The letter has forced Felmlee to seek new coverage at what she hopes won’t be too high a rate, given her experience already with rising premiums. And while she owns her home, she’s wondering what rising home insurance rates in Colorado and companies leaving the market could mean for the many people looking to borrow money to buy a home. She worries it could mean a much higher monthly mortgage cost once the increasingly expensive home insurance borrowers must have is factored in.

“How is that going to work? I don’t know,” she said.

This month’s devastating wildfires in California, besides taking lives, have destroyed thousands of homes and are focusing even more attention on the home insurance crisis in states including Colorado.

Ken Christoff, an independent insurance broker with Christoff Insurance Group in Fruita, said the current home insurance situation in Colorado “is kind of alarming,” with a lot of companies leaving the state or certain geographic areas.

Almost all companies offering policies in the state have pretty much doubled rates within the past 18 months, he said.

“We’re in the hardest property insurance market in a generation” in Colorado, said Carole Walker, executive director of the Rocky Mountain Insurance Information Association, a trade association for insurers.

She said companies, especially smaller companies, are pulling back and limiting the number of home insurance policies they offer, particularly in high-risk areas, in order to be able to pay for all claims of all other customers. She said rates are rising based not just on wildfire risk but due to hailstorms, which are the most expensive insurance catastrophe in the state. Factors such as inflation and the cost of construction and labor also are affecting rates.

Scott Campbell, a spokesman for Felmlee’s insurer, American National, told The Daily Sentinel via email that it previously announced its intention to withdraw from the homeowners market nationally, which it is in the process of doing now.

“Multiple factors are driving this decision including that several years of increased frequency and severity of weather events have caused an increased lack of profitability in this line of business. Inflationary pressures have also increased the cost of claims payments, which has compounded the lack of profitability,” he said.

‘STUNNED’ BY NONRENEWAL

Robin Brown, who lives in the Redlands area, said her family recently received a letter from Progressive Insurance saying it wouldn’t be renewing their home insurance based on the wildfire rating for the area in which she lives.

“I was stunned by it,” she said.

For both Brown and Felmlee, the loss of home insurance also could affect what car insurance they get going forward because they had bundled coverage, which provides for discounts when customers get both car and home insurance from the same company.

Brown said the letter from Progressive indicated the decision was based on the wildfire rating for the area where she lived. Progressive didn’t return an emailed request to clarify what actions it may be taking regarding no longer offering home insurance locally or on a broader scale.

Brown said her home is in the desert.

“There are no trees, it’s a lot of rocks. I had to laugh because there’s nothing to burn,” she said.

She noted that the letter came amidst the fires burning in California.

“I’m sure that’s a decision (by Progressive to not renew) that’s been in the making but it still feels very connected. Whether it is or not I don’t know,” she said.

Walker said California ranks first in the number of homes in high-risk wildfire areas, and Colorado ranks second. Colorado ranks second in the number of hail insurance claims.

“So we’re a high-catastrophe state,” she said.

STUDY DOCUMENTS PROBLEM

In 2022 a bill was passed seeking ways to address home insurance availability and affordability in Colorado. In working to carry that out, the state Division of Insurance had a study conducted that was released in 2023. It found that the Colorado insurance market had been struggling in recent years, and that in looking at the ratio between money spent on claims versus profits on policies, it had the fourth-highest ratio among all U.S. jurisdictions.

The study found that outside the top five insurance carrier groups, insurance carriers “have been shrinking their exposures in the Colorado market since 2021,” and the market is consolidating under the five largest carriers.

It found that the average homeowner premium in the state was up a total of nearly 52% between January 2019 and October 2022, with the size of average annual premium increases also growing over that time. Increases in Colorado are measurably higher than the national average, it said.

In 2023, the Colorado State Forest Service found that just under half of Coloradans, or just under 2.5 million people, live in the wildland-urban interface, where proximity to natural terrain and flammable vegetation creates a risk from wildfire. More than a million of them live in areas with moderate to very high wildfire risk.

Felmlee said her home is right in Grand Junction, and she doesn’t have walls of piñon pines, ponderosa pines, junipers or other such vegetation anywhere close to her home.

Andy Martsolf, emergency services director for the Mesa County Sheriff’s Office, said it’s not only homes that are in the wildlife-urban interface that are at risk from wildfire, but urban ones as well. Citing fires such as those in California, and the highly destructive Marshall Fire in Boulder County in late 2021, he said fires may start in that interface, but as structure fires occur and the winds drive fires, “it’s off to the races,” with a high potential of spread between houses that can be close together.

Martsolf noted that the Colorado River running through the middle of Grand Valley has riparian areas prone to burning, and a lot of drainages connect with the river. He said a fire along the river could ignite heavy fuel in drainages and lead to fires burning right up to homes.

“It’s important to understand that wildfire is our most significant hazard in Mesa County and regardless of where you live you should be focused on your home ignition zone and defensible space on your property,” he said.

He pointed to places such as Glade Park and parts of the Plateau Valley that are at a particular risk from wildfires.

“There actually are a lot of areas around Mesa County that are at risk,” he said.

The county in 2023 released a Community Wildfire Protection Plan that was an update of a 2012 plan, but in 2008 it also released a plan specific to the Glade Park and Redlands area twildland-urban interface with Colorado National Monument, to supplement a 2004 county plan identifying both of those areas as communities at risk.

FRONT RANGE ‘TRAIN WRECK’

Christoff said insurers are facing significant costs for reinsurance, which is insurance that insurers themselves obtain to cover big losses, and that also is helping drive up costs for consumers. He said insurance companies aren’t in the business to lose money, and he believes the home insurance problem in Colorado is driven by losses on the Front Range.

“The Front Range is a train wreck. They have wind, hail, fires,” he said.

House Speaker Julie McCluskie, D-Dillon, said in an interview that according to a presentation by the state Division of Insurance at a community meeting this fall in Summit County, two brief hailstorms caused as much damage as the Marshall Fire, which destroyed more than 1,000 homes. Given the way insurance companies pool risks, homeowners in the mountain counties she represents pay for the cost of hailstorm damage even though they don’t have hailstorms, she noted.

When it comes to fire, the 2023 state Division of Insurance report said, “Some of Colorado’s areas at high risk of wildfire run close to the densely populated areas of the state, increasing the potential for large losses to insurers.”

Christoff believes that even with wildland-urban interface issues, the Western Slope is a cash cow for the industry, but with so few people here and such high losses on the Front Range, profitability becomes a problem for insurers.

MOUNTAIN PROPERTY PROBLEMS

Christoff doesn’t think things are at the point where homeowners in general can’t find affordable insurance or any insurance.

“But I can definitely tell you it gives people a big pause before they buy that mountain cabin unless they’re just going to self-insure it and pay cash because those are the properties that are being canceled, non-renewed,” he said.

Speaking on Tuesday, he said he had two clients whose properties on Grand Mesa were non-renewed that day. It’s also been an issue around the Powderhorn Mountain Resort area, he said.

He said properties his company used to issue policies for perhaps $1,200 to $1,400 a year around the town of Mesa and in the Glade Park area might now cost $3,300 or $3,500 a year to insure.

“Insurance rates just keep going up for those rural areas that are considered high-risk,” said Mike Eaton, a Carbondale resident and real estate broker associate for Slifer Smith & Frampton.

He said he’s not an insurance expert but has seen the challenges both in working with real estate clients trying to find insurance, and looking for insurance himself. He said some insurance companies seem to be a bit more aggressive and willing to insure higher-risk properties more easily, while some of the more well-known companies like State Farm and American Family Insurance want nothing to do with them.

He understands the business decision driving the companies’ actions, especially in light of continuing devastating fires.

“They’re not going to take on stuff that’s likely going to cost more than they’re making off of it,” Eaton said.

He said he has seen some real estate deals fall through due to the home insurance challenges. He hasn’t seen the insurance crisis have much impact on the real estate market in the Roaring Fork Valley and Garfield County because the demand for housing is so high. But he said the people who are being most affected by it are first-time homebuyers, for whom insurance is making it even harder to get their foot into the door of the expensive housing market.

People who are maxing themselves financially in trying to get a mortgage are no longer able to get into a property if the cost of insurance on top of that is too high and the seller won’t come down on price.

“It’s just another factor that pricing people out of the market,” Eaton said.

STATE OFFICIALS TAKING NOTE

Colorado Gov. Jared Polis touched briefly on the home insurance problem in his recent State of the State address and called for reforms aimed at helping tackle cost and access issues.

Polis “sees this as an important part of making homeownership more affordable for Coloradans of every budget,” Shelby Wieman, a Polis spokesperson, told the Sentinel. “Colorado is no stranger to natural disasters and the impacts of hail and fire, which is why this is a priority for him during this legislative session. He looks forward to continuing this important conversation with legislators and stakeholders.”

Among bills in development is one that would ensure mitigation measures taken to combat disaster risk are incorporated into a homeowner’s insurance costs. McCluskie said she hasn’t seen that bill draft yet, but if communities and homeowners are investing in fire mitigation and prevention efforts, they should receive some credit for that in insurance rates.

“I’m eager to see how that bill comes forward,” she said.

A bill passed in 2023 created a Wildfire Resiliency Code Board that will adopt model resiliency codes and standards for local use.

Another 2023 bill that became law provides for the creation of a Fair Access to Insurance Requirements (FAIR) Plan designed to provide property insurance coverage for homeowners and businesses when they can’t get it through traditional means.

Walker said she thinks it is part of the solution to the problem in Colorado and hopes it will take some pressure off the private market, knowing that it doesn’t have to take on higher-risk properties.

The plan is being rolled out this year but is intended to be a last-resort option. It will be available only when a property owner has been rejected by three standard insurance companies, and it is the most expensive way to insure a property and will offer only basic coverage, according to the plan’s website, www.coloradofairplan.com. If standard insurers won’t cover a property, insurance agents may recommend as an alternative to the FAIR Plan exploring the surplus lines market, which consists of insurers specializing in covering properties that don’t meet the underwriting standards of the traditional market.

Walker noted that the FAIR Plan’s startup costs and capital reserves will be paid for by assessments on private-market insurers, and those costs will be passed on to insurance customers.

McCluskie said lawmakers are starting to hear of homeowners associations, lodges, condos and hotels also struggling when it comes to insurance availability and affordability, and last year the legislature passed a bill that will have the Division of Insurance study that issue and make recommendations.