Colorado proposes incentives for homeowner wildfire mitigation efforts

Jackie LoVerme Vice President of Strategic Partnerships | Insurify

Colorado is taking steps to address the challenges homeowners face in securing insurance coverage amid increasing wildfire risks. State Insurance Commissioner Michael Conway has announced plans for legislation aimed at compelling insurers to consider property owners' efforts to mitigate wildfire risks when determining rates and discounts. The proposed legislation would also allow homeowners to contest their wildfire risk scores and require insurers to clarify available discounts.

During an October 9 town hall meeting, Conway expressed his frustration with current wildfire risk models, as reported by the Durango Herald. "Wildfire risk models are the bane of my existence right now — one of the banes of my existence right now," he stated. "I hate them."

The impetus for Colorado's legislative push stems from recent devastating wildfires and the subsequent retreat of some insurance companies from high-risk areas. According to the Colorado Division of Fire Prevention and Control, four of the state's five largest wildfires occurred between 2018 and 2020. Notably, the East Troublesome Fire in 2020 destroyed 580 homes, while the Marshall Fire in 2021 claimed 1,084 homes.

In response to these events, several insurers have stopped renewing or issuing new policies in counties deemed at significant risk for wildfires. For instance, Chubb reduced its coverage offerings in parts of Boulder County last year, and Farmers Insurance subsidiary Foremost paused new policy writings in four counties this summer.

Despite having a lower overall wildfire risk than other areas, Arapahoe, Douglas, El Paso, and Weld counties have notable regions with high wildland urban interface (WUI) risks. Douglas and El Paso counties exhibit particularly high WUI risks with substantial portions of their populations facing moderate to highest risk levels.

Foremost has indicated it will continue offering dwelling fire policies covering properties where owners do not reside year-round.

As Colorado ranks among the most expensive states for home insurance—averaging $4,367 annually according to Insurify—Conway's legislative proposal seeks to alleviate costs by incentivizing mitigation efforts. In May 2023, Colorado established a Fair Access to Insurance Requirements (FAIR) Plan for those unable to secure traditional coverage. This plan is expected to open applications in early 2025 but requires three denials from standard insurers for eligibility.

Conway criticizes existing wildfire risk models used by insurers for overlooking mitigation measures undertaken by communities and individuals. "That's unacceptable," he said. "If we want to encourage people if we want to encourage communities to mitigate, people have to get the return on their investment for that."

California's previous legislation mandating insurer discounts for homeowners implementing protective measures against wildfires serves as a precedent; however, savings may be minimal according to E&E News analysis.