Property Insurance Rates Surge in Minnesota, Leaving Homeowners and Insurers Concerned
Property owners in Minnesota are facing a crisis: rapidly escalating insurance rates and diminishing coverage, with some industry insiders calling the situation “a disaster.” The primary drivers are severe weather events—particularly wind and hailstorms—that are becoming both more frequent and more costly.
LuAnn Paulet, owner of Insurance by Design in Rosemount, mirrors the anxieties of many of her clients. She’s witnessed firsthand how the cost of home repairs and replacements has skyrocketed, particularly for roofs, with price tags now ranging from $20,000 to $40,000. “But that never, ever was the intention of homeowner insurance,” she stated.
LuAnn Paulet, owner of Insurance by Design, an independent agency that handles among its services home insurance, works alongside her 9-year-old Labrador Retriever Sherman and colleague’s 3-year-old Staffordshire Terrier Sylie at her office in Rosemount, Minn., on Wednesday. (Anthony Souffle/The Minnesota Star Tribune)
Climate Change and Increased Storm Damage
Experts point to a changing climate as a major factor, increasing the frequency of severe weather events. In 2023 alone, a single storm caused approximately $1 billion in claimed losses in the Twin Cities and central Minnesota. This followed a record-breaking 2022, which saw $6.3 billion in storm damage across the state.
These events, according to data from the National Centers for Environmental Information, are striking the country with greater regularity.
Market Dynamics and Regulatory Pressures
Daniel Schwarcz, a professor at the University of Minnesota specializing in insurance law, highlights the complexities within the home insurance market, emphasizing the gap between risk and insurance rates. Regulatory pressures in some states might create distortions, potentially leading insurers to compensate by raising rates in areas considered more stable.
Schwarcz believes the federal government needs to take a more active role in regulating property insurance as the market becomes more dysfunctional.
Rising Premiums and Limited Profits
Minnesota’s home insurance premiums are climbing faster than in most other states, according to an S&P Global analysis. They found that Minnesota ranked 12th for rate increases between 2017 and 2023. A Minneapolis Fed report noted a 39% increase over seven years, well above inflation, with premiums rising by an average of 15% in 2023 alone.
While homeowners see rising premiums, their private insurance providers are struggling to turn a profit. Aaron Cocking, president and CEO of the Insurance Federation of Minnesota, said that 2024 marked the first profitable year in six years for carriers in the state.
In 2022, for every $1 collected in premiums, carriers paid out about $1.92 in claims, with weather disasters being the main culprit.
Consumer Impact and Regulatory Response
Many policyholders are frustrated as property insurance-related complaints to the Department of Commerce, which regulates insurers in the state, doubled between 2020 and 2023. The common complaints are high costs after wind and hail damage, which lead to narrower coverage and higher deductibles.
Grace Arnold, the Commissioner of the Department of Commerce, emphasizes that rates directly reflect the conditions experienced in Minnesota. Still, expensive reinsurance—insurance that insurance companies purchase—also influences coverage.
Challenges and Future Outlook
While cases of insurers refusing to offer coverage remain rare in Minnesota compared to states at greater risk, some local companies have still left the market. One of those is Wisconsin-based Secura, which exited the Minnesota market in 2023.
Independent agency owner Paulet views these actions as signs of “hard times,” and anticipates continued challenges in the industry.
Rena Hammes, a retiree from Blaine, has kept American Family Insurance for about 40 years. While her premium has increased, she remains understanding, having experienced extensive damage to her home in a 2017 storm.
Cocking states, “It’s a real challenge for insurers to get the rate that they need,” adding, “The only thing worse than unaffordable insurance is unavailable insurance.” which has become pointedly evident with what we are seeing in California.
