The wildfires tearing through Los Angeles aren’t likely to have an immediate impact on homeowner’s insurance premiums in Colorado.
Insurance premiums in Colorado have been climbing for several years. That means most insurance companies already built in the buffers they need against fires in the state, according to Carole Walker, director of the Rocky Mountain Insurance Information Association.
“Colorado … has allowed insurance companies to take the increased rate they need to respond to the market conditions and increased risk,” Walker said. “So in Colorado, as we've seen these higher insurance bills, we're in a better position because we've seen that happen over the past several years. So we don't likely see an immediate impact in the California fires.”
Insurance companies use complex models to target specific risks for specific areas, according to Steve Hakes with Lafayette-based insurance brokerage Rocky Mountain Insurance Center. They aren’t likely to view Colorado through the same lens they view California, he said.
“Most of the insurance companies have used technology over the last couple of years to really hone in on specific territories as opposed to what used to be more regional,” Hakes said.
On top of that, many insurers have already pulled back on writing new insurance policies in high-risk areas of Colorado following the 2021 Marshall Fire.
“They've already begun phasing out a lot of the mountain home insurance that they write. We've had a lot of cancellations, non-renewals from some of the companies … who have said, ‘We don't want to deal with this anymore,’” Hakes said.
This year, Colorado lawmakers will debut two major bills to rein in home insurance. The state will also begin selling insurance plans to homeowners who are no longer offered insurance in the private market, likely in the first few months of 2025.
Coloradans currently pay some of the highest insurance premiums in the country. Home insurance costs $818 more per year on average compared to 2020, and Colorado now has the fourth-highest insurance premiums nationwide, according to a July research paper by Benjamin Keys and Philip Mulder.
Coloradans need to think about the costs of insurance when they are making household budgets, RMIC’s Walker said.
“Everything that insurance pays for is more expensive,” Walker said. “We know people are crunching those numbers on everything from groceries to their property taxes. Insurance needs to be a part of that.”
