New Colorado law can’t guarantee home insurance coverage or rates, experts say

DENVER — Insurance isn’t exactly the go-to for cocktail party small talk. For many Colorado homeowners, however, home insurance has become something they very much want to talk about – the increasing likelihood of not being able to find a policy altogether.

Bipartisan legislation, HB25-1182, Risk Model Use in Property Insurance Policies, was signed into law in May. It makes the insurance industry offer transparent premium savings on official websites, plus deliver written notice to all applying for a policy of their inherent fire risk.

Insurance experts said this new law can’t guarantee low rates, or that homeowners will be able to get insurance at all.

Insurance industry lobbyists said the current claims bill from the Marshall Fire, the most expensive wildfire in state history, is more than $2.5 billion.

Kevin Lombardo, along with more than 1,100 other homeowners in Boulder County, lost his home in that fire in 2021.

When the Lombardo family returned home after the fire, they struggled to locate their lot. There were no material goods salvageable, or even recognizable. They decided to rebuild, this time well above fire code.

“There’s a lot of fire resiliency built into this house, and insurance doesn’t seem to actually factor that in. At all,” he said. 

The key, Lombardo said, is mitigation.

“Fireproof venting, we’ve got the fire-treated wood, we’ve got triple-paned windows,” Lombardo said. “I didn’t get any discounts for fire resiliency.”

Lombardo pointed to livestock munching high grass in nearby open lands as another example of citywide mitigation, or reducing risk for wildfires with actionable steps. Still, the rates stay high, if a homeowner can get insurance.

“We can make homeowner’s insurance more affordable. That’s going to bring more insurance companies into the market because they’re going to want to compete in that space,” said Mike Conway, Colorado’s state insurance commissioner.

During our 20-minute conversation, Conway used a form of the word “competition” more than 15 times. He wants more insurers to come to his state, thus lowering prices.

The insurance industry itself isn’t so sold. Carole Walker, executive director of the Rocky Mountain Insurance Information Association, has her own buzzword: mitigation. It got more than 15 mentions during our 25-minute chat.

“Companies will either be giving mitigation discounts for wildfire-prepared homes or be calculating for it in their wildfire risk score model,” Walker said.

That score will determine whether an insurer would even offer up a policy.

“Those models are really making most of the decisions for the insurance companies, on where insurance are going to write business and how much they’re going to charge,” Conway said. “The problem was that we couldn’t, at the same time, assure homeowners that the mitigation work they were doing [would end up reducing premiums.]”

Hence this section of the law summary: If an insurer does not incorporate property-specific and community-level mitigation actions into its models, the act requires the insurer to provide discounts to policyholders who demonstrate actions taken on the property to reduce the risk of loss.

While the legislation is set to take effect July 1, the insurance industry’s surrogates are not backing down. 

“What we’re concerned about as an industry is stabilizing the market,” Walker said. “And anything that you do to push insurance companies to not be able to make business decisions, that’s when you get in trouble.”