MINNESOTA: Legislature Looks to Address Rising Insurance Premiums

One distressing trend that has become all too familiar for Minnesota residents is the rising cost of homeowner’s insurance. An increase in hail storms and major weather events is surely to blame, but even those who haven’t suffered a claim have seen their rates rise over the last few years. What’s causing the increase and what steps might the Minnesota Legislature be looking to make to stop the surge?

Increase in Weather-Related Events

There is an increasing frequency of natural disasters and weather-related events nationwide. Insured losses from natural disasters in the U.S. now routinely approach $100 billion a year, compared to $4.6 billion in 2000. This surge in covered losses, coupled with the surging cost of rebuilding, is hurting insurance carriers who must raise rates to offset their losses, which in turn leads to higher costs for consumers. We can see a similar scenario playing out right before our eyes in Minnesota as well.

State data suggests that Minnesota’s winters are warming, and the state is getting wetter, experiencing more intense and frequent rainfalls. Major weather events have been nearly three times more likely to occur in the last two decades than in the 20th century, according to the Minnesota Department of Natural Resources. In fact, all of the top-10 combined warmest and wettest years on record for Minnesota have occurred in the last twenty-five years. The state experienced 387 major hail events in 2022, behind only Texas and Nebraska, and 77 tornadoes, behind only Mississippi, Texas and Alabama. Minnesota suffered nearly $2 Billion in homeowners’ insurance losses in 2022, more than surrounding states Wisconsin, Iowa, South Dakota, and North Dakota combined.

In Minnesota, where property insurance prices are surpassed only by states on the coasts, state law has kept things somewhat in check. Minnesota law permits regulators to call for a public hearing whenever an insurance carrier raises premiums 25% or more in a year. This has led insurers to generally stay below that threshold to avoid a public hearing; however, premiums are still on the rise. Minnesota homeowners have seen their insurance premiums nearly quadruple over the last two decades. When we entered the new millennium a little over twenty years ago, the average annual cost of home insurance for Minnesotans was just over $350. Today, that number has increased to almost $1,600.

In just the last few years, the number of homeowners who reported complaints to the Minnesota Department of Commerce about denied or delayed insurance claims has more than doubled. Carriers have responded by narrowing coverage or requiring higher deductibles for wind and hail damage.

Minnesota regulators and officials have taken notice.

Grace Arnold, commissioner of the Minnesota Department of Commerce, testified before Congress last year about rising insurance costs and the immense challenges faced by the industry. While Arnold noted the difficulties of a hardening market, she was quick to mention that Minnesota has not yet seen an exodus of insurance carriers like Florida or California have, something all Minnesotans want to avoid. Aaron Cocking, president and CEO of the Insurance Federation of Minnesota, an advocacy group on behalf of Minnesota insurance companies, echoed a similar message, stating “That’s one of the things we want to avoid in Minnesota, any action that makes us an insurance desert. That doesn’t do anything for anybody…We want to make sure insurance is not only available but also affordable.”

Minnesota Legislature Willing to Listen

In an effort to keep insurance available and affordable, the state Legislature may be willing to step up. Several bills and programs are being discussed, all of which focus on providing direct financial assistance to Minnesota homeowners.

The Legislature established a new pre-disaster mitigation program to help Minnesotans upgrade their roofs to make them more resistant to high wind, hail and other extreme weather events. The program, named “Strengthen Minnesota Homes,” aims to keep Minnesotans safer and healthier in their homes and is one the Legislature sees as a crucial step in getting Minnesotans to build “individual climate resiliency”.

The Strengthen Minnesota Homes (SMH) program will provide financial assistance to homeowners to improve the resilience of their homes to protect against extreme weather events such as high wind and hail. Eligible homes will be awarded a grant to cover part of the cost of modifying their existing homes to a higher “FORTIFIED” construction standard. Similar upgrades have been shown to reduce the costs of hail and wind related damage by up to 60%.

Strengthen Minnesota Homes relies on a construction method called FORTIFIED developed by the Insurance Institute for Business and Home Safety (IBHS). The FORTIFIED standards are a research-based set of construction upgrades designed to enhance a home’s ability to withstand the impacts of severe weather. These standards go above the building code and are designed to enhance a home’s ability to withstand the impacts of extreme weather.

More than $1 million in planning funds has been appropriated to the agency to work over the next two years to stand up the details of the new program while the Legislature continues to work on the framework for the program and establishes criteria for contractors and other professionals to perform work on homes once the grant program becomes operational.

Another benefit to homeowners from the legislative sessions – Minnesota will require insurance companies to offer a premium discount to Minnesotans who upgrade their existing roof, or build a new roof, to the FORTIFIED standard. Once insurers file these discounts and approved products are available, any Minnesotan with a FORTIFIED roof on their home will be eligible for a discount on their insurance premium.

What Can You Do

While it may be another year or two before Minnesota homeowners can take advantage of these programs, there are steps you can take to ensure you’re getting the best coverage available for your home.

First, always be sure to check your policy for any changes in coverage or deductibles. The last thing you want is to file a claim and realize your coverage isn’t what you thought it was. Second, don’t be afraid to test the market for your next renewal and ask your broker if there are any discounts available.

Finally, if you do suffer a claim or your property is hit by a major weather event, be prepared. Notify your insurance carrier right away, document the loss by taking pictures and keeping notes, and make sure you have the right team of insurance experts behind you.

At SJJ Law, we work with homeowners on a wide variety of residential property disputes. We understand the complications typical of these disputes and can help you get the most out of your policy. With years of experience dealing with Minnesota weather and Minnesota insurance companies, we can help you find the right solution. If you’re facing a denial or a delay of a large homeowners claim, contact our office today so we can help you get on the road to recovery.