Fire should not have major impact on insurance

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— Wildfires throughout Colorado so far this year have prompted more than $80 million in insurance claims, but agents said homeowners should not see a dramatic increase in their insurance bills.

There are about 5,000 acres burning in Routt County right now, but insurance agents said those fires should not heavily affect the overall average of claims, which is used to base rates.

"The current fires won't make insurance rates go up in most mountain areas," said Carole Walker, executive director of the Rocky Mountain Insurance Information Association. "If you live in a high-risk area, you might pay a little more. With that said, if you are willing to do things to reduce your risk, it's not that much more."

Walker said $80 million is by far the largest amount insurance companies have had in claims for wildfires in the state's history. But it is much smaller than the yearly costs of damages from wind and hail storms, which have brought in claims of more than $180 million in the past.

"Eighty million dollars is a lot of money paid, but it is not huge in insurance terms," Walker said.

Alan Miller, the regional public affairs manager for State Farm Insurance, said homeowners insurance is based on the amount and size of claims that come into the agency for designated regions. And when those claims increase so do the rates.

"What you pay for insurance depends on how many claims are collected," Miller said. "For State Farm, (the wildfires are) a one-time incident, and it doesn't make a dramatic difference in the overall rates because it is included in the long-term average."

For State Farm, areas with similar claims are grouped by region, because as Miller said Routt County residents don't want to pay for hail damage in the Denver area. So far this summer, no major wildfire claims have been made in the region incorporating Routt County, Miller said.

While companies like State Farm determine insurance rates by regions, agencies also look at premiums on a "case-by-case basis." It is becoming harder and harder for insurance companies to write insurance for houses in remote forest areas with little water access, insurance agents said.

"My general take on insurance, even without the fires, is that the underwriting is getting a little tougher on what companies will insure," said Doug Champlin of American Family Insurance in Steamboat. "There are just some risks we are not willing to accept."

Champlin said for remote areas with trees standing against the house and no defensible clear space, his company is obligated not to underwrite it. He also said other companies are not interested in high end homes once they are more than 10 miles away from fire stations. And homes with no water source five miles away from fire stations have a higher rating than those in downtown Steamboat 100 feet away from a fire hydrant.

American Family Insurance, which is a prominent home insurance agency in the Midwest, also places a moratorium on writing insurance or increasing insurance coverage on homes 10 miles or less from a fire. That moratorium continues until three days after the fire dies.

These are policies that Kris Dobb from Sleeping Giant Insurance and Financial Services also sees. She said that during the Hayman Fire she received two to three calls from locals wanting to boost their coverage, but once the fires started in Routt County those calls jumped to between 20 and 30.

Although homeowners could see a 10 percent reduction in insurance for fire prevention, there are no incentives for clearing a defensible space around homes, Dodd said.

But Dodd said it is almost mandatory for homeowners to clear trees away. If they don't insurance premiums could triple for what would be less coverage, she said.

The reason incentives are not given for tree clearing, Walker said, is because monitoring it would be too hard.

"An alarm system and sprinkler system you know that is in place and is not likely to change. This is a more difficult thing to monitor," Walker said.

But she did say federal and state programs are available that could give grants for creating a defensible space and if homeowners do $250 in prevention work it could be matched by government money.

Dodd also lends the practical advice for homeowners to check with insurance agents before they start to build. Homeowners should know if they need outside water tanks or sprinklers before building, because it could be too late or costly once the structure is finished.

"People who are building in remote areas should think about insurance and call and work something out," Dodd said.

While this round of fires is not likely to spike rates for Routt County, insurance agents said rates might go higher if fires continue. Walker said the potential for a devastating wildfire like the one in Oakland, Calif., that generated $2 billion in claims has been on the horizon for Colorado for quite some time.

"Wildfires have certainly been on our radar screen. It is not 'if' but 'when.' And we are starting to see the when. It will take time to impact rates and availability of insurance," Walker said.

The collision of over forestation and growth of mountain communities has the potential to ignite some very costly wildfires, she said, and that could force rates to increase."And we're not talking about remote locations," she said. "There are bedroom communities and entire blocks and subdivisions going up in flames."

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