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Experts discuss how inflation impacts Colorado property insurance premiums

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Posted at 9:05 AM, Nov 01, 2022

COLORADO SPRINGS, Colorado — Inflation is driving up costs on many goods and services. But one necessity Colorado families may not expect is higher premiums on their homeowners insurance.

Industry experts say companies are re-evaluating rates in response to rising costs of building materials and home furnishings.

"What you're insurance company is looking at when they decide what to charge you for a premium is how much would it cost to repair and rebuild your home in today's dollars, replace all that stuff," said Carole Walker of the Rocky Mountain Insurance Association. "Unfortunately, those costs are skyrocketing."

Walker said Colorado homeowners will see even greater price jumps than neighboring states because of the one-two punch of catastrophic fires and numerous hail claims in recent years.

"Unfortunately, Colorado is in the perfect storm of all of these risk factors on a collision course," Walker said.

Earlier this year, Colorado lawmakers asked the Division of Insurance to study the impact of the Marshall Fire and report back with better strategies for recovery.

During a virtual meeting held October 21 about the study, Colorado Insurance Commissioner Michael Conway told the committee members that many consumers contacted him struggling to find policies.

"Two to three months ago, my phone started ringing really from a variety of the folks in this meeting today, but just in general from consumers, from Coloradans generally, that they were having huge issues with availability and finding coverage, really throughout the state," Conway said.

He explained that many other states have government-funded insurance programs known as insurer or last resort to address scarcity.

"The vast majority of states, 35 of the 50 states, have what they refer to as a fair plan, but it's really an insurer of last resort, and there's different mechanisms to do that," Conway said.

Kyle Lahey, an independent insurance broker with Integrity First Insurance, said his company works with 20 providers to give customers more options, especially those with hard to insure properties.

"A lot of times that comes with proper education," Lahey said.

He explained that underwriters are pulling in the reins in response to consecutive years of high loss ratios in Colorado and that mountain properties in particular can be harder to insure.

"The challenge is, a lot of companies, they're getting very, very cautious about these mountain properties," Lahey explained. "If there's a tree in the picture, they're pulling back, or they're asking for certain protections."

Walker said the insurance industry is very interested in studying the stability of Colorado's market place. She questions whether a state-backed program would have the courage to charge customers enough money to cover losses.

“Will there be the political will to adequately charge what needs to be charged for that premium because when unthinkable happens, our goal is to ensure that people can rebuild," she said.

Florida's state-backed insurance provider, Citizen Property Insurance, has become the state's largest provider as many private insurers have either become insolvent or dropped in rating.

"Colorado really is at a tipping point of how can we, especially with our catastrophic wildfire risk, our hail risk, maintain a stable competitive private market if we do put in a state fund of last resort that it looks nothing like Florida or Louisiana," Walker said.

She encourages homeowners to make a yearly 'check-up' with their provider to ensure that their coverage limits will be enough to cover a loss.

Consumers can also learn more about their individual property risk. The Colorado State Forest Service created an online Wildfire Risk Public Viewer where users can search individual addresses.

The Federal Emergency Management Agency also has many fire mitigation recommendations at to help lower fire risk.

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