Insurance Perspective

1. Insurance Perspective Governor’s Task Force on Wildfire Insurance and Forest Health

2. Background/ContextWhat is Homeowners Insurance? Broad coverage for a wide-range of properties • Physical damage coverage for 16 named perils • Coverage for personal property (on and off premises) • Liability coverage • “Homeowners Insurance” includes: • Single family homes • Rental properties (apartments, house, condos) • Condos • Mobile homes

3. Background/ContextHO Insurance Marketplace in CO • Competitive Market (no residual market) • Variety of products area available: bare bones policies to deluxe policies especially for homes in the WUI. • Hundreds of companies that write business in the state: in general this means homeowners insurance is available and affordable for consumers, especially compared to other catastrophe prone state

4. Background/ContextPressures on Homeowners Insurance There are a lot of factors that determine rates, but rates often determine what people do. Claims Costs: • Catastrophes are a primary cost driver for Homeowners Insurance Other factors: • Legislative and regulatory pressures • Litigation Costs

5. Background/ContextPressures on Homeowners Insurance Costs of Catastrophes: 1991-2010 US Total Catastrophe Insured Losses • Hurricanes & tropical storms: 44% • Tornadoes: 30% • Winter storms: 7.4% • Earthquakes/geological events: 5.1% • Wind/hail/flood: 4.1% • Fire 2.2% • Civil disorder/power outage/water damage: less than 1%

6. Background/ContextPressures on Homeowners Insurance Colorado Catastrophes • Colorado is in the top ten for costly catastrophes • Catastrophes make up 40% of all HO claims costs • 2009, 2010 and 2012 very high CAT years 2012 Catastrophes June 6-7 hailstorms: $321 million High Park Fire: $97.1 million Waldo Canyon Fire: $352.6 million

7. Background/ContextPressures on Homeowners Insurance Catastrophes aren’t the only pressure on Homeowners Insurance Non-catastrophe claims have increased dramatically over the last 15 years. The severity of non-CAT claims has increased 258% • $2,184 in 1997 • $7,819 in 2011

8. Recent EffortsRegulation/Regulatory Outreach Catastrophe Response • Staffing Recovery Centers • Attending and participating in community meetings • Addressing consumers concerns/ Consumer Awareness • Summary Disclosure Forms • NAIC buyers guide

9. Recent EffortsLegislation HB 1225: Homeowners Reform Act Working towards a consensus bill to balance homeowner concerns and marketplace dynamics

10. Recent EffortsEducation Spring 2012 Wildfire Ready Campaign with CBS 4 • Industry funded in partnership with Governor’s office, DOI and other stakeholders • Returning in 2013 with expansion to Colorado Springs Press Conference and Mitigation Workshops at Lowes Partnering with groups on various brochures and educational pieces: • Over 100,000 distributed

11. Recent EffortsEducation Rocky Mountain Insurance Information Association (RMIIA) • Educational arm of the insurance industry • Provides consumer messaging before, during and after catastrophes • Industry liaison during catastrophes between gov’t agencies, companies, consumers and regulators • Member of the state Disaster Recovery Task Force • Works with various organizations throughout the year on wildfire issues (ie Front Range Round Table)

12. Recent EffortsEducation National Partnerships • Institute for Business and Home Safety • Fire Adapted Communities • Firewise

13. Challenges • #1: Making homeowners pay attention and want to be actively engaged in the insurance process • The insurance process Includes everything from determining the replacement value of their home to mitigation to home inventory. • Homeowner consistently do not want to be involved in the insurance process until there is a claim.

14. Challenges #2: How to work with our partners? • Getting out of our silos and understanding each others strength and limitations • Inconsistencies in cities and counties in planning, disaster preparedness and disaster recovery. This can dramatically impact the claims process • The philosophy that insurance can be the “hammer” or the “carrot” • Other partners such as ISO

15. Challenges #3 Catastrophes are “Big Business: • A lot of outside groups flood to CATs: Everything from contractors to consumer groups to everything in between. • How to positively navigate consumers through the business of catastrophes • Catastrophes are a time of extremes and they bring out the best and worst.

16. Where are Things Now?Innovations and Best Practices Education Best Practices: It is slow, but it does make a difference Key Messages: • Inventory: Know what you have • Financial Preparedness: Make sure you have enough insurance to replace what you have • Mitigation: Protect what you have

17. Where are Things Now:Innovations and Best Practices Education Innovations: Finding new ways to deliver our messages. Kids: Starting in our schools We have seen this work before: Fire Safety Week, Seatbelts, etc

18. Where are Things Now?Innovations and Best Practices Disaster Recovery Models: We know they work and there is a lot of room for innovation. Local Example: Colorado Springs Together

19. Where are Thinks Now:Innovation and Best Practices Things we know work and make a difference: • Building Codes; • Building Materials; • Zoning Codes