A bill introduced this week in the Colorado legislature could offer homeowners a financial incentive to reduce wildfire risk. House Bill 1182 would require insurance companies operating in the state to inform homeowners about methods to protect their properties from wildfires and potentially lower their premiums as a result.
The measure also includes provisions for homeowners to appeal wildfire risk assessments, which can lead to higher costs or non-renewal of policies. This legislation is the latest attempt to address the increasing cost of homeowners insurance and non-renewals in wildfire-prone regions of Colorado, a growing problem exacerbated by climate change and the rising frequency and severity of wildfires across the state.
Property insurance costs in Colorado have increased significantly, rising an average of 57.9% between 2018 and 2023, according to the Rocky Mountain Insurance Information Association.
Nonrenewals are becoming a major issue in Colorado’s homeowners insurance market. Lawmakers are hoping to address the escalating costs, as many insurers are dropping coverage or leaving the state altogether.
Despite the rising costs, property insurers have lost money in Colorado for eight of the past 11 years, according to Ethan Aumann, senior director of environmental issues and resiliency at the American Property Casualty Insurance Association.
In response to these challenges, the legislature passed a bill in 2023 that established a quasi-governmental insurer to provide coverage to homeowners who cannot obtain it on the private market. House Bill 1182 is intended to prevent homeowners from needing this last-resort coverage.
While hail is a significant factor in rising insurance costs, wildfire presents another major concern. Unlike hail, homeowners can actively take steps to protect their property against wildfire.
The bill’s sponsors in the House are Democratic Reps. Kyle Brown of Louisville and Brianna Titone of Arvada. In the Senate, the lead sponsors are Sens. Lisa Cutter, D-Jefferson County, and Cleave Simpson, R-Alamosa.
Titone shared instances of homeowners losing coverage due to incorrect assessments of wildfire risk made by insurance companies. These errors involved assumptions based on satellite imagery, leading to coverage cancellations. “We want to make sure that these kinds of situations are rectified,” Titone stated.
House Bill 1182 will require home insurers in Colorado that use a wildfire risk model or scoring method to share details of their calculations with the state. They will have to explain how these models affect underwriting decisions and rates. These models must consider homeowners’ efforts to mitigate risk, such as removing vegetation or using fire-resistant materials, as well as community- and state-level mitigation activities. Insurers must also account for state-level purchases of wildfire-fighting equipment.
Colorado, for example, has acquired two wildfire-fighting helicopters in recent years. Furthermore, insurers would be required to inform homeowners about their property’s wildfire risk assessment within 60 days of a renewal or 90 days of a nonrenewal notice. Insurance companies would then have 30 days to respond to any appeals, and denials of an appeal must be forwarded to the Colorado insurance commissioner.
If passed and signed into law, the bill would go into effect in 2026 and is a key component of Gov. Jared Polis’s legislative agenda for the year. Polis addressed lawmakers during his State of the State address, mentioning the rising insurance costs that are affecting both homeowners and renters. “I hear from Coloradans across our state — I’m sure you have too — who either can’t find coverage or who are seeing very large increases and getting priced out of the market for the coverage that they have,” Polis said.
Insurance companies have expressed concerns regarding the bill’s timeline and their ability to comply with the changes, citing potential technological limitations.
Carole Walker, who leads the Rocky Mountain Insurance Information Association, expressed support for mitigation efforts but highlighted concerns about protecting the proprietary technology of the companies that provide modeling and verifying the effectiveness of mitigation work. Walker stated, “We do believe in mitigation… We have common ground on (wanting) mitigation to matter and we want to incentivize homeowners to do personal- and community-level mitigation.” Titting also mentioned that they are open to providing companies more time to prepare for the legislation before it goes into effect. “Maybe there’s some things that you need to push off a little bit later, but we shouldn’t kick the whole thing down the road just because there’s a couple technological things that we need to address,” Titone said.
The bill has been assigned to the House Business Affairs and Labor Committee, but no initial hearing has been scheduled yet.
