Insurance Federation of Minnesota - Dateline November 2011
Weather-Related Claims Taking a Toll on Homeowners Insurance
Overview: Weather-related claims are taking a huge toll on the Minnesota homeowner’s insurance
Weather-related claims are taking a huge toll on the Minnesota homeowner’s insurance marketplace. Legislative action on this issue is essential to protect Minnesota’s consumers.
Independent research conducted by Dr. Bob Hartwig of the Insurance Information Institute confirms this alarming trend. Below is a summary of Dr. Hartwig’s findings recently presented at a November 1, 2011, summit attended by more than 120 people, representing 26 insurance companies, independent agents, regulators and legislators.
Dr. Hartwig’s full presentation is available at: http://www.iii.org/presentations/homeowners-insurance-is-a-minnesota-meltdown-coming.html
Minnesota Now a Consistent Top Catastrophe State
In 2007, Minnesota had the second highest amount of catastrophe losses among all states that year (the latest year for which data is available) with $747-million in losses (second only to California’s $1.4-billion in primarily wildfire losses).
In 2008, Minnesota was third nationally in catastrophe losses with $1.5-billion behind Texas and Louisiana, which were stuck by hurricanes that year.
The data is not in for 2010, but it is highly likely that Minnesota will be another Top Three catastrophe loss state. And 2011 may not be much better.
Claims Costs Driven Largely by Extreme Storm Activity
The claims cost increases are primarily from the large amount of storm damage in Minnesota in the last five calendar years. While 2011 saw only 30 tornadoes (out of about 550 total severe storm reports), Minnesota led the nation in tornado touchdowns in 2010 with 144. Before 2010, Minnesota saw an average of 44 tornadoes in a typical year.
In 2008, Minnesota’s loss ratio for homeowners insurance was 157.3, one of the worst on record. Nationally the homeowner’s combined loss ratio is estimated to be 115.0, seventh highest in the last two decades.
Average HO Premiums
Minnesota is now the 14th most expensive state for average homeowners’ insurance premiums ($845), up almost 225% since 1998 ($345).