New bill seeks to curtail rising homeowners’ insurance costs

As Colorado legislators try again this year to make housing more affordable, a bipartisan trio has offered a new way to address the issue, introducing an incentive-laden bill to help residents to disaster-proof homes and try to slow the rising cost of homeowners insurance.

While the $560,000 median cost of Colorado homes is an often-cited statistic, leading to rankings like the No. 47 slot the state earned from CNBC this year for its cost of living, the cost of homeowners insurance also is rising — where residents can get coverage at all. A Metro Denver Economic Development Corp./Colorado Competitive Council study found that premiums rose 30% statewide from 2019 to 2023, and a state-funded study found that premiums for homeowners’ associations, which often cover multifamily communities like condominiums, went up at an even greater 115% rate from 2020 to 2024.

The causes of the price hikes are myriad. The Metro Denver EDC study identified increasing regulatory burdens, more frequent and costly natural disasters and soaring reinsurance costs. The Colorado Division of Insurance study, mandated by a 2024 bill, said those factors are exacerbated by 38% of carriers reporting a contraction in risk appetite, leading insurers to pull back on the number of policies they write or pull out of the state altogether.

Could disaster mitigation reverse insurance trends?

A key thing found by Somil Jain, a property-and-casualty actuary who conducted the DOI study, was that insurers, when asked how to keep prices down, cited the need for property owners to mitigate against the state’s most common disasters — wildfires and hailstorms. And when the Colorado Chamber of Commerce organized a Property & Casualty Insurance Subcommittee in the fall to investigate potential solutions, it learned from industry leaders that steps like installation of hail-resistant roofs and creation of wildfire-defensible space around homes and neighborhoods reduced risks and brought insurers back into markets.

All of that led to the introduction Tuesday of Senate Bill 49 by Democratic Sen. Marc Snyder of Manitou Springs and Republican Sen. Lisa Frizell of Castle Rock, as well as Democratic Rep. Sean Camacho of Denver. The bill creates two new incentives to help Coloradans better disaster-proof their homes, in hopes of slowing or even reversing those insurance-premium spikes and reducing one of the pressures keeping people from affording homes.

It first allows homeowners to establish tax-exempt “catastrophe savings accounts” from which they can pull money to use for installing impact-resistant roofing, performing wildfire mitigation projects and paying homeowners’ insurance deductibles. The idea, Snyder said in an interview Thursday, is that people who can put away money tax-free can choose not to replace hail-damaged roofs with the same material but instead with pricier — but also far more effective — hail-resistant covering.

Savings accounts and grant programs

SB 49 also expands the use of the Natural Disaster Mitigation Enterprise, created in a 2021 bill to offer mitigation grants to local governments to help with wildfire-prevention efforts, to homeowners’ associations and individual homeowners. This could allow individuals or groups of residents to pool resources and protect their areas better and, through such actions, see direct impacts on their homeowners’ insurance rates.

Snyder was the cosponsor of a bill last year, HB25-1302, that sought to charge fees on each homeowners’ insurance premium sold in Colorado and use the proceeds to give grants to homeowners to buy hail-resistant roofs or undertake wildfire-mitigation techniques. The bill died late in the session as lawmakers from both parties said they did not want to raise insurance costs on everyone to try to encourage some people to take steps that could reduce premium averages statewide, and that reasoning stuck with Snyder.

“These costs just keep piling on an on to people, and many of them are reaching a breaking point. And I think anything that increases costs on Coloradans, I’m going to have to look at it with a very discerning eye,” he said. “That’s why I’m attracted to a program like Senate Bill 49, because it should not incur costs on anybody.”

Colorado: 4th-highest homeowners’ insurance costs

Indeed, the two incentives, as suggested by the Colorado Chamber subcommittee, are both voluntary for residents and won’t drive a fiscal note during a year when the Legislature is looking to close an $850 million budget shortfall. The bill seeks to address a significant problem — the state’s $6,630 projected annual premium costs for 2025 ranked fourth-highest in the U.S., according to an Insurify study — and does it in a way that the insurance industry says can slow cost hikes.

Colorado has taken several steps already to try to address the issue. Last year, it launched a state-run insurance plan of last resort for homeowners who could not find coverage on the private market, particularly those with homes in the wildland-urban interface. And a law that takes effect on July 1 requires insurers to consider individual disaster-mitigation efforts when setting rates, inform homeowners of what they can do to lower rates further and hear appeals from residents who argue they’ve boosted their mitigation.

But the efforts, while critical, only go so far. Snyder, whose district in western Colorado Springs and adjacent hamlets like Manitou Springs contains more homes in the urban-wildland interface than any other Senate district, noted that the last-resort plan covers losses only up to $750,000. And he’s heard from quite a few residents in his district that their homes are worth more than that but that they can’t find insurance to protect against what could be a complete loss.

Impact of incentives could spread beyond those who use them

SB 49, if it passes and gets critical uptake, could have impacts beyond just the individual homeowners who take advantage of it, backers believe. The more homes that reach measurable standards of disaster mitigation, the less risk that insurers will see in the state as a whole and the more likely they will be to offer a greater number of policies and, through competition, to lower premium costs.

Other states — including hurricane-prone places such as Alabama and South Carolina — have adopted similar incentives to help residents prep their homes for those disasters and have reported some success in impacting rates, experts told the Chamber committee.

Home-insurance prices have not always been the purview of business leaders. But home affordability has ranked as high as No. 2 among the top concerns of employers when they were asked in Chamber surveys in recent years about obstacles to expansion in the state. And with insurance accounting for 10.8% of monthly mortgage payments in Colorado, according to the Metro EDC study, any organization wanting to address home affordability must focus on these costs, business leaders have said.

“Homeowners’ insurance rates are becoming an increasing burden on Colorado families, driving up the cost of housing and creating workforce challenges for employers,” Colorado Chamber President/CEO Loren Furman said. “If left unaddressed, these escalating costs will continue to strain Colorado’s rising cost of living and limit future economic growth.”

Dueling property insurance bills?

SB 49 may not be the only option presented for legislators this year on how to try to slow rising homeowners’ insurance costs. Snyder said that other sponsors of HB25-1302 have discussed the possibility of revamping that bill to fund a new enterprise with fees on insurance premiums, even as Gov. Jared Polis reportedly has advised against bringing back a carbon copy of that defeated effort.

Snyder said that even if an enterprise bill is introduced, he doesn’t consider the two bills to be mutually exclusive in terms of getting support. SB 49, after all, is meant to incentivize consumer behavior in a purely voluntary way, while the other bill would be more of an effort to use different financial means to push more widespread behavioral adoption.

But he’d like to see if the voluntary approach could have a significant impact on rising homeowners’ insurance premiums before legislators go down another path, he added.

“When you put an added cost onto an insurance premium, it’s going to get passed onto a consumer,” Snyder said. “Senate Bill 49 seeks to get us to a better, more hardened, more resilient place without increasing fees on anyone.”

The bill, assigned to the Senate Finance Committee, has yet to be scheduled for its first hearing.