Legislature will try again to lower homeowners insurance rates by funding hail-resistant roofs

Colorado insurance premiums have risen 65% in 5 years. Hailstorms are mostly to blame

Colorado lawmakers want to impose a per-policy fee on home insurance providers to raise $20 million a year for a program that would provide grants to homeowners to protect their properties against hail.

The hope is that the program will protect enough Colorado homes against hail that insurance rates will drop across the state.

A similar effort failed last session.

In the last five years the average premium in the state has gone up 65%, according to the National Association of Insurance Commissioners. That makes Colorado one of the top-10 most expensive states in the country for homeowners insurance.

Climate experts say that is partly a result of more frequent and damaging weather driven by a warming planet. Since 1980, Colorado has had more than 76 weather-related disasters – including fires, storms, hail and floods that each caused more than $1 billion in damages. And it's getting worse – most of those disasters occurred in the past decade.

A new bill that will soon be considered would require the state to collect a half-percent fee on homeowners insurance policies that would go into an enterprise fund. A state board would then distribute grants to help people purchase hail-resistant roofs, which are more expensive than traditional shingles.

Bill sponsor Sen. Kyle Mullica, a Democrat from Thornton, estimated the fee could generate $20 million per year in the first five years, the maximum an enterprise can generate under state law. "I think there'll be real dollars here."

Mullica came on board to sponsor this year's bill, after he joined with Republicans to help defeat a similar proposal last session because he worried insurance companies would pass the fee directly to consumers. This year's version says the "insurer shall not surcharge the fee amount to policyholders." It's not yet clear how that may be enforced.

"The main difference this year is that we really put that focus on making sure that there's not a surcharge placed on consumers for this. We obviously need revenue coming in for this grant program to really help folks get these fortified roofs onto their homes and see the benefits, but we wanted to make sure too that it wasn't going to necessarily increase the cost of their homeowner's insurance."

The bill includes a study component around wildfire

Unlike the bill last year, the proposal doesn't offer money to insurance companies who provide plans in wildfire-prone areas.

"But we are not ignoring wildfires either. And we do have a study component in the bill to really look at best practices from that standpoint," Mullica said.

The goal of the bill is to lower pressure on premiums by helping make sure fewer homeowners need to replace roofs after a hailstorm.

Each hail disaster adds up for insurers – who pass those costs on to their policyholders. According to state figures, hail damage to homes is the biggest driver of those costs. On average, 60 to 70 % of the amount of premium that people pay across the state is from hail risk, even in places that don't get hail.

Gov. Jared Polis has called Colorado's insurance situation a major crisis that drives up costs for homeowners and reduces availability.

"We also have many homeowners who have a lot less choices, even some down to one choice, and to insure with less competition also means higher rates," Polis said in an earlier interview with CPR News and Rocky Mountain PBS. "So it's become a major problem."

A representative from the insurance industry attended the bill's unveiling at the Capitol on Tuesday. Carole Walker heads the Rocky Mountain Insurance Association and is an industry lobbyist. She said the industry has a shared goal with the state to get more hail fortified roofs to ultimately reduce risk and lower insurance premiums

"That is what's going to make a difference. That's the long-term answer to making our homes safer and more insurable," Walker said.

Andrea Kramar from Rocky Mountain PBS and Lucas Brady Woods from KUNC contributed to this report.

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