Published: December 17, 2012

Colorado is a great place to live and so many activities to participate in outside!  Thats why we live here!  Have  you noticed how sever the weather has been over the last 4 years?  As a Colorado Native I can remember storms but it seems like they were more spread out back then.As part of this change in weather activity, sever weather related claims have been at a 4 year high!  Hail, Wind and now Fire dominate the headlines and as you can imagine, the insurance companies are paying millions.  I would anticipate rates going up quite a bit over the next few years as the insurance companies are making adjustments.

  • How much can we expect the rates to climb?  It is hard to say but the insurance commissioner will regulate the amount of increase as well as statistical data to back the rate hikes.  As you can imagine, the statistics are there so it is really just about the timing.  Anticipate anywhere from 10% increases to as much as 30%.

Please review this chart below as you will see a visual on the sever losses reported to the insurance companies during 6 months in 2011.  The trend continued into 2012 but I don’t have a map just yet.

  • Why is this the perfect storm for increased rates?  If you look at the combined ratios for home insurance companies throughout the US, you will see that they actually never make any profits on premiums.  They call their loss ratios, “Combined Loss Ratios”.  This CLR as illustrated below shows you that they continue to lose money in home insurance and really are ok with it.  Why?  They make their money or profits investing consumer money.  But with the financial market being weak, they are not finding the same profits like in the past.  Bonds, Treasuries, Real Estate are all weak.  This is typically safe with solid returns.  So if the insurance company cannot get profits from the market and the home insurance losses are increasing, then they must go back to the basics and take a hard look at company expenses as well as the home insurance product premium and coverages.
  • Waiting for the next hail claim to replace your 15 to 30 year old roof with a low deductible?  It may be too late.  The insurance companies are beginning to roll out provisions in their home insurance policy by doing some if not all of the following
  1. Separate Wind Hail Deductibles:  An insurance company may say that your wind/hail deductible will now be a percentage of your dwelling coverage.  So if your home is insured for $200,000 and you have a 1% wind/hail deductible, your out of pocket for a hail/wind claim is $2,000.
  2. Sliding scales for age of roofs:  One direction companies are implementing is taking a deductible scale for the age of your roof.  So if your roof is new, a $1,000 deductible at replacement cost is acceptable.  If your roof is say 20 years old, you may have a $3,000 deductible at Actual Cash Value.
  3. Type of roof:  In many cases and quite honestly all cases that I know of in Colorado, if you have a type of roof, insurance companies are changing coverage on you.  For instance a Wood Roof may be non renewed, not eligible for new business and in most cases, Actual Cash Value instead of Replacement Cost.  Ask your agent for details
  4. Pull out of Colorado:  This being the most extreme, if an insurance company is not profitable and is not making profits in the market or through alternative sources, they may have to pull out of Colorado altogether.  I have no specific information at this time on carriers looking to do so, but this is a likelihood.  Smaller premium companies would be first.
  • So what is next?  As always, I recommend calling an independent insurance agent here in Colorado to work with you on rates and coverages.  Independent agents work for you and have access to many companies.  A captive agent at State Farm, Farmers, American family for example only work for one company and so your best interest may not be as high as the companies best interest!

If you have time, i might recommend that you read this article below produced by The Denver Post.  The URL ishttp://www.denverpost.com/business/ci_21711680/colorado-homeowners-can-expect-see-rising-home-insurance?source=emailThank you to those of you that are current clients for your continued support of All Access Insurance and our team.  My hope is that we can continue to bring you good information on the changing landscape in insuring Colorado.Rick ClineChris MaynardMark RendonEmily Parsons