(C) Common Dreams
This story was originally published by Common Dreams and is unaltered.
. . . . . . . . . .
'Tipping point:' Colorado homeowners face insurance coverage refusal in high-risk areas [1]
['Carol Mckinley Carol.Mckinley Gazette.Com', 'Timothy Hurst', 'Timothy Hurst Denver Gazette', 'Carol Mckinley']
Date: 2024-06
The bad news dropped in an email. Marilyn Saltzman’s insurance company, Auto Owners, would not be renewing her homeowner’s policy even though she and her husband had cleared dry vegetation from the house, never filed a claim with them and never experienced a wildfire.
None of it was enough.
Since the $500 million East Troublesome fire of October 2020 and the $2 billion dollar 2021 Marshall fire, major insurance companies have zoned in on Colorado's vulnerability to future natural disasters. Colorado Insurance Commissioner Michael Conway confirmed that some of the larger companies have begun to refuse to renew homes in pockets of Pueblo, Colorado Springs and in the high county that are at a high-risk for wildfires. Still, he said homeowners have been able to find coverage. “Even in those small pockets, we do have other carriers that are still writing business in those places," Conway said. "We don’t want it to be the case that homeowners can only find one or two insurance companies who will write business with them.”
Although her own rejection was a shock, Saltzman knew the reason for it.
Her house sits on a heavily-wooded half-acre in the wildland urban interface area of Conifer, which insurance companies consider ripe for wildfire.
Auto Owners decided that renewing her policy isn’t worth tossing the dice.
“At first I was kind of panicked,” Saltzman said. “You want to protect your home. Auto Owners didn’t give us any choices. They just said they weren’t going to renew our policy.”
The Saltzmans felt that, though they did all that they could to mitigate the risk of wildfire, it wasn’t enough to sway insurance companies to give them protection.
“The big question is if homeowners are doing the right things, will they have home insurance given the environment,” Jefferson County Commissioner Lesley Dahlkemper said. “It’s incredibly scary in terms of the wildfire threat they face in their communities.”
She said that many of her constituents in Evergreen, Pine and Conifer worry about whether home insurance will be an option “the way things are going." In Colorado, private insurance companies, such as Auto Owners, in order to stay solvent, can unilaterally refuse customers who are in areas vulnerable to wildfire or other natural disasters. According to the most recent homeowner availability study produced by Oliver Wyman Actuarial Consulting in March 2023, premiums have been increasing significantly in Colorado over the last three years. Between January 2019 and October 2022, the average homeowner premium is up +51.7%, or +11.5% annually. The study determined that rate changes and inflation were driving the numbers. The Dec. 30, 2021 Marshall Fire cost insurers more than $2 billion. That price tag kicked off a push for insurers to reassess properties statewide with a microscope-focused look on high-risk areas.
What insurance companies are seeing under that microscope is a perfect storm of multiple catastrophic risks:
• This past year, Colorado ranked second in the country behind Texas for hail insurance claims. Hail, not wildfires, is the most expensive insured Colorado risk. One 45-minute hailstorm can cause billions of dollars in damages.
• Colorado followed only California in a recent national CoreLogic Survey for the state with the most homes at risk for wildfire.
• For the past two decades, Colorado occurrences of natural disasters increased by 275%, the second highest to Kansas.
The new normal
Insurance companies are under pressure as they adjust to what experts are calling the “new normal” of climate change-caused disasters, rising material and labor costs.
The new normal has homeowners, firefighters, politicians, and insurance brokers concerned that Colorado will get the same coverage-cold-shoulder as California and Florida in the wake of wildfires, flooding rains and hurricanes in those states.
Major insurance companies, such as All State and State Farm, are no longer writing homeowner renewals in California due to high environmental risks. Insurance companies were watching as Hurricane Idalia hit Florida this week, wary of its potential destruction and what the ultimate bill would be — expected in the billions.
Some major insurance companies have already pulled out of Florida, leaving some homeowners paying premiums that are up to four-times higher than they are in other parts of the country. While the situation hasn't yet turned that dire in Colorado, many homeowners like Saltzman who live in the high country and in volatile pockets of places like Pueblo and Colorado Springs are either not getting renewed or are paying high wildfire deductibles. Insurance companies have a laundry list of specifications they use to decide how, or whether, they will cover a property. Included on that list is proximity of the dwelling to responding fire stations and water sources, fire fuels in the area, whether it sits on a slope, and how good the roads are. If a firetruck can’t access the home because there’s no way for an apparatus to get in to fight the blaze, there’s little point in providing coverage.
Conway said that the fact that major insurers haven’t left the state entirely is “incredibly important from the standpoint of keeping the market stable while we find ways to adjust to climate change and the fact that we are in a different world than we were 20 years ago,” Conway said.
Featured Local Savings
‘At a tipping point’
The issue has gotten the attention of Colorado homeowners and insurance brokers, who signed in to listen to a Zoom discussion on Tuesday on availability and affordability hosted by the Colorado Division of Insurance. It was the first of three planned meetings for homeowners grappling with high premiums or access to coverage. “We are at a tipping point,” Carole Walker, executive director of the Rocky Mountain Insurance Information Association, told the 127 participants. She said that Colorado can learn from the mistakes other states have made “who are backpedaling” because they chose a political over a fiscal path. “We have an opportunity to keep private insurers here but it’s not one simple answer,” she said.
During the meeting, Walker reported that Colorado is the third most expensive state in the country for the insurance industry to do business with after Louisiana and Texas.
Residents continue to build in areas that are at high risk for wildfire or flooding despite the dangers, and state leaders say a partnership between the property owners and insurance companies is necessary moving forward.
Walker and Conway stressed that communities and insurance companies that are under pressure must work together with a plan that includes fire mitigation. It was an issue during the open forum portion of the meeting. Daniela Gosselova, resident of Grand County — where the October 2020 East Troublesome Fire burned 120,000 acres — put the responsibility on homeowners who choose to build in wildfire-prone areas despite the danger.
“There are too many wooden mansions in the middle of alpine forests and, as we speak, these kinds of buildings continue to rise every day,” she said. “You don’t build a house, you don’t have a disaster. These are human-caused disaster."
One insurance broker, Guy Lucero, told the group that, after years of reasonable coverage, his business changed in the last few months. “We’re having definitely more challenges," he said. "We’ve had one or two of our companies put down a moratorium and kind of stop writing here in Colorado." Art Candales, who lives in the Black Forest outside of Colorado Springs, where a wildfire devastated the area in 2013, said his insurance went up 122% this year. “That makes it hard for us to figure out where to go because the increase was so high, we weren’t prepared for it.” Candales wondered if there were a way to limit the rate of increases.
Conway addressed what he called “sticker shock” of those skyrocketing rates. “We need to find a way to bring stability to the marketplace,” Conway said. “I do think that there’s a way to get to that stability and that is to encourage more insurers to write in this state.”
I nsurance of last resort
Already, state leaders are preparing for a day when private insurance companies deny coverage to Coloradans at high risk of losing their homes or businesses. Last May, Gov. Jared Polis signed the Fair Access to Insurance Requirements, or FAIR plan into law as an insurance of last resort managed by the government. That plan won’t be up and running until Jan. 2025.
Lawmakers are not only concerned with future climate change-induced disasters like wildfire and floods, but also about what that's going to mean when the state's population explodes by 1.8 million people by 2050, according to research conducted for SB 206, which created the Disaster Relief Rebuilding Program. The legislation, which the Department of Local Affairs manages, provided money to wildfire survivors and for first responder firefighting tools. Legislators predicted that, without significant interventions, the average area burned by fire in Colorado each year will increase by 50% to 200%.
In the meantime, many property owners are finding that getting coverage requires a myriad of phone calls and rejections before finding an insurance company that will be willing to cover them.
One common criticism of the FAIR plan is that it has a $750,000 cap, which will not cover rebuilding many of the pricey homes constructed on large pieces of land smack dab in the middle of the wildland urban interface.
“Insurance of last resort is super-costly. We needed to do it, but we can’t look at that as a long-term solution,” said State Sen. Lisa Cutter, who is vice-chair of the Wildfire Matters Interim Committee. Last year, she worked on the Wildland Urban Interface Code Board, which will determine what “high risk” means and define the wildland urban interface.
Conway admits the Fair Plan is not perfect. “We want that market of last resort. A legislator asked me how many people would go into FAIR plan and I told him I hope the answer to that question is zero. But I also understand as I look around to my colleagues in other states, it’s a priority for us to have protections in place in the future if that (lack of commercial insurance availability) does happen."
He said that there will be ongoing conversation about where last resort coverage should be capped.
After a mad scramble, Marilyn Saltzman was relieved to finally get State Farm to agree to cover her property at what she considered a fair price. Like many Coloradans, she feels she has been penalized for moving to the mountains for the beauty and solitude. “We all recognize that there’s wildfire risk and we’ve mitigated as much as we can," she said. "Insurance is for protection and it is a concern that a limited number of insurance companies are willing to insure people who live in the mountains now.”
[END]
---
[1] Url:
https://denvergazette.com/news/home-insurance-rejection-wildland-urban-interface-colorado/article_15e6c34c-478a-11ee-8487-4336ad7af1eb.html
Published and (C) by Common Dreams
Content appears here under this condition or license: Creative Commons CC BY-NC-ND 3.0..
via Magical.Fish Gopher News Feeds:
gopher://magical.fish/1/feeds/news/commondreams/
