Increasing Insurance Rates in Colorado
What’s Causing It The Increasing Insurance Rates and What Can We Do As Consumers?
Have you noticed any increase in your costs for Auto and Homeowners Insurance in Colorado over the last two plus years? If you have not, you should feel lucky. You should also know that what is happening in the areas of loss for both products is not a carrier problem, it is an industry problem. That means if you have not seen large increases in your cost of insurance, you most likely will very soon. Prior to the last two years Colorado may have seen annual rate increases of 2 to 12 %, on average. The increasing insurance rates were due to an average increase in losses, as well as the cost of labor and materials. Over the last two to 4 years, the increases have been from 2 to 92%, depending on the area of the State you live in. For Homeowners Insurance the most susceptible areas are that of the Front Range, which is the Wind and Hail Belt of Colorado. Colorado is second in the nation to Tornado-Struck Oklahoma for Catastrophic Claims. The losses also include the Wildfire claims that occurred in 2012 and 2013. We saw a total of 1,105 homes destroyed in the High Park Fire, Waldo Canyon Fire, and Black Forest Fire. The Flash Flood Event in September of 2013, which affected 17 Counties in Colorado is not a factor in most of the increases due to Flood Insurance being a Federal Program, for now. That may be changing soon with recent Federal Legislation being voted through to allow Private Carriers to Underwrite the coverage. 90% of all property loss claims in the State of Colorado are Roof Claims due to Wind and Hail Storms. Your roof is the most important part of the underwriting of a homeowner’s insurance policy for your closing. The roof cannot just pass a pre-purchase inspection, but must also pass an inspection done by the Insurance Carrier themselves. And, the all popular 5 Year Roof Certification does not help a roof pass, that is in actuality a roof with only 5 years of life left. Remember, if a Sellers Roof has un-claimed hail damage, a claim can still be filed with the Sellers Carrier, and the roof repaired or replaced before or after the closing. The key is not to be left with a roof on a house that you just purchased, that is bad or out of code. It is then most likely going to be your dime to fix it.
So what has changed from the Insurance Carrier stand point due to the Catastrophic Wind and Hail Losses? Two major changes are occurring to the policies. Either the carrier is doing a mandatory percentage deductible, such as 0.50 to 2% of the dwelling coverage amount, or they are no longer paying for replacement cost of the roof, after the roof is a certain age. The age depends on what type of roof you have. The most common roof, which is Composition Asphalt Shingle, normally has replacement cost for the first 10 to 15 years of life. After that the coverage goes to the depreciated value, with no recoverable depreciation available. Other types of more durable roofs, such as Metal, Concrete, and Tile, have up to 20 years of replacement cost coverage before the roof goes to the depreciated value. You will have to check with each individual carrier for the coverage that they offer. Make sure that the coverage the Agent is telling you that you have is in the verbiage of the policy language, or included as a Rider to the Policy.
As for why our Auto Insurance Rates are being so affected, just one thing comes to mind, distracted driving. The death rates on our roads in Colorado are up 17% over last year. When you combine distracted driving with a much higher rate of speed when impacts occur, we have fewer people surviving impact accidents. The other bleeding that is happening is the losses from 16 to 22-year-old drivers. As of last year, the Company that I represent had loss ratios for 16 to 22-year-old drivers of greater than 350%. That means the insurance carrier is losing $2.50 for every $1.00 of premium being collected. For Colorado specifically, due to our low unemployment rates, we are seeing more drivers and more vehicles of value on the road than ever before. That equates to an increase in the average dollar amount of each claim.
The difference between the increases for the Auto Insurance and the increases for the Homeowners Insurance is, we can fix our driving and what is happening on our roads through education to help slow increasing insurance rates, and becoming more responsible drivers on our roads. We cannot prevent hail storms. There is a reason why there are so many Personal Injury Attorney’s in our State, and most States.
For more information, please contact Brian Dee Counterman, LUTCF
Allstate Insurance Agency Owner in Littleton Colorado