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Proximity Of Risk Is At Issue

Companies that provide fire insurance in oversaturated market areas, perhaps end up with 20-30% of the market. When a fire breaks out in that area, a problem results. You cannot have State Farm with 69% of one of the zip codes. They cannot do that and remain sustainable.
I discussed this in a recent article published in Captive Review, a trade publication that covers the risk management industry.
The solution is to spread the risk.
With WOWS Insurance LLC, each protected cell company will hold a portfolio of 100 California homes, diversified by location.
This allows us to make a really unique offering that lowers the risk to the reinsurers. So premium charges can be reduced over time.
Properties will be grouped together so the homes in each cell have similar fire scores and values.
WOWS has identified over 293 different areas in California alone within its risk profile, with no more than one home from each area in each cell portfolio.
We’ve been able to show that, from an actuarial standpoint, even if it’s the highest of high fire scores, the spread of risk is 100 times more ...
... important than the fire scores themselves.
WOWS Insurance Services' plan is to expand beyond California to eight western states, highlighting those states like Nevada, Washington, Oregon, Utah and Colorado that all face similar wildfire risk. Their insurance markets are three to five years behind the California market.
Currently, WOWS has expanded to lead the charge to bring additional insurance carriers back into California.
Importantly, the WOWS program is fully transferable from home sellers to buyers, something that numerous realtors believe makes the policy an asset of the property. This is an industry first and major California realtors have told me that being in the program could boost a property’s value.
We’re going to be stabilizing the market because when you make the policy fully transferable from sellers to buyers you’re taking the fluctuation out of the market. Right now, there are two problems. Consumers are not sure if they are going to get a renewal, and they don’t know if the premium is going to double or triple overnight. We solve both of these problems.
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