The start of a new year is a good time to reflect on how quietly, and sometimes invisibly, fundamental systems change. Few forces are reshaping property insurance more profoundly right now than risk scoring and mapping, especially in wildfire-prone regions. John Putnam’s recent article on IRMI, Risk Scoring and Mapping Are Reshaping Property Insurance, deserves close attention from anyone who cares about the future availability and affordability of insurance.
Putnam has become one of the most thoughtful and credible voices writing about insurance and wildfires. I have noted his excellent work a number of times in this blog, including Every Claims Professional Must Read Putnam Now: Emotional Recovery After Wildfire Loss.
He does not traffic in slogans or easy villains. Instead, he explains how underwriting tools actually work, why they were adopted, and what their downstream consequences may be for policyholders, insurers, and regulators alike. That combination of technical understanding and real-world awareness is rare, which is why his work should be closely followed by professionals and policymakers alike.
Risk scoring is often presented as a neutral, even benevolent, advancement. The premise is simple enough. Insurers use increasingly sophisticated data, models, and mapping tools to predict losses more accurately and price insurance accordingly. In theory, this leads to fairness, efficiency, and better incentives for mitigation. In practice, as Putnam carefully explains, the outcomes are far more complicated and often far harsher for consumers living in catastrophe-exposed areas.
Putnam captures the core tension with clarity and restraint when he writes:
A central purpose of scoring is to quantify risk and allocate anticipated losses to customers most likely to experience them. On the surface, this seems like a worthy objective, but the actual outcomes may differ. For insurance consumers living in designated catastrophe areas, insurance costs may rise precipitously, making adequate coverage either unavailable or unaffordable.
Wildfire-prone states are already facing this problem, which, so far, seems to have no easy solutions. As this occurs, the call for more legislative and regulatory oversight creates an even more challenging environment for insurers. Even though another purpose of scoring is to promote mitigation, the impacts and costs of mitigation will likely pose a significant hurdle for Main Street America. They will require continual education and financial resources to accomplish.
This is not an abstract concern. We have already seen similar dynamics play out with credit-based insurance scoring, which I have written about for decades, as noted in Credit Scores in Underwriting: The Redlining of The New Millenia? What begins as a statistical tool often evolves into a blunt instrument, one that systematically prices entire communities out of the market. Risk scoring tied to wildfire exposure threatens to accelerate that trend, particularly when mapping models are opaque, unchallengeable, or disconnected from on-the-ground realities.
The promise that mitigation will solve the problem also deserves scrutiny. Many homeowners are willing to harden their homes, clear defensible space, and reduce risk. But mitigation costs money, time, and expertise. For many families, especially those already stretched thin by rising premiums and deductibles, the gap between what models demand and what households can realistically achieve continues to widen.
Putnam’s article matters because it frames these issues honestly, without pretending there are easy answers. It also highlights why transparency, accountability, and thoughtful regulation will be essential as risk scoring becomes more deeply embedded in underwriting decisions. If left unchecked, these tools risk undermining the very societal promise of insurance, which is to spread risk rather than isolate and penalize those unlucky enough to live in the wrong place on a map.
My view is that laws and regulations are needed in every state to provide transparency. Every consumer has a right to understand how a credit score is determined. Insurance risk scoring made by any insurer should be fully explainable to any applicant for insurance.
As we head into a new year, insurers, regulators, and insurance professionals would do well to carefully read Putnam’s work on risk scoring. His writing does not just explain where the industry is going; it also explains how it is going. It quietly asks whether we are comfortable with where these trends may ultimately lead.
Thought For The Day
“Write it on your heart that every day is the best day in the year.”
— Ralph Waldo Emerson
