Many people have seen insurance companies starting to increase rates late 2022 and are expected to see increases throughout 2023, and into 2024 but just aren’t understanding the surge in Minnesota homeowners insurance premiums.
Why is this happening? Inflation and weather. Inflation, which has become an ugly word in 2022, continues to play a major role in insurance premium increases. How does inflation affect home insurance?
- Cost of construction: Materials have increased an average of 15% over last year.
Wood is up 16%, Steel up 22%, Concrete 16%, etc.* - Cost of Labor: Construction labor cost increased 14.1% in 2022 and another 5-7% in 2023 **
- Weather impact: Over the past few years, we in MN alone have seen significant increased storms.Here is a quote regarding MN from Bankrate.com:
“Minnesota ranked seventh in terms of weather-related losses,” Deventer said. “The Insurance Information Institute ranked it fifteenth for 2021 tornadoes. There were 37, [and] thankfully no deaths. Minnesota was ninth for wildfires, which surprised me. There were over 2,000 wildfires that burned 69,000 acres of land in 2021.”
These factors have caused insurance companies in Minnesota, like Allstate, who has report underwriting losses for eight (8) consecutive quarters. In fact, we are seeing the company pay out $1.64 in claims for every $1.00 received in premium.
All, this is impacting rates with all the insurance companies. Simply put, the pool of money used to pay claims by insurance companies have to pay claims is running at a major deficit which is causing companies to raise rates.
Allstate is focused on keeping costs as low as possible for their insured and we, as your agent, are committed to doing what we can to help keep your rates as competitive as possible.
Additionally, with regards to homeowners’ insurance, you are seeing some drastic moves/changes with a number of companies, such as:
- Three major companies have pulled out of MN and no longer writing business due to unprofitable business in MN.
- One major company is no longer writing new auto and home business in MN.
Many companies have really tightened their guidelines for new business. Example – any claim in the past 3 years (regardless of loss type) are being rejected. - Many companies are offering replacement costs on roof up to a certain age. Allstate is at 15 years which is the norm, but some companies are at 10 years of age. Then Actual Cash Value or a depreciation schedule for older roofs.
- Some companies will no longer cover soft metal surfaces such as gutters, downspouts, etc…
- Also seeing companies applying a $5,000 or 1% deductible for Hail/Windstorm claims.
With Condominium/Townhome policies (HO6). The industry has seen a significant spike in Loss Assessment Claims over the past couple years. To that point, we are seeing the following:
- Insurance companies increasing rates on HO6 policies – on average, I am seeing about a 20% increase.
- Insurance companies limit the Loss Assessment coverage that can be applied towards a Master Policy deductible. Example – insurance company will pay up to $2,000 for a Loss Assessment claim.
- One major insurance company is no longer writing Association Master Policies. And many of them that are still offering Association Master polices are increasing premiums at an alarming rate which is forcing the Associations to increase their Master Policy deductible from, $10,000 to $25,000, $50,000 and more.
Please give me a call if you have any questions or want to connect about any mortgage and lending questions.
DAN DAHL, Results Home Mortgage
Mortgage Loan Officer | NMLS#1773815
(c) 952.237.6112
dan.dahl@resultshomemortgage.com
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Dan started in the mortgage industry in 1997. I offer all kinds of mortgage financing options ranging from 1st time home buyers to homeowners looking for their lake home. One of my main priorities is to help you through the home loan process with as smooth of a process as possible, making sure you understand what is going on at all times… continue reading