Published: January 24, 2012

This year will prove to be an interesting hurdle for Home Insurance in the state of Colorado. Higher rates, and changes to coverages will begin to occur if they have not already. Why is this going to happen?

Here in Colorado we have seen the perfect storm over the last couple of years. Tremendously high hail counts, a poor financial market, increased policy coverages and a long run on insurance companies lowering premiums to gain market share.Lets break these down further.

  1. Hail losses: 2009 and 2010 were severe loss years for Hail and Wind in Colorado. If it wasn’t hailing in your neighborhood, rest assured it has been hailing in others. Millions of dollars have been paid out on catastrophic losses as the direct result from covered perils Wind and Hail. Despite deductibles at 1k or higher, insurance carriers have had to replace most roofs in the Denver Metro Area.
  2. Poor Financial Market.  Typically insurance companies can run loss ratios a bit higher then they would like if they are able to offset their loss with revenues generated from their investments.  When they are not getting the returns they would want for this offset, it results in a negative impact to shareholders or investors
  3. Policy Coverages.  Over the years that I have been an agent, I have seen companies offer more and more coverages on a home policy.  Fire and Wind/Hail would be a given here in Colorado but now carriers offer identity theft, sewer backup, frozen plumbing, Increased coverages on Jewelry etc.  These additional coverages are enticing to clients that would rather file a claim then to eat their loss.  More coverages equals more claims and if the premium is too low for the amount of coverages, then we have yet another negative impact on loss ratios.
  4. Lower premiums.  Many insurance companies both existing and new to Colorado have been competing for your business.  Not just on auto but on home.  There is a standard market premium that in theory would be what an insurance company should charge based on their overall risk.  This “mendoza” line that the industry sets has been somewhat ignored and premiums have been lowered to gain market share.  This is risky business when we have hail losses in Colorado.  Not enough premium for the risk!  Sounds like yet another negative.

So what can you expect and what can you do about it? First things first, home premiums are going up!  Yep.  No question.  Around 20 to 40% for some carriers.  So if you were paying $1,000 for home insurance, expect a $200 to $400 increase within 12 to 24 months.  So, with this in mind, my suggestion would be to discuss higher deductibles for sure and look to consolidate your auto or rental properties with the same carrier.  The more you bundle, the better.One idea that not many people know about is you can re-rate your home insurance with the same carrier.  Why?  If your credit has improved (or gotten worse), your rate can be adjusted.  Talk with your agent about re quoting with the same home carrier if you feel confident your credit score has improved.Dont put your auto with one carrier and your home with another.  At any chance consolidate.  I cannot express this enough as insurance companies can get premium from your auto to offset their risk on the home.Will this end soon?  The answer is no.  Insurance companies are only allowed to increase premiums with the insurance commissioner at set times and at set amounts ( I am not a specialist on this).  I do know that if they could, many would take a 100% or 200% increase on home premiums to get them profitable.  Of course, they would lose all their business so they have to take increases slowly over an extended period of time.  Also, can we expect more hail to hit Colorado?  If you have lived here longer then 12 months, you know the answer is yes.  And with the above negative impacts, will the home insurance carrier be able to get the premium profitable soon?  I doubt it.Did I mention Credit?  I mentioned how you can re quote if your credit improves but what if you have poor credit and trying to purchase new home insurance?  Your rate will be higher with 90% of carriers.  Here at my agency we have one company that will place competetive home insurance on credit that is sub par. Use an indpenendent insurance agent that can go through several markets.  Why anyone would use one agent with one product is amazing.  Relationships and company branding are my guess.  They like their agent and carrier even though they are paying too much premium with potentially lower coverage.  I know my clients value me (at least most of them!) but I am not worth 30% higher rates for anyone!Take your time to understand what your policy covers and if you have questions, give me a call.Rick Cline: All Access Insurancewww.rickclineagency.com