In fire-prone areas, insurance companies are using satellite technology to identify high-risk customers.

The Los Angeles Times

AUBURN, CA – Sheree DiCicco’s first response to a notice that her insurance would not be renewed because her landscaped home in the Sierra foothills was too close to brush was to wonder aloud: How on earth did inspectors get past the guards of my gated community?

A phone call to her insurance company 400 miles away in Orange County revealed that the inspection had been conducted by satellite, and the determination that brush was a quarter-mile from her home had been forwarded to her mortgage holder.

“I was shocked,” DiCicco said. “I didn’t know insurance companies would, or even could, do such a thing.”

At a time when Americans can watch satellite images of Hurricane Ivan bearing down on the Gulf Coast and government agencies across the country are doing mapping surveys with their eyes in the sky, insurance companies are availing themselves of the technology to weed out high-risk customers.

DiCicco’s carrier, First American Property and Casualty Insurance Co. of Santa Ana, is using satellite imagery to reexamine about 10% of its outstanding policies, most of them scattered across brush lands in California, Nevada and Arizona, a spokeswoman for the company said.

“It’s part of an effort to identify high-risk properties in high-brush areas,” said Jo Etta Bandy, a spokeswoman for First American. “In the event of a question as to the determination, we can do a field inspection, which could trump any reports that had been generated.”

At the same time, however, the carriers are hitting people where they live by threatening to cancel insurance policies and placing mortgages at risk.

“This is an emerging and serious statewide problem,” said California Insurance Commissioner John Garamendi. “Insurance companies are using satellite imagery and just plain photos to red-line vast areas of the state without taking into account the individual circumstances of an individual home.”

Garamendi said he is warning companies not to do it, but he doesn’t have the legal authority to stop it.

“There are companies that have said they will not insure a home within 2,000 feet of brush,” he said. “By those guidelines, they would not be able to insure anyone in the Santa Monica Mountains, or all of San Diego County. Essentially, these computerized databases and satellite technologies are cheaper than sending someone out to visually inspect a property.”

Take Mark Munger, who lives about 15 miles north of the DiCiccos. He was recently informed by letter that his property insurance would not be renewed because satellite photos showed his home was near brush. State-of-the-art risk assessment systems have been catching on in the insurance industry since last summer, when 10 major wildfires swept across Southern California, causing $2.6 billion in losses.

Some industry officials say satellites are popular among small carriers who are trying to level the playing field against larger competitors who can more easily afford to dispatch inspectors for on-site assessments in remote communities.

Mercury Insurance of Los Angeles, which commands roughly 3% of the market in California, uses satellite systems to “provide us with information on brush exposure to individual properties,” said Bruce Norman, the carrier’s vice president of marketing.

“We also use an agent [to confirm the finds] in the process of dealing with a client,” he said. “But the system enables us not to inconvenience people by trying to get into their backyard or trying to see if there’s brush growing on the hill behind them.

“Like any tool,” he added, “you have to use it with care, reason and judgment, and you have to understand the decisions you make impact people’s lives.”

The practice is so new that even insurance watchdog groups were unaware that some home inspections were now being conducted by orbiting spacecraft peering down with color cameras that are able to observe objects as small as 6 inches.

“I’d not heard of this before; it’s scary,” said Harvey Rosenfield of the Foundation for Taxpayer and Consumer Rights. “It has a creepy, intrusive aspect to it.”

Pete Moraga, a spokesman for the Insurance Information Network of California, a nonprofit media relations organization supported by the property and casualty insurance industry, would not go that far.

“We don’t know what the outcome of this technology will be because it is so new,” Moraga said. “If it actually makes us more cost-effective and efficient, it may turn out to be a good thing. But if the privacy concerns bear out, that is something the industry will have to take a look at.”

First American is a subsidiary of the First American Corp., one of the largest providers of data in the nation. But when it comes to satellite imagery, the company turns to CDS Business Mapping of Boston.

CDS markets an evaluation system it calls the “risk meter,” which relies on remote sensing equipment and brush and weather mapping and other data to help carriers rate and pinpoint, on a lot-by-lot basis, such threats as brush fires, hailstorms, earthquakes and floods.

“In the old days, carriers would rate the risks in entire cities or ZIP Codes,” said Jamie Munson, CDS’ director of consulting services. “We’re offering something new, which is the ability to determine risks at the street level at individual homes, condos and businesses.”

The images are culled from commercially available satellite data, he said, and “can vary from pretty rough to pretty fine. But it’s not like we can identify someone sitting in their backyard.”

For the DiCiccos, whose home abuts a golf course, First American’s high-tech risk evaluation strategies have been a nightmare.

The company sent an inspector to their home last week to double-check the satellite findings. Based on that inspection, the carrier determined the distance to the brush was acceptable and that it would continue to insure the property.

But in an interview on her patio, which is surrounded by rosebushes, Sheree DiCicco worried that “they have put in motion an action that I can’t stop now.”

“They didn’t call us first or visit in person, and that hurts,” added Dan, her husband. “For us to clear brush out 1,500 feet would mean wiping out five neighbors’ yards on either side. Ridiculous.”