Lipsher: Mountain homes find insurers reluctant

In this Saturday, June 23, 2012 photo provided by Darrell Spangler, a firefighter works the scene of a home being consumed by flames in Estes Park, Colo. (AP Photo/Darrell Spangler)
/>In this Saturday, June 23, 2012 photo provided by Darrell Spangler, a firefighter works the scene of a home being consumed by flames in Estes Park, Colo.
(AP Photo/Darrell Spangler)

Don’t know if this is broader than Colorado, from the Denver Post this morning. Here’s the link, below is an excerpt.

Last summer, insurers in Colorado paid out an estimated $449.7 million in wildfire claims. This year, many are saying they no longer want to take on the risk, even for loyal policyholders like the Littles, who have worked extensively to create a “defensible space” cleared of flammable vegetation that buffers their home from the surrounding forest.

Although the insurance companies in Colorado paid out $1.37 for every $1 in premiums collected in 2009 (the most recent year for which figures are available), it’s not as though they are not still wildly profitable. The net income of U.S. property-insurance companies grew to $33.5 billion in 2012, up from $19.5 billion in 2011, according to the Property Casualty Insurers Association of America.

Interestingly, wildfire insurance claims amount only to about 2 percent of all property-insurance payouts nationally. Hurricanes and tropical storms chew up 44 percent, followed by tornadoes at 30 percent.

But recognizing a sharp rise in large-scale weather-related disasters — if you doubt the effects of climate change, just look to the insurance companies’ actuarial tables for proof — the nation’s second-largest insurer, Allstate, last year moved to get out of catastrophe insurance altogether.

Because of a series of bad wildfire seasons, on top of the costly hailstorms that routinely tear up roofs in these parts, Colorado has joined the nation’s top 10 states in terms of disasters, according to Carole Walker, executive director of the Rocky Mountain Insurance Information Association.

That means premiums have risen sharply in many cases, policies have been dropped outright in others, and some areas are considered so risky that insurance companies have placed moratoriums on new policies.

(Local governments only now are beginning to take note when crafting zoning rules for new residential development along the forest boundaries and considering restrictions or requiring defensible space. One positive out of the insurance companies’ skittishness is that they increasingly are requiring property owners to clear out defensible space and use fire-resistant construction.)

Some disaster-stricken states — including California, Texas and Florida — have seen the availability of affordable property insurance dry up so much so that they’ve resorted to government-backed plans.

Colorado hasn’t reached that point, yet, but it’s obvious that insurance companies want only to maximize profits rather than provide, you know, policies that would actually insure property owners in the case of catastrophic loss.

Amy Bach, executive director of the non-profit United Policyholders, a consumer advocacy group, said it’s not unusual for insurance companies to overreact to catastrophes by sharply increasing premiums or axing coverage, but options remain in the insurance marketplace.

“People wonder: ‘How is this fair? I paid money to this insurance company for so many years, and I finally need it, and now that I need it, they’re dropping me,’ ” she said. “There’s just no law that forces insurance companies to take on customers they don’t want. My message is don’t be loyal to the insurance company, because they’re not going to be loyal to you if it’s not in their economic interest to do so.”

Calls to several of the largest insurance companies about their approach to wildfire coverage went unanswered.

The Littles ultimately were able to acquire a policy from a different company for only a couple hundred dollars more annually, one that actually sends out private firefighters to douse their home in a fire-resistant gel in the face of an encroaching wildfire.

Note: in case you haven’t been following the relationship of climate change and insurance companies, check out this post on Roger Pielke, Jr.’s blog or just search for Munich Re. There’s considerably more to this than meets the eye.

5 thoughts on “Lipsher: Mountain homes find insurers reluctant”

    • Wow. That’s quite a statement. I’m at least glad you didn’t make that statement about someone in our biz, but still.
      What in particular do you disagree about? What logic was “false”?

    • Some of us don’t do “the Twitter” *smirk*

      Weather report: I’m visiting the eastern Sierra Nevada, near Topaz Lake, and we had thunderstorms yesterday. Across from my brother’s house a lightning fire popped up in thick pinyon pine. A crew jumped on it right away and knocked it down, despite the high winds and ladder fuels, This morning, clouds are starting to billow again, and the winds are blowing, with 80 degrees temp.


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