Home Restoration After a Fire

Jim Riesberd, Commissioner of Insurance for the State of Colorado Division of Insurance, recently shared his experience with the storms and wildfires that ravaged the state of Colorado this past summer. This Commissioner’s Column article appeared in the Volume 9, Issue 3 Fall 2012 issue of The Colorado Regulator.

This summer, I was part of the DOI team that responded to the thousands of people who were devastated by the storms and wildfires that swept across our state. We talked with fire victims at the Disaster Recovery Centers in Conifer, Fort Collins and Colorado Springs during the fires and immediately after, and we have participated in numerous community forums as we worked with other local, state and federal agencies to aid in the recovery process. DOI is also working with the insurance carriers to encourage them to provide the quality of service required at a time like this, and to keep them advised of what we are hearing from impacted consumers.

I am familiar with talking to consumers through my legislative experience in hosting town halls. However, working with consumers at the disaster recovery centers and later, the community meetings, was quite a different experience.

At one disaster center, a man came up to me wearing sandals, shorts and a t-shirt. He reached into his pocket and pulled out a set of car keys. “I’m 50 years old,” the man said. “This is everything I own in the world.” His home, and everything in it, was destroyed in the High Park fire.

I listened as survivors of the fires shared their stories, their experience in recovery, dealing with the insurance companies and how they handle their new living arrangements. I heard about the challenges of daily living, both for those who had lost everything and for those whose homes were damaged but still habitable: how difficult it is to get back to normal routines, going to work, getting the kids to school, and at the same time dealing with the challenges of home rebuilding or home repairs.

The number one problem I heard from these survivors was that they were not prepared for a disaster like this.

One of the big lessons learned from the summer wildfire season of 2012: don’t base your coverage in a homeowner’s insurance policy on the mortgage value or even the purchase price. Base it on what it will cost to rebuild, using today’s construction costs, which will more than likely be higher than the other two. The policy also should take into consideration the cost of cleanup, especially after a wildfire.

And if the homeowner lives in a subdivision, there’s one other consideration: economies of scale. When a builder or developer constructs a subdivision, there are certain price breaks that they get for building a lot of homes, such as less expensive materials and labor. When the time comes to repair or rebuild, those economies of scale most likely won’t be available, so that adds to the construction costs.

Once the policy is updated to reflect today’s costs, make sure you review it every year to keep pace with construction costs. The U.S. Department of Labor estimates that the cost of construction materials increased by 5 percent this year, and those costs have increased by 35 percent since 2004.

Another lesson from this summer is the value of having a home inventory. It’s much harder to recreate a list of your possessions from memory after a disaster. Create your list before disaster strikes. The NAIC has produced an important smartphone app to help homeowners and renters develop a Home Inventory Checklist. While it is the obligation of a carrier to compensate for a loss, in the case of a fire, theft or other damages, only the owner knows what has been lost. Without good records it will be more difficult to prove what is lost when the time comes to file a claim.

I also spoke to many organizations during this past quarter. Many of the presentations centered on the importance of personal responsibility of the consumer when purchasing policies and making claims. When meeting with agents and carriers I stress that consumer protection does not begin when a consumer contacts the DOI, but at the first meeting with an agent and with every action by the carrier. While agents have an obligation to fully explain the policy, and every policy option and coverage, consumers have a responsibility to provide enough information to make sure they purchase the right coverage, to fully understand the contract they are signing, and to keep the agent and company updated on any change they make that will impact the coverage.

It’s been a very busy summer for the Division, and our staff continue to excel as they handle a high volume of work. I am proud of the quality of people we have been able to attract and retain and of the quality of the service the Division is able to provide to people throughout Colorado.

We know the recovery process will be very hard for those affected by the summer storms and wildfires. We will do all we can to help the survivors get through it.