Jon's Network

Another nice bit of information about insurance markets from the Cyberinsurance article I blogged earlier:

Fire insurance markets thus involve not only underwriters, agents, and clients, but also code writers, inspectors, and vendors of products and services for fire prevention and protection. Although government remains involved, well-functioning markets for fire insurance keep the responsibility for and cost of preventive and protective measures largely within the private sector.

There was actually a great example of the contrast between how government and the private sector handle risk in the news recently. Earlier this month, Sun Valley, a vacation community in Idaho, was at risk of being destroyed by forest fires. From the Google AP article:

New York-based insurance company AIG has policies on about 200 homes in the area, 30 to 40 of which are worth at least $1 million. AIG said it sent private firefighters to spray a barrier of fire retardant on the 10 to 12 homes most at risk.

Times-News has more detail about the actions of AIG to protect it’s customers. Says AIG about their preemptive response to the threat of the fires:

We’re not only in the business of paying claims, we’re in the business of preventing them.

The local police found this ridiculous:

“That sounds ridiculous to me,” said Kim Rogers, a Ketchum Police Department spokesman, “especially since we haven’t lost any structures. I mean, this is a Forest Service fire, not a private fire.”

I don’t want to say that public fire departments never save homes, because they do all the time here in Southern California, but I will point out that if they fail, they bear no liability for the loss. A private insurance company, on the other hand, has the profit motive as an incentive to protect your property.

AIG is impressive, they have demonstrated an innovative approach to successfully insure homeowners from loss due to fire and they are the largest cyberinsurance underwriter according to the IEEE article.

(Thanks for the find David)