Colorado Bill Tackles Insurance Transparency in Wildfire-Prone Areas
Colorado lawmakers are considering a bill designed to increase transparency from insurance companies when assessing homeowners’ risk of wildfires and setting premiums. House Bill 1182 would require insurers to share information with homeowners and the state regarding their risk models and scoring methods, as well as detail how these assessments impact insurance costs.
The legislation comes in response to soaring insurance premiums in the state, driven partly by climate change-related weather patterns. This spike in costs has made Colorado a more expensive place to insure property.
Wildfire smoke rising above a Breckenridge neighborhood.
The bill would also mandate that companies consider individual or community-level wildfire mitigation efforts when evaluating risk and grant homeowners the right to appeal their property’s risk assessment.
Between January 2019 and October 2022, homeowners in Colorado saw their insurance premiums for single–family homes increase by 52%, according to the state’s division of insurance. Multi-story condominium complexes and other higher-value buildings have faced even steeper increases, with costs doubling in some instances.
Rep. Brianna Titone, a primary sponsor of House Bill 1182, stated that homeowners are actively seeking to reduce their risks through mitigation strategies such as home hardening and creating defensible space. However, these efforts do not consistently translate to lower premiums.
“I think a lot of homeowners are guessing a lot of times what they can do,” Titone said. “And the insurance companies are not really clearly communicating with the homeowners as to what they think they should do.”
“That’s very frustrating to a homeowner who may have spent a lot of time and money investing in this,” she continued. “But do the insurance companies think that even matters? And how can we convince them that it does.”
This issue is especially pressing in Colorado’s mountain communities, where the continuous threat of wildfires makes mitigation a top priority.
Summit County Commissioner Tamara Pogue reported frequent inquiries about property insurance costs and noted that increases of 300% or 400% are not uncommon for homeowners.
“Property insurance is part of housing affordability,” Pogue said. “You have to have it, you have to pay for it.”
Summit County has supported numerous fire mitigation efforts, including funding for U.S. Forest Service employees, and requiring defensible space for new developments. The county has provided millions in grants, utilizing a voter-approved fund to help neighborhoods share the costs of fuel reduction, tree removal, and evacuation route improvements.
According to Pogue, Summit County was the first in Colorado to establish a dedicated funding source for wildfire mitigation, approving a property tax increase in 2008 and again in 2018. She said those efforts have helped reduce fire risk.
For example, a minor wildfire near a Breckenridge neighborhood last summer was quickly contained due to fuel mitigation efforts from 18 months prior.
“I think that homeowners should be given credit for that effectiveness and for the dollars they have invested in that mitigation and right now, in the (insurance) system, there is no consistent way that work is taken into account,” she said. “We should, as a community, be able to recoup some of those benefits here.”
A firefighter at work in Summit County.
Gov. Jared Polis has made insurance industry reforms a high priority, advocating for greater transparency in risk assessment and pricing. The industry faced criticism during a December meeting of Western state governors, and Polis reiterated his call for insurance relief in his State of the State address last month.
“The rising cost of insurance isn’t relegated to homeowners alone,” Polis said. “It gets passed on to renters, too.”
Carole Walker, Executive Director for the Rocky Mountain Insurance Association, said insurance companies support individual and community-level mitigation efforts in reducing a homeowner’s risk. However, Walker stressed that lawmakers must be cautious to avoid policies that could further burden insurance companies operating in the state.
She pointed to California, which has seen insurers leave the state due to what she called a misguided slate of legislation that capped rates and restricted the use of predictive risk models.
Colorado is already the third least profitable state for insurers, behind Louisiana and Texas. It ranks second in the country for hail risk and third for wildfire risk, according to the Rocky Mountain Insurance Association.
“Colorado is a high catastrophe risk state for insurance companies,” Walker said. “It’s a cautionary tale. We need to be careful in Colorado, we’re just a few bad public policy decisions away from being California.”
The insurance association seeks amendments to the bill that would establish industry standards for homeowner mitigation work. Walker stated that insurers are open to creating an appeals process and sharing information on risk reduction, but are concerned about being forced to disclose intellectual property.
She emphasized that any disclosure requirements in the bill must be feasible for insurers to follow and expressed concern about legislation that could make doing business in Colorado unviable.
“The stakes are very high on this,” she said.
House Bill 1182 is also sponsored by Rep. Kyle Brown, and Sens. Lisa Cutter and Cleave Simpson. It’s scheduled to be heard and voted on by the House Business Affairs and Labor Committee on Wednesday, Feb. 26.
