Colorado lawmakers have abandoned a plan to drive down home insurance prices by asking utilities to pay tens of millions of dollars into a fund in exchange for easing some of their wildfire liability. Instead, they’ve pivoted to place the financial burden on homeowners through a 0.5% fee on every homeowners insurance policy in Colorado, up to $100 million every five years.
The original proposal, outlined in House Bill 1302, aimed to reduce private insurers’ financial risk and drive down premiums by collecting up to $100 million every five years from utilities to buy reinsurance for home insurers. However, utilities balked at the idea, leading lawmakers to amend the bill.
The Shift in Approach
The amended bill imposes a fee on homeowners insurance policies, which would be collected by insurance companies and handed over to a state enterprise to purchase reinsurance. The fee can be waived if a home meets the Insurance Institute for Business and Home Safety standards for wildfire mitigation or has a similar level of protection against wildfire.
Rationale Behind the Fee
Sponsors of House Bill 1302, including House Speaker Julie McCluskie and Rep. Kyle Brown, argue that the fee is fair and worthwhile as it seeks to reduce private insurers’ financial risk and drive down premiums paid by homeowners. “Quite frankly, half a percent, given the way that homeowners insurance has gone up in the last number of years — just in the last year alone in the Denver area it went up 16% — in order to stabilize the market and prevent future gigantic increases is more than a good trade-off,” Brown said.
Impact and Reactions
The changes mean that people with homes in parts of Colorado that aren’t prone to wildfire or hail will be paying to drive down insurance costs for people who live in high-risk areas. While areas with high hail risk generally aren’t as prone to wildfire, and vice versa, proponents argue that insurance works better with bigger risk pools.
Insurance carriers were initially skeptical of House Bill 1302, but the amendments have brought them closer to supporting the legislation. “It’s a huge improvement,” said Carole Walker, who leads the Rocky Mountain Insurance Information Association.
The bill, a key initiative of Gov. Jared Polis’ administration, next heads to the House Appropriations Committee.
