Northern El Paso County Coalition of Community Organizations (NEPCO) – Wildfires drive up insurance costs in county

By Dave Betzler

The good news is that Colorado has earned another top three recognition. The not-so-great news is that this somewhat smoke-obscured national ranking is for Colorado’s wildfire risk. May was Wildfire Awareness month, providing an opportunity to look at wildfire risks and rising insurance costs facing individual homeowners. The recent catastrophic East Troublesome and Marshall/Boulder wildfires sharply, and in some case painfully, highlighted the dynamics of property insurance, a Rubik’s cube of wildfire risk, rebuilding costs, premiums, and regulatory changes.

Colorado is third nationally for properties in areas of high or extreme risk, and over 40 percent of Colorado’s nearly 6 million people live within the wildland urban interface (WUI). By definition, the WUI is the line, area, or zone where man-made structures and development intersect with undeveloped lands and vegetative fuels. In a two-state—Colorado and New Mexico—risk study, El Paso County was “particularly concerning” for properties at risk of wildfire damage.

Homeowners across northern El Paso County face twin challenges of insurance availability and affordability, and overcoming these challenges will not be easy, quick, or inexpensive. Area homeowners as well as those moving to Colorado face annual insurance costs that are roughly 30% higher than the national average, with 2021 reflecting insurance premiums that were up an average of 12%.

The all-too-common reality for consumers is fewer insurance carriers, limited policy choices, and continuing premium spikes. Nationally, tornadoes and hurricanes account for almost 90% of all losses, with wind/hail accounting for 5.4%, followed by catastrophic fires for 1.5%. Louisiana, Florida, and Texas, followed by Colorado, are the highest-cost states for property insurance. At the state level, more than 75% of insurance carrier groups have written fewer policies, and in Darwinian fashion, large firms are absorbing the small.

In a turbulent and dynamic insurance market, the desired homeowner goal of stable policies and reasonable premiums can often appear like a distant mirage. In Colorado, consumers do have an insurance watchdog and advocate. Vince Plymell, a senior Division of Insurance official, noted that investigation of consumer complaints following the East Troublesome and Marshall fires recovered $19.6 million for consumers, a 93% increase in dollar recovery over the previous year.

In Colorado, property and casualty insurers are governed by regulations and guided by administrative agencies, with oversight by the state Legislature. Legislators are increasingly concerned with today’s dynamic insurance environment of rising costs and limited policy choices and the downstream effect on homeowners. The Legislature developed Senate Bill 22-213, which called for creation of a wildfire urban interface Code Board to oversee statewide wildfire-related buildings and land-use standards. SB 23-213 included language for statewide regulation and enforcement of land use, a particularly concerning clause for homeowners associations and their members. The 2023 Colorado legislative session ended May 8 with SB 23-213 failing to pass after legislators were unable to reach a compromise between the Senate and House versions.

Most states have some type of minimum coverage or insurance-of-last-resort as a safety net for homeowners. Fair Access to Insurance Requirements (FAIR) plans were created as a response to insurance market unavailability that occurred when insurers stopped providing coverage to high-risk properties and individuals in specific geographic areas. These state-mandated FAIR plans create an insurance pool funded by the insurance companies to provide coverage to individuals and businesses who are unable to obtain insurance in the regular market. In essence, FAIR plans function as a quasi-governmental insurer for homeowners unable to secure a regular insurance policy. This session, Colorado legislators proposed a FAIR plan that, if enacted, would function as insurer-of-last-resort for homeowners and businesses.

Colorado’s heightened and growing wildfire risk, coupled with a more stringent insurance market conditions, limit consumer options and add more difficulty for the individual insurance decision maker. A statewide independent poll in 2015 found that 96% of Coloradans said that it’s very important or pretty important for homeowners to undertake fire mitigation. Monument Fire District has a no-cost risk assessment program that gives homeowners important steps to reduce the wildfire risk, and NEPCO’s (Northern El Paso County Coalition of Community Organizations) Wildfire Preparedness Committee provides practical tips to ensure safety and survivability for those living in the wildland urban interface.

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NEPCO meetings are usually held on the second Saturday of every other month at the Woodmoor Barn, 1691 Woodmoor Dr., 10 a.m. to noon. The next meeting is July 15. The topic is water issues. All members of HOAs are welcome. For more information, see http://nepco.org.

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