable more accurate pricing, a healthier book of business.

If you are interested in learning more about the impact of extreme weather events on insurance losses, click here for the LexisNexis Home Trends Report.

Wildfire Season: ‘The New Abnormal’?

Each year, California burns. With another record wildfire season come and gone, each new season seems worse than the last. While mitigation against firestorms is tricky, evolving technologies like fire-fighting foam—used for pretreatment and suppression sprayed around a property or on combustible building materials—can help businesses avoid peril and keep doors open as long as possible.

In 2018, major fires stretched from the Oregon border in Northern California south to the Los Angeles suburbs – a distance of over 685 miles (1,100 km). The worst was the Camp Fire (so called because of its outbreak on Camp Creek Road in Butte County), which broke a 2017 record for the number of structures destroyed (15,573 – 472 of which were commercial) and killed over 80 people, according to CBS News. It became the deadliest wildfire in California’s history and the worst in a century in the U.S., according to the state of California.

Three fires alone – the Camp, Woolsey and Hill fires – caused total insured losses of $9.05 billion, which could balloon to over $13 billion when final tallies are in. CoreLogic, a third-party loss estimator, places total California wildfire losses for 2018 at between $15 billion and $19 billion.

Of the 20 largest wildfires in California history, 15 have occurred since 2000. While data shows the overall frequency of wildfires has remained relatively constant season-on-season, the size, volatility and impact of wildfire events has dramatically increased.

Is this a new normal? Can improved risk mitigation techniques help extinguish wildfires once and for all?

Reinsurance and risk modeling experts have begun using terms such as “mega-fires” and “the new abnormal” when mentioning recent wildfire trends and also identify several contributing trends to worsening conflagrations.

See also: Spreading Damage From Wildfires  

Some of these factor include an increase in property development in and adjacent to areas between unoccupied land and human development; an increase in fuel loads such as dead trees on the ground; an increase in weather volatility from year to year; longer dry seasons; intense seasonal winds that change fire behavior; and, multiple fires erupting at the same time and often in close proximity.

Foam “coverage” for fire-protection

Among fire mitigation solutions, one of the more novel has been the application of environmentally safe, biodegradable fire-fighting foam used for pretreatment and suppression around a property’s perimeter and buildings where the fire threat is imminent. One such solution, marketed by Consumer Fire Products, Inc. (CFPI), a professionally trained brigade of fire professionals dedicated to wildfire property protection, is applied manually from private fire trucks fashioned with state-of-the-art equipment. The brigades coordinate closely with local incident command centers and operate within active fire zones, at the behest of insurers and other interested parties.

Major insurers often work with companies like CFPI to evaluate exposed locations, assess fire threats and prioritize deployment of resources. Customers with significant exposure and within close proximity to the forecast fire path could be identified, allowing CFPI to patrol these locations and take precautionary measures such as clearing brush, relocating flammable materials away from combustible construction and, as a last resort when under imminent threat, spraying buildings and foliage with biodegradable, fire-fighting foam.

Although the ability to know exactly where to invest and deploy protective services real-time is challenging, the concerted monitoring of conditions with underwriters has enabled protection services, once deployed, to continue until conditions like wind speed, low humidity and underbrush dryness have diminished enough over a seven-day period to safely discontinue services.

Insurance support

Innovative approaches and services represent part of the new frontier in predictive and proactive mitigation responses. As such capabilities emerge, it is imperative that the insurance industry be at the center of any such dialogue.

After an event, insurers should ramp up communication efforts with customers – making immediate contact and maintaining it until adjusters can access affected areas to assess damages, advance funds and analyze and facilitate customer needs (e.g. finding temporary storage locations or modifying existing undamaged structures).

Besides property insurance, which covers existing structures, and time element coverages to protect against business interruption, some “inland marine” coverages can also help in the rebuilding phase (e.g. repairing a burned-out site that is damaged by ensuing mudslides), like builders’ risk, installation floaters, riggers liability and construction block.

Mudslide Mitigation

Heavy rains during the wet season in previously burned areas can often cause devastating mudslides, which can further exacerbate and even increase property loss. According to the State of California Department of Insurance, insured losses from the 2018 mudslides—which especially hit the Santa Barbara area hard—resulted in 358 commercial property claims, totaling $129.2 million. Taking all claims into account – commercial and personal property – the grand total was $589.5 million, according to CBS News. Damages from mudslides can be as costly as damages from fires.

Some tips to mitigate mudslide dangers include monitoring local warnings to know if you are in a mudslide-prone area; being aware of your surroundings and the possibility of mudslides; and, being mindful of the potential for large pieces of landscape, including trees, logs, boulders and other debris fields, as well as “floating” destroyed houses, buildings, vehicles, etc. to fall or move in your vicinity.

See also: How to Fight Growing Risk of Wildfire  

Insurers can now strengthen their clients’ defense and better preserve their property partnership with policyholders. They are looking into how this in-event mitigation service on a large scale can be tailored to meet the customers exposed to various natural perils. By doing this, top insurers are taking risk prevention and mitigation to the next level.

CA’s ADR ‘Carve-Out’ Offers Key Advantages

When the California legislature established a workers’ compensation system in 1913, it was designed to mandate insurance to rapidly provide desperately needed medical treatment and wage loss mitigation to injured workers. In return, injured workers would not be able to sue in civil court and receive massive verdicts that could bankrupt businesses or receive punitive damages or “pain and suffering” beyond the scope of the medical findings.

There were three prongs of the Safety Act of 1913, also known as the Boynton Act. First, it provided compensation to injured workers. Second, it required employers to purchase insurance and established a state insurance company, known as the State Compensation Insurance Fund, in case employers could not acquire other insurance coverage. Third, it gave the state power to make and enforce safety rules and regulations, to prescribe safety devices to be used by employees and to require accidents to be reported.

In other words, the original workers’ compensation program provided an “alternative dispute resolution” program to address the particular needs of workplace injuries. The Boynton Act included specific provisions for total temporary disability, medical benefits, permanent disability and death benefits. It was an exclusive remedy, with minimal exceptions for cases involving gross negligence and willful misconduct.

The Boynton Act was also strongly supported by labor unions, which had become much more interested in workplace safety following massive industrial tragedies such as the deadly March 25, 1911, fire at the Triangle Shirtwaist Company in New York City, which claimed 146 factory workers’ lives.

See also: States of Confusion: Workers Comp Extraterritorial Issues 

Although the workers’ compensation system had significant advantages over civil litigation, by the 1990s there were substantial bottlenecks in the system with the Workers’ Compensation Appeals Board taking months to set matters on the calendar over a wide range of issues ranging from medical treatment to competing qualified medical evaluators. Any time there was a dispute, even on relatively simple matters, it could take months to get a hearing and ultimately a decision.

To mitigate delays, several state legislatures, including California, developed legislation that would permit labor unions and management to jointly develop “carve out” agreements that resolve disputes outside the state workers’ compensation system with no diminishment to benefits to injured workers.

In California, the legislature passed Labor Code section 3201.5 covering construction trades and later 3201.7 covering more lines of work, allowed unions negotiating on behalf of employees and management to develop addenda to collective bargaining agreements that described rules and procedures of alternative dispute resolution programs tailored to the needs of their particular industries.

While programs vary widely, most ADR programs are paid for by a joint labor-management trust and retain ombudsmen who can help resolve disputes informally between the parties, escalate the matter to mediation proceedings and set arbitrations for unresolved conflicts that require a ruling. A party that is not satisfied with the arbitrator’s decision can then appeal the matter to the state Workers’ Compensation Appeals Board.

To make sure that the programs are workable and are fair, they must be approved by the California Department of Industrial Relations before going into effect.

See also: Workers Comp Ensnares the Undocumented  

Employer and labor unions developed programs in a way that sought to minimize conflicts over medical treatment or medical-legal evaluations through the joint development of medical provider networks (MPNs) and predetermined lists of agreed medical evaluators. They require tight timelines for scheduling mediations and arbitrations, and the fact that only one case is on the docket at a time prevents the distraction of traditional hearings where litigants may have several cases on the calendar at the same time. Predetermined and stipulated medical provider networks keep lien litigation to a minimum, and cases can be resolved and closed in a fraction of the time.

With an emphasis on cooperation rather than pursuing a win-lose model, these provisions save insurance companies the costs of extended litigation and provide injured workers with prompt medical care and dispute resolution. It presents both parties with a win-win.

Increased Flood Exposure From Fires

California wildfires are a fairly frequent occurrence: The five-year average of wildfires has been 4,770, with around 202,705 acres burned, but in 2017 there were 6,877, with 505,733 total acres burned, according to the California Department of Forestry and Fire Protection. While these storms are devastating and heart-breaking, in almost all cases insurance supports recovery.

What is often overlooked is the threat of flood – which is not covered by homeowner’s insurance – that wildfires create. By being aware of how flood exposure arises from wildfires, and knowing the insurance options available, homeowners can take action to be prepared should an event occur.

What causes flooding from wildfires

Flooding from wildfires can arise in three ways:

  • Landscape and runoff flow — The wildfire changes the characteristics of the landscape and increases the chances of flooding from runoff due to:
    • Vegetation — When it rains, trees and plants that cover the ground catch a certain portion of rain on their branches and leaves, which slows accumulation at the ground level and lets the moisture simply evaporate. Wildfires remove this natural protection.
    • Removal of litter — Litter (leaves and pine needles on the ground) normally allow for absorption of water, again slowing the runoff of water. In a wildfire, litter is eliminated.
    • Scarring — One of the major and most dangerous effects of wildfires is that ash and burnt top soil, which are water-repellent, are left behind. This has the same effect as taking an area and covering it with concrete – there will be a big increase in runoff of water, and normal drainage sources will quickly fill up.
    • It will take approximately five years before all of the vegetation is replenished and the soil begins to return to its original state.
  • Mudflow — Because so much of the vegetation is removed in a fire, the potential for mudflow is greatly increased. In some cases, mudflow is a covered peril under a flood policy as long as the mudflow has a milkshake consistency. If not, the flow is considered a landslide, which is not covered. Mudflow-type claims normally are higher-value claims because they are even more destructive than a normal flood.
  • Debris — Ash and debris from wildfires can cause problems with river and stream runoff. Debris is carried into the stream or river, causing natural dams and water buildup, which will push water out of the banks and can flood areas that have never flooded before.

See also: How to Fight Growing Risk of Wildfire  

The importance of understanding what a 100-year floodplain is

A 100-year floodplain is based on a statistical probability needed by the insurance industry as a standard on which to base policies. The process of determining a floodplain is based on scientific measurements that are then put through a formula/statistical model to generate an estimate of how often a flood event could occur. For a 100-year floodplain, there is a “one-in-100 chance (1%) flooding may occur in any given year, or a “return period” of once every 100 years,” according to FloodSafety.com. 

It’s important for homeowners to understand this language so that they can have a better understanding of what their flood exposure is estimated to be.

Understanding the application of flood maps

Homeowners should take caution when looking at a flood map to determine their flood exposure, especially if they live in an area affected by wildfires. Flood maps are created using data gathered from many sources. Assumptions and statistics are applied to determine if in any one year there is a 1-in-100 chance that you will have a flood that will cover a certain area. Any major changes in the data – such as the occurrence of a wildfire – will inevitably affect the chance of a flood.

What’s more, floodplains on a flood map cover a very large area. This means that properties can also be at higher or lower risk within a floodplain depending on where in the floodplain they are located. For example, one house in the 25-year floodplain may flood two feet deep during a storm, but a neighbor deeper in the floodplain may flood six feet deep.

The bottom line — knowing how to apply a flood map to particular circumstances is a huge advantage for homeowners when determining their specific risk and what steps to take to mitigate those risks.

What can homeowners do?

Homeowners have several steps at their disposal that they can consider taking to protect their homes from flood exposure due to wildfires:

  • Use online tools to help evaluate the risk of flooding. These tools, such as those found here, can determine a flood risk rating score based on location, show the average number of claims, associated costs and more.
  • Purchase flood insurance. Flood insurance is not included in a standard homeowners policy. In many cases, flood insurance can bring peace of mind in regard to protecting a home. Many people feel they do not have a flood risk or cannot get flood insurance because they are not in a flood zone. That is simply not true. The only thing that will prevent a homeowner from getting flood insurance is if they are in a designated wildlife area (CBRA) or if their community does not participate in Federal Flood Plain management programs.

See also: 2018 Workers’ Comp Issues to Watch  

Conclusion

While it is not known what weather patterns will do over the next couple of years, we do know that there is a large population of people in California who have increased flood exposure. Informed homeowners who take the necessary steps to be prepared will be able to effectively deal with their flooding exposure and an event should one occur.

This article is provided for general informational purposes only and is not intended to provide individualized business, insurance or legal advice. You should discuss your individual circumstances thoroughly with your legal and other advisers before taking any action with regard to the subject matter of this article.