In a recent eye-opening meeting, I delved into discussions led by Colorado Insurance Commissioner, Michael Conway, dissecting the issues and potential trajectories within the insurance landscape.
As a real estate professional deeply invested in the well-being of our community, the updates were both informative and concerning. We're witnessing a stark reality: escalating insurance costs for single-family residences and the disconcerting trend of insurance companies severing ties with HOAs, leaving them in a scramble to secure coverage at significantly higher rates. In this context, Commissioner Conway's insights assumed a crucial role in unpacking the complexities of this evolving scenario.
One notable development discussed was the Fair Plan signed into law on May 12, 2023. This plan is designed (like affordable health insurance) to provide insurance when unavailable through traditional means. The Fair Plan offers two options: a $750,000 cap plan for single-family homes and a commercial market plan with a $5 million cap, catering to HOAs. While these may seem low, it was emphasized that extensive negotiation was needed to push this legislation through.
However, the timeline for the Fair Plan is ambitious. Setting up what is essentially a new insurance company involves multiple steps, from appointing board members to establishing bank accounts. The goal is to have products available by January 1, 2025. This, Commissioner Conway acknowledged, is not an immediate solution.
One of the key takeaways was the frustration within the industry. The lack of proactive solutions and the absence of collaborative efforts have left the Commissioner and others looking for answers. As a real estate professional, it was disheartening to hear that there aren't immediate solutions, and the industry is grappling with the complexity of current modeling technology. Concerns were raised about the role of local governments and fire departments. The Commissioner expressed the insurance industry's move beyond ISO modeling, making it challenging to understand the intricacies of the technology. This lack of insight hampers the ability to make informed decisions on crucial matters like infrastructure planning.
When asked about guidance for realtors to share with clients, the outlook wasn't optimistic. Commissioner Conway candidly mentioned that it might get worse before it gets better, anticipating premium increases. He did, however, express hope in maintaining robust availability, acknowledging that the community's efforts in fire mitigation have played a significant role in retaining insurance access.
In terms of the commercial market, it was affirmed that some sectors, like hotels (Estes Park discussed), are already feeling the impact. Conversations about commercial solutions are on the horizon, but, as stressed throughout the meeting, finding creative, long-term solutions will take time.
As real estate professionals, it's crucial to stay informed and transparent with our clients. While the road ahead seems challenging, the resilience of our community, coupled with ongoing efforts, remains a beacon of hope in navigating these insurance complexities. It's a time to brace for change, advocate for solutions, and keep in close touch with your trusted insurance advisor to address the evolving landscape of insurance in Colorado.
Read more about the FAIR Plan
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