Property Insurance Rates in Minnesota Climb Fast with No End in Sight
“It’s a disaster, quite frankly,” said an insurance agency owner, reflecting the industry’s struggles amid heavy losses in recent years.
By Bill Lukitsch The Minnesota Star Tribune January 29, 2025
Property owners, according to insurance agent LuAnn Paulet, have long viewed their policies as maintenance contracts, hoping for enough damage to warrant inexpensive repairs. But with coverage diminishing and rates escalating, she describes the situation as “a disaster, quite frankly.”
“Roofs are through-the-roof expensive,” said Paulet, owner of Rosemount’s Insurance by Design, citing price tags that can climb between $20,000 and $40,000. “But that never, ever was the intention of homeowner insurance.” Following the devastating Los Angeles wildfires, the costs of which might become the country’s most expensive natural disaster on record, with insured losses potentially reaching tens of billions, insurance specialists are anxious about the impact of a changing climate on an unstable industry, built on the precise pricing of risk, and the potential consumer consequences.
Heavily driving increased costs for Minnesotans are severe wind and hailstorms. In 2023, a single storm swept the Twin Cities and central Minnesota, resulting in roughly $1 billion in claimed losses. That followed the costliest season in state history in 2022, which tallied $6.3 billion in storm damage.
Events of such magnitude are striking the country with much greater frequency, per data maintained by the National Centers for Environmental Information.
Risk is the chief factor behind rising home insurance bills, and states regulate the industry to ensure fairness in pricing and coverage. But some researchers point to a growing gap between risk and insurance rates, as leaders in high-risk regions face intense political pressure to keep rates low at all costs.
Daniel Schwarcz, a University of Minnesota professor specializing in insurance law, suggests multiple perspectives for how high-dollar climate catastrophes can impact the home insurance market across state borders. Regulatory pressures in some states create distortions, he said, such as artificially low rates in California and Florida, which may prompt insurers to seek compensation in states more forgiving of increases. Recent evidence supports this position, he added. Additionally, an unprecedented event, like the California wildfires, broadly changes risk calculations, causing prices to rise across the board.
As the market continues to grow more “dysfunctional,” Schwarcz believes the federal government should take a more active role in regulating property insurance.
‘A real challenge’
Even without a coastline or a year-round climate with wildfire potential, homeowner premium costs are rising faster in Minnesota than in most other states, as consistently shown by data collected over the past few years. An S&P Global analysis of data from 2017 through 2023 found the state ranked 12th for the rate of home insurance premium increases. The Minneapolis Fed over the summer released a report examining the rise of home insurance costs across the northern region as providers notch greater losses. The report pointed to a 39% increase over a seven-year period in Minnesota, far above the pace of inflation, with premiums increasing 15% on average just in 2023.
While premiums jump and coverages scale back, Minnesota’s private home insurance providers have struggled to turn a profit in recent years.
Aaron Cocking, president and chief executive officer of the Insurance Federation of Minnesota, said 2024 marked the first time in the past six years when carriers actually made money in the state.
Losses reached a high-water mark in 2022, when carriers paid about $1.92 in claims for every $1 collected in premiums, Cocking said, with weather disasters a key driver.
To stay in business, insurers need to make enough money to at least cover the risk of a given area. Over past years, Cocking said, some insurers set premium increases just below the legal threshold to avoid triggering rate hearings.
California has witnessed a mass exodus of insurance companies. Cocking said that happened because the companies were unable to get the rate they needed — a problem Minnesota has also seen to some extent.
“I think California felt, as they were doing that, that they were protecting consumers,” Cocking said, adding: “Do you think that those consumers now feel protected from what happened? Or would they have rather paid a little more in premium and still have their insurance now?” Although Minnesotans enjoy a relatively competitive market, Cocking said that could change in an unkind environment.
“It’s a real challenge for insurers to get the rate that they need,“ Cocking said. “The only thing worse than unaffordable insurance is unavailable insurance. And I think that’s become pointedly evident with what we’re seeing in California.”
Regulators’ role
Many Minnesota policyholders are growing increasingly frustrated.
Property insurance-related complaints to the Department of Commerce, which regulates insurers doing business in the state, doubled between 2020 and 2023. Common grievances were high costs after wind and hail damage, as insurers narrowed coverage and increased deductibles.
The role of the department is balancing the interests of consumers and insurance providers, Commissioner Grace Arnold said.
She stressed that the rates Minnesotans pay are based “on the conditions we’re experiencing here in Minnesota,” saying disasters in California are unfortunate but regulation is left to individual states. Still, one way the financial toll of California’s multibillion-dollar disaster may ripple out is through more expensive reinsurance — the insurance that insurance companies buy to contain their own exposure — which weighs risk and sets cost on a global scale. Insurers also say the cost of rebuilding is rising, driven by factors like limited labor and more expensive materials and technology.
For the most part, Arnold said Minnesotans are not encountering “deserts of insurance.” Cases of insurers unwilling to write coverage are rare compared with other states with greater risk levels.
There is a backstop for residents unable to secure private insurance. But few use the Minnesota FAIR Plan, the insurer of last resort established by the state, said Gary Rupp, its executive director.
At its height, Rupp said, the plan carried about 12,000 policies. Today it has 3,338.
But applications increased last year: In 2024, the number rose by nearly 50%, Rupp said, though the overall number of new policies issued went up only 6%.
Paulet, the independent agency owner, recalled Wisconsin-based Secura‘s exit from doing business in Minnesota in 2023. The company stopped writing home and auto insurance policies in Minnesota, along with other states in its coverage area, on the heels of heavy weather-related losses.
She views that as another sign of hard times while the industry undergoes a “fundamental shift.” Premiums are shooting up so quickly, Paulet said, that she sees a 30% increase to renew as a relatively attractive option. “It‘s bad. It’s gonna be bad,” Paulet said, adding that she had been advising clients to look forward to 2026.
Destruction in Blaine
At least one Minnesotan is quite happy with her home insurance provider — even though her bill is getting more costly.
Rena Hammes, a Blaine retiree, has kept American Family Insurance for about 40 years. Her latest premium increase is about 20%, she said, which she learned in a recent letter. She and her husband live in a community with well-kept yards. In June 2017, a destructive storm turned her neighborhood upside down. Hail pummeled one side of her house for about five minutes. One of the first things she did was take photos. Then she called her insurer. All told, the damages amounted to about $98,000, Hammes said, to replace windows, two doors, an air conditioner and the roof. “The damage was so extensive. It was crazy,” Hammes said, recalling trees stripped bare.
She counted herself lucky to get her home fixed so quickly. Some of her neighbors waited about two years, she said, before all was said and done. So, when her latest increase came in the mail, Hammes understood.
“It’s not like they’re doing it just to my household,” she said. “Everybody is in the same boat with this. It’s all the same everywhere.”
