Insurance Payments Change

by Sharon Campbell

Be ware, insurance payments are not fixed and can change. Take a look at an example in Denver, Colorado.

Colorado homeowners can expect to see rising home insurance rates
Linda Peterson was stunned when she received the renewal notice for her homeowner’s insurance policy a few weeks back.

The annual premium was rising from $1,370.74 a year to $1,981.99, a much larger jump than she had expected even with the calamities she witnessed in her own backyard of Colorado Springs.

“We have lived here 20 years, and it is the biggest increase we have received,” she said.

The dismay Peterson experienced is expected to become much more common in the months ahead as insurers in Colorado try to bring premiums into line with claims.

It’s not the summer’s destructive wildfires that are to blame — those will likely spur more localized increases in a few years — but storms and catastrophes from 2008 to 2010.

“Insurance premiums are based on patterns and trends over a long time,” said Carole Walker, executive director of the Rocky Mountain Insurance Information Association, an industry trade group. “It is a multiyear process.”

Some consumers along the Front Range will get double-digit percentage increases as their renewals come up this year and next, Walker said.

The Windsor tornado in 2008 was the most costly in state history, at $193.5 million in insured losses. Three hailstorms in 2009 generated $1.4 billion in damages, making that year the costliest in Colorado ever for insurers.

Insurers note that a severe hailstorm lasting minutes can generate much larger claims overall than a forest fire burning for days.

In 2009, insurers in the state paid out $1.68 in claims for every $1 they collected in premiums. In 2010, it was $1.37 in claims for every $1 in premiums, the fourth-worst showing of any state in the country, according to the Property Casualty Insurers Association of America. For the previous three years, however, insurers paid less than they collected in Colorado.

Some consumers may want to say tough luck, that the insurers didn’t forecast properly. But regulators take a different approach, said Marianne Goodland, director of consumer education at the Colorado Division of Insurance.

If claims continue to outpace premiums for a sustained period, then insurers will eventually deplete their reserves and not have the money needed to pay out claims.

“You want your insurance company to be able to pay your claims. You want them to be financially solvent,” Goodland said.

That doesn’t make big premium increases much easier to accept.

Sharon Campbell

Guild Mortgage

scampbell@guildmortgage.net