Insurance premiums in Colorado are unlikely to be immediately affected by the wildfires currently raging in Los Angeles. Over the past few years, Colorado insurance companies have already adjusted rates to account for increasing risks, including wildfires, according to Carole Walker, director of the Rocky Mountain Insurance Information Association.
“Colorado… has allowed insurance companies to take the increased rate they need to respond to the market conditions and increased risk,” Walker explained. “So in Colorado, as we’ve seen these higher insurance bills, we’re in a better position because we’ve seen that happen over the past several years. So we don’t likely see an immediate impact in the California fires.”
Insurance companies utilize complex models to evaluate risk on a localized basis, according to Steve Hakes of the Lafayette-based Rocky Mountain Insurance Center. He noted that the assessment of risk in Colorado is unlikely to be influenced by the situation in California.
“Most of the insurance companies have used technology over the last couple of years to really hone in on specific territories as opposed to what used to be more regional,” Hakes said.
Furthermore, many insurers have already scaled back writing new policies in high-risk areas of Colorado since the 2021 Marshall Fire, in which nearly 1,000 homes were destroyed.
“They’ve already begun phasing out a lot of the mountain home insurance that they write. We’ve had a lot of cancellations, non-renewals from some of the companies … who have said, ‘We don’t want to deal with this anymore,’” Hakes stated.
This year, Colorado lawmakers plan to introduce two major bills aimed at regulating homeowners’ insurance. Additionally, the state will start offering insurance plans to homeowners who have been dropped by the private market, which is expected to begin in early 2025. Colorado residents currently face some of the nation’s highest insurance premiums.
According to research released in July by Benjamin Keys and Philip Mulder, home insurance costs have risen by an average of $818 annually compared to 2020. This makes Colorado the state with the fourth-highest insurance premiums in the country.
“Everything that insurance pays for is more expensive,” said RMIC’s Walker, emphasizing the need for Coloradans to factor insurance expenses into their household budgets. “We know people are crunching those numbers on everything from groceries to their property taxes. Insurance needs to be a part of that.”
