Colorado homeowners consider selling as insurance rates rise

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 in the Security-Widefield area in 2017. “We have to find a way to lower these rates.”

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.

Six years ago their annual insurance premium was about $1400. They managed, but increases in property taxes and home insurance premiums are now forcing them to consider the difficult decision of uprooting their lives, selling their homes and moving somewhere cheaper.

“Maybe look into a mobile home or a condo,” Brennan said. “Do we stay in Colorado Springs? Do we move further to Peyton? But then all our doctors are here. And that’s a tough, tough thing to consider.”

Because Mr. Brennan has multiple sclerosis, their only income is his disability insurance and his spouse’s caregiver salary.

“There are nights I worry because I can’t sleep. What am I going to do? Where can I go?” asked Brennan.

Since 2018, her home insurance has increased over 200% from $1290 to $3900. Insurance costs have reduced his escrow. Along with rising property taxes, the Brennans are facing nearly impossible mortgage payments.

Brennans called his insurance company, but he said they essentially told him it was the “cost of doing business in Colorado.”

What are the running costs?

Carol Walker, executive director of the Rocky Mountain Insurance Information Association (RMIIA), says there are three reasons for Colorado’s high home insurance rates: climate disasters, high costs, and the reinsurance market (insurance for insurers).

In Colorado, devastating hail storms and wildfires are common and devastating. The 2021 Marshall Wildfire in Boulder County caused $2 billion in damage. The 2012 Waldo Canyon Fire in Colorado Springs cost more than half a million dollars. The 2017 Denver hailstorm cost $2.3 billion.

“Mother Nature is not slowing down. Call it climate change – whatever you want. We know, in 2023, we had record-breaking disasters,” Walker said.

According to the National Center for Environmental Information, there were 28 confirmed weather/climate disaster events in 2023 that caused more than $1 billion in damage each in the US. Colorado experienced one of those disasters in a hailstorm in June.

Colorado ranks second in the nation for hail claims and third for highest wildfire risk areas, according to the RMIA.

Apart from catastrophic climate events, inflation and the price of goods and services have all increased. Everything from the cost of repairs and remodeling to labor shortages in products like lumber, drywall, and happiness.

All these factors and market conditions are converging, causing the reinsurance market to grow. Reinsurance rates are growing at a record pace of 40%, Walker said.

“Colorado is the third most expensive and worst profitable state in the country, behind Louisiana and Texas. So when you think about insurance companies making all this money, how can they charge more for rates? That’s not really the case,” Walker said. “Insurance companies, unlike retail products, are trying to balance the amount of risk they take on — that’s the number of high-risk policies — with ‘Can they reinsure?'”

Will Insurance Companies Leave Colorado?

In states like Florida, Louisiana, and California, some insurance companies have eliminated or reduced availability due to the previously mentioned factors.

In May of last year, State Farm announced it would stop accepting new applications in California.

“State Farm General Insurance Company made this decision due to historic increases in construction costs outpacing inflation, rapidly increasing catastrophe risk, and a challenging reinsurance market,” their announcement said.

But with the growing population, Carol Walker with the Rocky Mountain Insurance Information Association said insurance companies don’t want to leave Colorado.

“I think there are a lot of rumors and arguments around insurance companies getting out of the state of Colorado. We’re not at that point yet. But we’re at a tipping point,” she said.

She said the insurance industry is at the table in Colorado and wants to have a stable, competitive market, but she worries that state lawmakers may try to regulate the industry in a way that pushes them out.

“You can’t control Mother Nature and the growing disasters. But you can control that knee-jerk reaction of ‘Well, we need to crack down on insurance companies. We need to regulate what they charge for insurance. We need to mandate discounts, ‘ Walker said. “When they’re in the market where they’re trying to keep those costs down to repair and rebuild and the number of claims.”

However, like California, Walker said she has seen some insurers limit availability for new policies in high-risk wildfire and hail areas.

Fair planning and what is being done to address it?

In 2023, Governor Jared Polis signed into law the Fair Access to Insurance Needs (FAIR) plan, which is a last resort insurance option for homeowners who cannot secure coverage from any other agency.

The FAIR plan is now being developed, with the police-appointed board set to deliver an operational plan by July 1. Access to FAIR plan policies won’t come until early 2025.

“We don’t want to find ourselves in that position in a few years and then take time to build this FAIR plan,” said Vincent Plymel of the Colorado Division of Insurance. “Essentially, the FAIR plan is building a new insurance company from scratch.”

Plymel said that’s an option to address concerns if insurers move out of state.

But Carol Walker doesn’t want Coloradans to rely as much on the plan as Florida residents do with their state-mandated 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 is left out. While a FAIR plan works, it’s really just a short-term solution for people who can’t find insurance anywhere else,” Walker said.

Vincent Plymel with the Colorado Division of Insurance said the state legislature and Colorado Insurance Commissioner Michael Conway are “committed to finding solutions” to ease the squeeze on homeowners.

Plymel said they will look to the Legislature for other possible solutions.

What can homeowners do?

Homeowners can’t prevent climate disasters, but there are some options to try and secure lower premiums.

“Think of insurance as part of your household budget. We all have to budget more for insurance and probably shop more for it,” Walker said. “We hope that inflation will come down. We hope that the cost of repair and reconstruction will come down. But we don’t see that happening in the short term.”

Walker emphasized that mitigation efforts such as home hardening against wildfire hazards could ultimately affect insurance premiums statewide. He recommends talking to local fire officials and insurance companies about mitigation options.

“As wildfire risk is higher, the science really shows us that if we do the proper mitigation, as homeowners, as whole communities in the state, we can do a lot to put the odds in our favor to bring that risk down,” she said. “And that investment in mitigation will pay dividends in not only making us safer and reducing risk, but making homes more insurable. And then insurance more affordable.

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Email senior reporter Brett Forrest at [email protected]. to follow @brettforrestTVand in X Brett Forrest News on Facebook.

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