COLORADO SPRINGS — Some Colorado homeowners, especially those on fixed incomes, are facing a crisis as home insurance premiums continue to rise in the state.
“We're one paycheck away from disaster,” said Gerard Brennan, who bought a home with his wife in the Security-Widefield area in 2017. “There has to be a way for us to get these rates lower.”
The Brennans thought Widefield would be a more affordable area and their “forever home.” Their daughter and grandson live nearby and they don’t want to leave.
But increases in property taxes and home insurance premiums are now forcing them to consider the difficult decision of uprooting their lives, selling the home and moving somewhere more affordable.
“Maybe look into a mobile home or a condo,” said Brennan. “Do we stay in Colorado Springs? Do we go further out to Peyton? But then all our doctors are here. And it's a tough, tough thing to have to consider.”
Since Mr. Brennan has multiple sclerosis, their only income is through his disability insurance and his spouse’s caregiver pay.
“There are nights that I don't sleep because I'm worried. What am I going to do? Where can I go?” asked Brennan.
Since 2018, his home insurance has increased over 200%, from $1290 to $3900. The insurance costs have caused a deficiency in his escrow. When coupled with increased property taxes, the Brennans are facing nearly unaffordable mortgage payments.
The Brennans called their insurance company, but he said they essentially told him it’s “the cost of doing business in Colorado.”
WHAT’S DRIVING THE COSTS?
Carole Walker, executive director of the Rocky Mountain Insurance Information Association (RMIIA), said the reasons for Colorado’s high home insurance rates are threefold: climate disasters, high costs on goods and services, and the reinsurance market (insurance for insurers).
In Colorado, catastrophic hail storms and wildfires are common and devastating. The 2021 Marshall wildfire in Boulder County led to $2 billion in loss. The 2012 Waldo Canyon Fire in Colorado Springs cost just under half a billion dollars. A 2017 Denver hail storm had a price tag of $2.3 billion.
“Mother Nature is not slowing down. Call it climate change—whatever you want. All we know is, in 2023, we had record breaking catastrophes,” said Walker.
According to the National Center for Environmental Information, 2023 had 28 confirmed weather/climate disaster events with losses exceeding $1 billion each in the US. Colorado experienced one of those disasters in a June hail storm.
Colorado ranks second in the country for hail claims and third for highest wildfire risk areas, according to the RMIA.
Apart from catastrophic climate events, the cost of goods and services have all risen. Everything from the cost to repair and rebuild and labor shortages to the price of construction products like lumber, drywall, and glass.
All of these factors and market conditions are colliding, which in turn is increasing the reinsurance market. Reinsurance rates have been going up at a record pace of 40%, Walker said.
“Colorado is the third most expensive and worst profitability state in the country, after Louisiana and Texas. So when you think about insurance companies making all this money, how can they be charging more for rates? It really is not the situation,” said Walker. “Insurance companies, unlike a retail product, are trying to balance the amount of risk they take on—that's the number of high risk policies—with ‘Can they afford reinsurance?’”
WILL INSURANCE COMPANIES LEAVE COLORADO?
In states like Florida, Louisiana, and California, some insurance companies have pulled out or reduced availability due to the previously mentioned factors.
In May last year, State Farm announced it will cease accepting new applications in California.
“State Farm General Insurance Company made this decision due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market,” their announcement said.
But with a growing population, Carole Walker with the Rocky Mountain Insurance Information Association said insurance companies don’t want to leave Colorado.
“I think there's a lot of rumor and innuendo around insurance companies exiting the state of Colorado. We're not in that situation yet. But we are at a tipping point,” she said.
She said the insurance industry is at the table in Colorado and wants to have a stable, competitive marketplace, but she’s worried state lawmakers might attempt to regulate the industry in a way that does push them out.
“You can't control Mother Nature and escalating catastrophes. But you can control that knee-jerk reaction to ‘Okay, we need to crack down on the insurance companies. We need to regulate what they charge for insurance. We need to mandate discounts,’” said Walker. “When they're in a marketplace where they're just trying to keep up with those costs to repair and rebuild and the number of claims.”
Though, like California, Walker said she’s seeing some insurers limiting availability for new policies in high risk wildfire and hail areas.
THE FAIR PLAN AND WHAT’S BEING DONE TO ADDRESS IT?
In 2023, Governor Jared Polis signed into law the Fair Access to Insurance Requirements (FAIR) Plan, which is a last-resort insurance option for homeowners who can’t secure coverage from any other entity.
The FAIR Plan is being built right now with the Polis-appointed board set to deliver a plan of operation by July 1. Access to FAIR Plan policies won’t come until early 2025.
“We didn't want to find ourselves in that spot in a couple years and then have to take the time to build out this FAIR Plan,” said Vincent Plymell with the Colorado Division of Insurance. “Essentially, the FAIR Plan is building up a new insurance company from scratch.”
Plymell said it’s an option to address concerns if insurers were to pull out of the state.
But Carole Walker doesn’t want Coloradans to rely too heavily on the plan as Florida residents have done with their state-built insurance plan. Doing so helped push out the private market in the Sunshine State.
“The goal of the FAIR Plan is to make sure no one's in it. When a FAIR Plan works, it's just a short-term solution for people who truly can't find insurance elsewhere,” said Walker.
Vincent Plymell with the Colorado Division of Insurance said the state legislature and Colorado Insurance Commissioner Michael Conway are “committed to finding a resolution” to ease the squeeze on homeowners.
Plymell said they’ll look to the legislature for other possible solutions.
WHAT CAN HOMEOWNERS DO?
Homeowners can’t prevent climate catastrophes, but there are some options to try and secure lower premiums.
“Think of insurance as part of your household budget. We're all going to have to budget more for insurance and likely shop around more for it,” said Walker. “We hope inflation goes down. We hope the cost to repair and rebuild go down. But we don't see that happening in the short term.”
Walker also stressed mitigation efforts like home hardening against wildfire dangers can ultimately affect insurance premiums statewide. She recommended speaking to local fire officials and insurance companies about mitigation options.
“As the risk for wildfire is greater, the science really shows us that if we do the proper mitigation, as homeowners, as entire communities in the state, there is a lot we can do to put the odds in our favor to bring that risk down,” she said. “And that investment in mitigation will pay off dividends to not just making us safer and reducing the risk, but making homes more insurable. And then insurance more affordable.”
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Email senior reporter Brett Forrest at brett.forrest@koaa.com. Follow @brettforrestTVon X and Brett Forrest News on Facebook.
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