Wildfires and hail storms cause insurers to raise premiums and drop customers in Colorado

A new study finds homeowners insurance is becoming less available and less affordable in Colorado.

The study by the Colorado Division of Insurance shows 76% of insurers decreased the number of Coloradans they cover last year. And over the last three years, the average insurance premium here has jumped nearly 52%. 

While some insurers are selectively canceling policies in high-risk areas and many are considering mitigation when deciding whether to insure a property, the study says the problem isn't isolated to areas at high risk for wildfire. 

It found policies are being canceled and premiums are climbing across the state.

"Points out how bad our market is, how in trouble it is... how much pressure there is," said Carol Walker, executive director of Rocky Mountain Insurance Information Association.

She says Colorado has the third-highest risk of wildfire and the second-highest number of hail claims in the country. 

The Division of Insurance says homeowners are paying nearly 23% more for insurance since the beginning of last year alone, and more than a third of carriers have canceled ten percent of their policies here.

Walker says a growing number of catastrophes, skyrocketing home prices and inflation have combined to create a perfect storm in Colorado. She says the state is at a tipping point.

"We don't want to get it to the point where insurance company says 'no I need to take my business elsewhere,'" she expressed.

The study found most smaller insurers are already scaling back in Colorado. Five carriers now insure 65% of the state and their losses here are greater than in all but four other states. 

"We have to be very careful any solutions that we come up with to address availability and affordability of insurance don't make that problem worse," Walker said.  

A state insurance option or "Fair Plan," is among the solutions the legislature is considering. 

Walker says lawmakers can learn from states like Florida and Louisiana, where the insurer of last resort became the main insurer and has nearly gone bankrupt. 

"And I have deep concerns that keeps me up at night that the stakes so high here as we're creating solutions and looking at a fair plan that we do it right," Walker said.   

The study, she says, is just a start. 

"Where are people having trouble getting insurance? What types of policies are these? What types of homes are these? What geographic regions are these? I think we need to take a longer look at this," she said.

Walker says a state insurance option, which is typically for single family homes only, is one of many solutions. 

She says homeowners with more expensive properties in high-risk areas may need disaster policies on top of the state option. 

The condo market continues to see a lot of litigation related to construction defects and it may need insurance co-ops, according to Walker.

While the problem is statewide, the study found some insurers are selectively canceling policies in high-risk areas and many are considering mitigation when deciding whether to insure a property.