With news this week that the Waldo Canyon fire is the most expensive wildfire for insurance companies in Colorado’s history, rumors started to fly about increasing premiums and full coverage becoming harder to get.
“I think there’s a concern that there will be an immediate impact to insurance premiums,” said Carol Walker, executive director of the Rocky Mountain Insurance Information Association. “And that is just really not the case.”
She said the insurance industry does not operate as a body, making blanket decisions about coverage that apply to all providers. And providers typically don’t make dramatic changes to the way they operate in a region based on a single event.
Several insurers had a moratorium on issuing new policies while the fire was still smoking and while people were evacuated.
Joe Clement, broker owner of Re/Max Properties, said he had several closings cancel during the height of the fires because properties — even those far out of the fire’s reach — couldn’t get policies.
Those moratoriums have mostly expired now. Manny Strauch, an American Family Insurance agent on the northwest side, said his company on July 13 lifted a moratorium that only applied to affected areas. But he deferred to corporate media representatives for further comment on impact to new policies.
“As of today, we’re writing policies as usual,” said Steve Witmer, spokesman for American Family.
Long-term, he said the fire losses will be considered with historical loss data to help the company predict future need. But the one event won’t dramatically change rates there.
“Premiums are not about recouping the money lost,” Witmer said. “They’re more about securing against future losses.”
Premiums are based on individual factors, he said. And they will not change at all until the company does its annual policy review.
Insurance companies usually judge their exposure to risk on an individual basis, Walker said. They also consider trends and weather history in an area. But that history includes several years — usually at least three and more commonly 20.
The association estimates that insurance costs for the Waldo Canyon fire will total $449.7 million once all of the claims are processed. Insurance expenses as of July 17 for smoke damage, additional living expenses for evacuated policy holders, damaged and destroyed homes and their contents totaled $352.6 million with 4,300 claims filed.
While that’s high and, in combination with the High Park fire, Colorado insurance companies are looking at paying out more than $550 million in fire claims this year, it won’t make a significant impression on how insurance companies assess risk, Walker said.
“We’ve always known we have a huge wildfire risk in Colorado,” she said. “And now we’re experiencing that.”
It’s just one of the risks Colorado homeowners and insurers face.
Premiums have been on the rise in recent years as homeowners nationally absorb some of the expense from catastrophes around the country and as Colorado homeowners share the burden of refilling insurance company coffers after other catastrophes — namely hail.
Just a couple weeks before the fire broke out, more than 70,000 homeowners between south Denver and Colorado Springs filed claims for $321 million in hail damage claims.
“That was widespread damage,” Walker said. “A single wildfire, even a catastrophic one like this, isn’t going to directly impact premiums. That Mountain Shadows neighborhood, it’s still in an urban area near a fire department. That’s not going to change.”