Colorado homeowners and businesses unable to obtain homeowners insurance from private companies could get costly and minimal coverage from a quasi-government insurer of last resort under a bill introduced Thursday in the US legislature. State.
The measure, sponsored by three Democrats, aims to prepare the state for a future filled with more wildfires and other natural disasters fueled by climate change.
Dozens of states already have state-run or regulated property insurers as a last resort. But so far, state officials said, there has been no need in Colorado. The 2021 Marshall Fire in Boulder County and the 2020 East Troublesome Fire in Grand County, however, changed the conversation as residential and commercial owners began to be rejected by private insurance companies. .
Hundreds of homes were destroyed in each fire, causing billions in damage.
“I don’t think we’ve heard that anyone can’t get insurance yet,” said Rep. Judy Amabile, a Boulder Democrat and lead sponsor of Bill 1288. “But we can see that the writing is on the wall. If we put this thing up and it never gets used to it, that would be great. But that’s probably not going to happen.”
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The Colorado Sun spoke last year with residents of wildfire-prone areas of the state who struggled to find property insurance coverage in the private market.
Sen. Dylan Roberts, a Democrat from Avon who represents mountainous regions at high risk of being affected by wildfires, says he has heard from constituents who have been let down by their property insurers. Amabile said she knew a group of people in a Boulder neighborhood whose private insurer, Chubb Insurance, refused to renew their policies.
A spokeswoman for Chubb declined to speak to The Sun last year about the removal of coverage for some homeowners in Colorado.
“I think we’re taking a very proactive step here to prepare for what could be a major issue in the future,” said Roberts, who is also a lead sponsor of the bill.
Here’s how Colorado’s property insurer of last resort, modeled after Kentucky’s program, would work:
- The governor would appoint a nine-member board by Jan. 1, 2024, which would have six months to develop a nonprofit to serve as a property insurer of last resort. Private companies offering insurance in Colorado would be responsible for $10 million in start-up costs, of which $5 million could be passed on to customers. The board of directors, whose members would include several representatives of the insurance industry, will determine how much each private company would be responsible for intervening. The bill does not call for the state to spend money to start the program.
- Amabile said owners won’t get liability or content coverage under the state plan. “It’s just going to be a minimalist plan,” she said, “but then you can go get those other things from the insurance companies because they’re less exposed if they don’t insure everything.”
- To be eligible for coverage under the state plan, property owners would have to demonstrate that they are unable to obtain insurance from a private company, including by producing letters of “revocation” of insurers refusing coverage.
- The bill’s sponsors want to cap the coverage Coloradans could get under the plan at $1 million for residential owners and $5 million for commercial owners. Additionally, the sponsors of the bill want property owners to have to regularly demonstrate that they need the plan because they can’t get coverage in the private market.
Without home insurance, it’s almost impossible to get a mortgage, which severely limits who can buy or sell a home. There is also immense financial risk in owning a property without insurance coverage.
Coloradons would not be eligible for plan coverage simply because their property insurance rates have gone up.
“It will be (a) product of last resort — almost a safety net — to make sure someone can get home insurance,” said House Speaker Julie McCluskie, a Dillon Democrat who is also one of the main sponsors of the bill. “It should not be used on a large scale and replace the products of (private) insurers.”
Colorado officials want to prevent Colorado’s property insurer of last resort from becoming like Florida’s.
Citizens Property Insurance Corporation of Florida is the largest state-run property insurance program in the United States. In August, the policyholder-funded nonprofit surpassed one million policies and became the state’s largest property insurer. Nearly 28 million people live in Florida, which is frequently hit by hurricanes that wipe out entire communities.
The bill’s sponsors hope that after being assessed to cover the $10 million in start-up costs, private insurers that operate in Colorado won’t have to pay more money. But the bill stipulates that if the premiums charged by the public insurer do not cover its costs, the private sector would be liable.
McCluskie said the bill was drafted with input from the insurance industry and the Polis administration, whose insurance commissioner Michael Conway told The Sun last year that the state needs help. an insurer of last resort.
Carole Walker, executive director of the Rocky Mountain Insurance Information Association, an insurance industry trade group, said she appreciates the sponsors’ willingness to work with insurance companies on the bill.
“We met several times in (McCluskie’s) office, we were able to bring in executives and experts from the company,” Walker said. “We have been meeting with the Insurance Division since last summer.”
Still, Walker said, the insurance industry has concerns about the bill. They would like to see its implementation slower and have more say in the board that oversees the state’s plan, also known as the “fair plan.” Walker said there are also concerns about the power the governor’s administration will have over the plan, which she said could subject the program to political whims.
“It has to be set up like a business and it has to be run like a business,” she said. “We support fair plans as an industry, they just have to be right. And, unfortunately, we have a lot of experience with fair plans that have done good and bad.
Lawmakers will need to act quickly on the bill. The legislative session ends on May 8.
The measure has not yet been scheduled for its first committee hearing.