MODELS
Colorado Bill Would Increase Carrier Requirements to Enable Risk Model Use
DENVER //BestWire// - Lawmakers in Colorado are reviewing a bill that would increase disclosure and notification requirements, update modeling rules and increase consumer transparency for carriers that use risk models in underwriting.
House Bill 1182 would cover any carrier using wildfire risk models, catastrophe models, a combination of models or a scoring method. If enacted, carriers would need to include in rate filings with the insurance commissioner a description of the model, its impact on rates and an explanation of how it is used in underwriting, according to the bill’s text.
Additionally, models would have to incorporate property-specific and community-level mitigation efforts as well as any statewide activity to address wildfire risks. Carriers would have to include details on their websites regarding discounts available through these mitigation efforts, including the size of the discount and how specific mitigation projects can alter premiums.
Further, the bill would require policyholders to be given written notification of the wildfire risk scores, how they impact premiums and potential mitigation projects. The bill also creates an appeal process for consumers to challenge risk scores.
If enacted, the law would go into effect Jan. 1, 2026.
Attempts to gain comment from the bill’s sponsors were unsuccessful.
In November 2024, California finalized new rules allowing carriers to use forward-looking risk models in a move industry groups said would help stabilize the market (BestWire, Nov. 15, 2024). In exchange for inserting risk models into underwriting, carriers must agree to increase their coverage offerings in high-risk areas.
The five largest writers of homeowners multiperil insurance in Colorado during 2023, based on direct premiums written, were: State Farm Group, 20.82%; 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)