Colorado lawmakers will try again to pass legislation imposing a fee on homeowners insurance carriers to fund hail mitigation projects, after lawmakers rejected a similar bill last year. 

Democrats on Tuesday, April 7, unveiled their revised effort to drive down skyrocketing homeowners insurance rates with a bill that would levy a 0.5% fee on all homeowner insurance plans, paid for by the carrier. 

The fee is expected to generate up to $20 million in funding per year, money that would go to helping homeowners pay for the installation of hail-resistant roofs in a bid to lower their risk and reduce their premiums. 

The measure, Senate Bill 155, is being led by Sen. Kyle Mullica, D-Thornton, House Speaker Julie McCluskie, D-Dillon, and Rep. Kyle Brown, D-Louisville. 

“Homeowners insurance is unaffordable,” Mullica said. “This bill will start turning that tide.” 

Colorado homeowners pay, on average, $3,412 per year — about $284 per month — for a standard insurance policy for a $300,000 home, according to a March report from the Insurance Fairness Project. That’s roughly $1,000 more than the national yearly average of $2,424. 

Democrats last year tried to pass legislation they said would have addressed two of the largest drivers of those costs: hail and wildfire. Their bill would have imposed a 1% fee on homeowners insurance plans to fund grants for hail mitigation and launch a reinsurance program to help offset insurers’ losses from catastrophic wildfires. 

The two-pronged strategy was aimed at stabilizing the insurance market and driving down rates, with proponents arguing that the fee, which would have been paid by homeowners, would pale in comparison to the savings they would realize once insurers adjusted their premiums. 

The measure was led by McCluskie and was a top priority for Gov. Jared Polis, who has made reducing insurance rates a key tenet of his affordable housing agenda. But it was killed in a Senate committee by three Democrats and three Republicans, who said imposing a fee on homeowners was counterintuitive to the bill’s affordability goals. 

One of those Democrats was Mullica, who is now a prime sponsor of this year’s legislation. While lawmakers are again seeking to impose a fee, Mullica said this year’s bill includes explicit language barring insurers from passing that fee onto customers as a surcharge. 

“What changed for me is that it’s not a surcharge,” Mullica said. “The people of Colorado are going to come out on top here.”

This year’s bill also has early support from the Rocky Mountain Insurance Association, an industry trade group. 

The group’s executive director, Carole Walker, said that while there are still aspects of the bill where the association may seek amendments, she said proponents have engaged in a “robust stakeholder process.” 

“We definitely have the shared goal of reducing hail (risk) and really having a long-term impact; it’s our most expensive cost-driver for insurance,” Walker said. 

This year’s bill would not fund a reinsurance program for wildfires, unlike last year’s measure, though it would commission a study to look into creating such a program. Instead, the bill is almost exclusively focused on hail, which is the leading driver of insurance costs for Colorado homeowners. 

A study by the Colorado Division of Insurance released in February found that hail can account for anywhere from 26% to 54% of a premium’s costs, while wildfire accounts for as little as 0.9% to 24.6%. 

The study also analyzed discounts a homeowner could see for completing hail and wildfire mitigation. It found that hail mitigation can save homeowners an average of $82 to $387 per year, compared to $3 to $25 per year for wildfire mitigation. 

“Even those of us in the High Country, who face real wildfire risk, also face rising rates because of the damage that hail brings, even if that hail storm is in eastern Colorado,” McCluskie said. 

This year’s bill is just one in a string of attempts by lawmakers to drive down insurance costs and ensure coverage for homeowners. 

Last year, lawmakers passed a bill requiring more transparency from insurance carriers on how they assess a homeowner’s wildfire risk, with provisions aimed at ensuring homeowners receive discounted rates for mitigation work. 

The legislature also created the Fair Access to Insurance Requirements, or FAIR Plan, in 2023, which serves as an insurer of last resort that provides coverage to homeowners who can’t find insurance on the private market. The plan began accepting applications last year and covers homes valued at up to $750,000.