Risk Model Use in Property Insurance Policies
HB1182 regulates how homeowners and other residential property insurers may use wildfire risk models and catastrophe models when underwriting, pricing, renewing, or nonrenewing property insurance policies. The bill defines key terms such as wildfire risk model, catastrophe model, community-level mitigation action, and property-specific mitigation action, and it applies to homeowners insurance, condominium unit policies, multifamily residential housing policies, and the FAIR Plan. Insurers that use these tools must disclose the model or scoring method to the insurance commissioner as part of rate filings, along with a description of the model, its effect on rates, actuarial support for rating factors, and an explanation of how it is used in underwriting decisions.
The bill also requires insurers to account for wildfire mitigation efforts. If a model does not already incorporate property-specific or community-level mitigation, insurers must provide discounts when policyholders can show qualifying mitigation actions, such as defensible space, building hardening, or nearby community fuel-reduction work. Insurers must post public website information about available discounts, incentives, premium adjustments, and the process for appealing a wildfire risk score. They must also provide written notices to applicants and policyholders explaining wildfire risk scores, the score range, the property’s relative position in that range, the main features affecting the score, and the potential impact of mitigation actions. Policyholders and applicants may appeal inaccurate scores or discounts, and insurers must respond within specified timeframes. The bill takes effect July 1, 2026, and applies to policies issued or renewed on or after that date.
HB1182 adds a new section to Colorado insurance law governing wildfire-risk-based underwriting and rating for residential property insurance. It creates disclosure, notice, appeal, and mitigation-discount requirements for insurers and gives the insurance commissioner authority to adopt implementing rules. It also treats model submissions as trade secrets exempt from disclosure under the Colorado Open Records Act, while still requiring regulatory disclosure to the commissioner. The bill affects insurers, homeowners, condominium owners, multifamily residential property policyholders, and the state’s FAIR Plan.
The voting record suggests broad but not unanimous support for the bill. It advanced through committee with strong margins, including unanimous votes on several amendments, and it passed the House and Senate with comfortable majorities. The Senate Business, Labor, & Technology Committee recommended it for the consent calendar, indicating relatively little controversy at that stage. Final House votes on Senate amendments were also favorable, though not unanimous, showing some remaining reservations.
The main policy tension appears to be between consumer transparency/fairness and insurer flexibility in underwriting. Supporters likely favored requiring insurers to explain wildfire risk scores, recognize mitigation efforts, and provide appeal rights so homeowners can reduce premiums through defensible space, home hardening, or community mitigation. Potential concerns from insurers or some legislators likely centered on the administrative burden of disclosures, the complexity of model-based pricing, and the requirement to provide discounts when mitigation is not already built into the model. Another point of contention is the trade-secret protection for submitted models, which balances regulatory oversight against public access to the underlying methods.