This post is part of a series sponsored by AgentSync.
Colorado’s findings could prompt more state insurance departments to enact legislation to ensure consumer transparency.
Across the United States, homeowners in areas at high risk for wildfires are facing a growing crisis. That’s not all.affordable price” But many homeowners are unable to secure insurance, even if they pay high premiums. And it’s not just wildfires. Hurricanes, tornadoes, and floods are also occurring more frequently and more severely. It has become. Homeowners in many states struggle to insure their properties.
In response to this situation, many states have begun implementing it. Fair access to insurance requirements (FAIR) Plan. Also known as the insurance company of last resort. These state-run insurance programs are designed to provide homeowners with coverage for wildfires that private insurance companies do not offer. colorado It is the latest state to enact the FAIR plan and will begin offering coverage in 2025.
Current Homeowners Insurance Challenges in Colorado
While certainly not the only state with these issues, Colorado is on the list of states experiencing record wildfires. especially in the last 20 years. This continuing and growing problem poses a challenge for insurance companies. Eight of the past 11 years have been in the red. According to data collected by The New York Times. It is no surprise that insurance companies are struggling to stay in business and solvent, and their bailouts are placing a heavy burden on consumers.
Here are the top concerns about homeowners insurance in Colorado:
- My current insurance company canceled my contract with little warning.
- Afraid to file insurance claims for covered losses for fear of being withdrawn
- Fire mitigation measures must be taken, but there is no guarantee of ongoing coverage
- Prices have increased by more than 100% in the past two years
- You can only access homeowners insurance if wildfires are excluded from coverage.
- Unreasonable or impossible mitigation requirements, such as requiring homeowners to remove trees from adjacent properties.
One particularly important concern attracting the attention of state insurance regulators is the criteria on which various insurance companies base their wildfire risk assessments: their willingness to insure a particular property and their premiums. This is the billed amount.
Fire risk ratings can vary significantly from one insurance company to another depending on the criteria they use to assess it. This is a big problem for consumers because they have little or no insight or control over their ability to obtain insurance (or afford insurance). The lack of standardization and transparency prompted state regulators in Colorado to focus on how insurance companies assess fire risk and introduce new legislation to find a solution.
Colorado’s new insurance rating transparency and standardization law
The Colorado Department of Insurance has heard consumers’ pain. The state has taken the first important step by creating a new FAIR plan to assist homeowners who cannot obtain insurance through traditional means in the admitted market. Now, the state is going one step further with several new laws aimed at addressing homeowner concerns.
Senate Bill SB23-166: Wildfire Resiliency Code Board
this bill Signed into law on May 12, 2023, requires the state to “establish a wildfire resiliency code committee and adopt a model code for the wildfire resiliency code committee in connection therewith; Requires governing bodies to have jurisdiction over areas within the Wilderness” – City interface to adopt codes that meet or exceed standards set forth in the Model Code…”
Simply put, Colorado does not have a building code that provides a consistent level of fire protection for new and renovated homes. The defect cost the state $101 million in aid from the Federal Emergency Management Agency (FEMA), according to . Reported by ProPublica. This harms homeowners and increases the level of damage that fires can cause in the state, leading to further increases in insurance premiums and reduced coverage.
“The bill would create a 21-member board responsible for developing standards for new and heavily renovated homes in high-risk areas, including rules for the use of fire-resistant building materials and the clearing of vegetation around homes. It is to be established.”
- https://www.propublica.org/article/colorado-law-to-require-more-wildfire-resistance-homes
In theory, a committee made up of stakeholders such as government, the insurance industry, construction companies and fire departments could come up with a set of standards to harden homes to prevent catastrophic losses like the ones the state is seeing. I think it can be created. In recent years, for example, 1,084 homes destroyed by Marshall Fire.
House Bill HB24-1315: Restoration Research
this bill The law, signed into law on June 6, 2024, requires the Department of Insurance to conduct a study on the remediation of residential properties damaged by smoke, soot, ash, and other pollutants as a result of a fire.
Before this law was enacted, there was no uniform standard for homeowners to repair homes damaged by fire pollutants. Homeowners are unsure about how best to clean and repair their homes after a fire, which can lead to long-term health risks and pressure on the housing market. Consistent fire restoration practices also benefit homeowners and insurance companies in the long run by fortifying homes against future fire damage.
It is important that insurance policies cover complete and proper repairs after a fire, but there is currently no universal standard on what this means. This can result in homeowners paying out of pocket or not being able to recover from a fire at all. This study examines existing practices, standards, guidelines, indoor air quality standards, and insurance related to residential fire remediation to help the insurance department set statewide standards that all homeowners insurance coverage must meet. We plan to consider the scope of application.
House Bill HB24-1108: Property and Casualty Insurance Market Research
this bill Signed into law on May 31, 2024, the market study for property and casualty insurance contracts assesses current market conditions, affordability of coverage, potential measures for sustainability, and the impact of the formation of captive insurance. The Insurance Commissioner is authorized to carry out the following. companies.
One provision of the law is for the Secretary to examine and report on the standards insurance companies use when underwriting property and casualty insurance policies for homeowners and associations such as condominiums and HOAs. These standards are currently a bit of a black box for consumers, particularly when it comes to assessing fire risk and charging premiums based on fire risk. The Colorado Insurance Commissioner’s Office said at its Aug. 3, 2024, regional conference that this research will help clarify how insurers are quantifying risk, and future goals are for the state’s businesses and The goal is to standardize fire risk assessments across geographic regions, he said.
Regulatory change is always closer than you think
Insurers face continued challenges in getting rates right, consumers struggle to pay premiums, and regulators need to ensure fairness for homeowners and public safety. I’m trying to. This means that new laws applying to the insurance industry are regularly proposed and passed across the United States.
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