COLORADO
Colorado Reveals FAIR Plan Member Insurer Fee Recoupment Proposal
DENVER //BestWire// - Colorado’s insurance department released draft regulations detailing how member companies in the state’s new Fair Plan can recoup participation fees from policyholders.
(Photo credit: Michael Ciaglo/Getty Images)The state passed legislation to create its insurer of last resort in 2023, and it is hoping to launch the program early this year, Executive Director Kelly Campbell said (BestWire, Dec. 4, 2024). The carrier projects around 1% of the state’s properties will be eligible for enrollment.
Carriers are not required to recoup these fees, the Colorado Division of Insurance said. If they elected to recoup Fair Plan participation fees, carriers must apply a “fair and equitable” premium surcharge over a five-year period to all personal and commercial property policies. The surcharge must be disclosed on a policy’s declarations page.
The surcharge must be calculated following the FAIR Plan’s plan of operation, the draft regulations say. At least 90 days before applying the surcharge, carriers must submit a rate filing for approval from the insurance commissioner. If a surcharge amounts to less than 1%, the carrier can request to shorten the five-year recoupment period.
Colorado lawmakers are also looking at a bill clarifying the FAIR Plan is not an “insurance company or a person engaged in the business of insurance” nor is it a department, unit, agency or political subdivision of the state. The final point was made to clarify the FAIR Plan is solely responsible for any debts and obligations it incurs, according to text of House Bill 25-1205.
The bill would also grant immunity to the FAIR Plan’s directors and employees, as well as the commissioner and insurance department officials, for any action taken on behalf of the FAIR Plan. Only breaches of contract or common law would be grounds for legal action, according to the bill’s text.
The department is accepting comment on the draft regulation until Feb. 14.
Attempt to gain comment from the Division of Insurance were unsuccessful.
The five largest writers of homeowners multiperil in Colorado in 2023, based on direct premiums written, were: State Farm Group, with a 20.82% market share, Liberty Mutual Insurance Cos.,15.42%; USAA Group, 12.62%; American Family Insurance Group, 9.5%; and Allstate Insurance Group, 8.33%, according to BestLink.
(By Steve Hallo, senior associate editor, BestWire: Steve.Hallo@ambest.com)