Colorado is set to implement a new law that mandates insurance companies to take into account homeowners’ wildfire mitigation efforts when assessing insurance premiums. The legislation, signed by Gov. Jared Polis, aims to provide incentives for homeowners to invest in risk-reducing measures, potentially leading to lower insurance costs.
In mountain communities where wildfires pose a significant threat, homeowners have been taking proactive steps to mitigate risks. However, many have reported that their efforts haven’t resulted in lower insurance premiums. The new law seeks to change this by requiring insurers to consider ‘property-specific mitigation actions’ and ‘community-level mitigation activities’ when evaluating a home’s risk.
The law defines property-specific mitigation as actions recognized by the Insurance Institute for Business and Home Safety’s Wildfire Prepared Home program. This includes measures such as establishing defensible space and incorporating building hardening measures. Community-level mitigation activities, such as forest treatment and fuel reduction projects, will also be taken into account.
Proponents of the bill hope it will be a step towards curbing soaring insurance rates in Colorado. The state’s insurance premiums for single-family homes increased by 52% between January 2019 and October 2022, with mountain towns experiencing even greater increases. By making insurers more transparent about how they evaluate wildfire risk, the law aims to reward homeowners who take proactive risk management measures.
Homeowners like Lisa Lewis, who invested in a community-wide fuel reduction project and home hardening measures, are hopeful that the new law will lead to more reasonable insurance premiums. Lewis’s neighborhood, Ruby Ranch, was one of the first in the country to partner with the U.S. Forest Service on a fuels reduction project on wilderness land.
The law also gives homeowners the ability to appeal their risk score and requires insurers to publicize potential discounts for homeowners who have taken mitigation measures. While the law doesn’t take effect until July 2026, Colorado Insurance Commissioner Mike Conway believes homeowners may start seeing benefits sooner as insurers begin to adjust their models to reflect mitigation efforts.
The new legislation is part of a broader effort to stabilize Colorado’s homeowners insurance market. Lawmakers are planning to revisit a previously failed measure that would have imposed a 1% fee on homeowner insurance plans to create funds for addressing wildfire and hail risks. The goal is to find a solution to the state’s insurance affordability crisis, which has seen premiums skyrocket in recent years.
As Colorado continues to grapple with the challenges of wildfire risk and insurance affordability, the new law represents a significant step towards creating a more equitable and transparent insurance market for homeowners.
