Fire and hail escalate rates on homeowners insurance in Teller County

When Carl Andersen opened his homeowner's insurance bill the day before Christmas, the increase was not even close to being a gift.

"My insurance went from $5,400 to almost $13,000 a year," Andersen said.

Asked for an explanation, Andersen's agent said the increase was due, in part, to the payouts by insurance companies after the Marshall Fire in December 2021.

The fire, in Boulder County, destroyed more than 1,000 homes and commercial properties.

"Insurance companies are comparing us to other parts of the state versus how we're doing here personally," Andersen said.

Andersen lives in a rural area in Divide where the local fire department achieved a rating of 4 by the Insurance Service Center. A national agency that determines risk factors of local fire departments, ISO ratings are on a scale of 1-10, with 1 being the best.

"That's pretty good for a volunteer agency," said J.T. McLeod, the department's first paid chief. "The caveat is that, if you live beyond five miles from the station, your rating is higher."

Andersen lives beyond that critical five miles.

The ISO grades everything from training to the number of people on call at the station, the location, and water supply.

"The issue we run into with people being denied insurance or getting the policy cancelled is that we don't have a control factor," McLeod said. "Sometimes we get the impression that insurance companies are concerned but don't have the right knowledge base to be concerned."

Andersen thinks the ISO rating is outdated.

"This frustrates me because in the last couple of years, our local fire departments have done a great job of putting out fires, home fires, forest fires," he said.

On the other hand, State Farm does not use ISO ratings but the company considers risk factors on a case-by-case basis, said Erica Szymankowski, agent with State Farm and president of Szymankowski Insurance Agency in Woodland Park.

With 10 years of losses in Colorado, some insurance companies have had enough.

"People think insurance companies make gobs of money. They don't," said Tommy Feist, broker/agent with Farmers Insurance in Woodland Park. "With homeowners' policies, some of these companies lose tens of millions of dollars every year."

With the frequency of wildfires and severity of hailstorms such as the one in Cripple Creek in July, companies are on the hook.

"It used to be hailstorms would hit out on the Eastern Plains and might affect five houses but now they're sitting in the middle of the Broadmoor area, in downtown Denver, and you end up with 20,000 claims," Feist said.

No doubt about it, it's expensive to live in the mountains.

"I can quote a home in the Springs and the bill would be $1,500 a year. Take that same home and put it in Woodland Park, it's probably $3,500," he said. "Put that same home in Florissant and it's probably $7,000 for homeowners' insurance. It's unreal how expensive Colorado has gotten."

Andersen, who owns several businesses in Woodland Park, agrees.

"Insurance is driving some people out, young people, retirees, because they just can't afford to live here," he said. "It's not just the homeowners' insurance, but the property taxes, inflation, everything has gotten so expensive."

And there's no refuge for manufacturedmobile homes.

"I can't even write a policy anymore; no carriers want to carry them, especially up here," Feist said. "If you're in a mobile home in the Springs, no problem. Up here, companies won't touch 'em anymore."

Homeowners who have paid off the mortgage are not mandated to have homeowner's insurance.

"The day of the Waldo Canyon Fire (June 23, 2012) I bet I had 50 phone calls that day from people wanting to buy homeowners' insurance, people with $600,000, $700,000 homes who had zero insurance," he said. "I mean, my phone was ringing off the hook."

Despite the hurricanes and fires in other states, Farmers only establishes rates using data from Colorado.

"When a catastrophe hits in Colorado, it just affects Colorado customers because we're not using customers from all over the country so we might have a bigger rate increase for Colorado," Feist said. "The Marshall Fire is the most expensive in history. Of the 1,000 homes that were hit, 300 were Farmers' customers."

Szymankowski looks on the bright side of rising rates.

"Nobody wants their premiums to increase, but nobody wants to be insured by a company that can't afford to pay the claims it has promised to pay," she said. "So, this is a delicate dance that all insurance companies conduct."

For Andersen, he made the only deal available, to increase the deductible from $5,000 to $43,000 a year.

"The higher deductible brought the annual insurance cost down to $8,900 a year," he said.

Andersen's proposed solutions include more fire mitigation by rural homeowners along with more paid fire departments.

"It's going to be an expensive solution no matter what," he said. "With more than 50% of public land in Teller County, Andersen questions why the federal government can't do more mitigation in the forests.

Mitigation counts. "Before we insure a property, we conduct an inspection survey for eligibility, including the conditions like the roof health, mitigation around the structures, access to and from the location for emergency services," Szymankowski said. "This determines if the property is eligible for insurance with State Farm, but it does not affect the rates."

The inspection affects the home's approval process.

"It's like a passfail test," Szymankowski said. "If you fail, we may give you a chance to correct the errors and re-test, like a very generous professor in school."

John Shoub, who owns a home in Arabian Acres in Florissant was denied homeowners' insurance by four companies. On a tip, he found out about Homesite, an online insurance company based in Boston, Mass. Shoub said he talked to a person on the phone and was able to insure his home in Arabian Acres.

To date, Andersen has talked to Colorado representatives and Teller County commissioners.

"I want to make sure everybody is aware of it and that the issue needs to be addressed," he said.

Commissioner Dan Williams is on it. "The issue of the rising cost of fire insurance for residents in rural areas in Colorado is being raised to the highest levels in both the Colorado Legislature as well as nationally," Williams said. "This is a problem in all 47 rural counties in Colorado and other areas throughout the nation in areas that are prone to forest fires."

Williams recently testified before the bipartisan Fire Matters Board at the state capital.

"Teller County received accolades for all the outstanding work we are doing from improved communications, early use of aviation, and support of various fire mitigation grants to try and combat forest fires early and before they occur," he said. "One of the issues I raised was the cancellations for existing residents of fire insurance as part of a homeowner's policy and inability of new residents to obtain insurance."

Insurance is the law of large numbers.

"While you didn't have a claim, there were others who are going to spread out rates to account for losses," said Feist, the Farmers' agent.

Fair access to insurance requirement

"Communities like Woodland Park have been facing a risk of wildfire with some companies refusing to insure their homes," said Julie McCluskie, speaker of the Colorado House of Representatives and former resident of Woodland Park.

Last year, the Colorado legislature passed the Fair Access to Insurance Requirement, a nonprofit organization.

"We are creating a homeowners' safety net, insurance of last resort," said McCluskie, a Democrat who represents District 13, Chaffee, Grand, Jackson, Lake, Park, and Summit counties.

Governed by a nine-member board of insurers, agents, consumers, and homeowners, the members are charged with creating plans for the organization.

"This had bipartisan support," she said. "Other states are doing this, too."

The insurance program is only for people who have been denied coverage by their insurance companies or dropped, McCluskie said.

"The goal is not to compete with insurance companies but to offer alternatives," she said.

Gov. Jared Polis signed HB23-1288 May 12.

"The policies must be actuarially sound so that revenue generated from premiums is adequate to pay for expected losses, expenses, and taxes," McCluskie said. "Coverage limits not to exceed $750,000 for property and $5,000,000 for commercial property owners."