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Good Question: Why Do Our Insurance Rates Rise So Quickly?

MINNEAPOLIS (WCCO) -- A few years back, Kathy Lesicka's Monticello home had hail damage and needed the roof replaced. Two months after the repairs, her homeowners' premium increased by $200.

"That was the first time we ever claimed, and we were like, 'OK, we've been with you for 20 years, are you kidding me?'" she said.

According to a new study, Minnesota homeowners' rates after just one claim increased more than any other state in the country., an online insurance marketplace, found rates went by 21.2 percent, followed by Connecticut at 20.6 percent, Maryland, California, and Oregon.

"When you look at these premium increases, it is directly because we have seen more hail, intense hail, larger hail," said Mark Kulda, vice president of Public Affairs for the Insurance Federation of Minnesota.

Kulda said the trend for more devastating storms began in 1998, when Minnesota homeowners had $1.5 billion in losses, more than the previous 40 years combined. After that, the state has seen damaging hail storms and, in 2010, led the nation in tornadoes, totaling at 144.

"Before 1998, it was a quiet state, we had relatively cheap in premiums," he said, "and now we're becoming a top 10 state in premiums, and it's because increased storm activity."

That had Lesicka wondering: "Aren't tornadoes in like Kansas and Oklahoma worse than our weather?"

Kulda says those states already have high insurance rates. Texas tops the list at $1,560 a year, followed by Louisiana, Florida and Oklahoma. Minnesota ranks 14th at $981 a year. That's up from 35th in 1997.

"Right now, we are still at a bargain," Kulda said. "We are getting a break because homeowner companies are losing money. So we are catching up the nation in how we compare our losses."

Pat Ondracek of Crystal doesn't think insurance companies should raise rates for people who have filed only one weather-related claim. Texas, for example, has a state law preventing insurance companies from raising rates after one claim.

"It's not fair to penalize the homeowner for something they can't control," she said.

But Kulda says the data show that for policyholders who have filed one claim, the chances of them filing a second or third claim is very high.

"Because of that additional risk, they're going to have to pay," he said.

Laura Adams, senior insurance analyst at, said states' rates are different due to state regulations and history of claims. Minnesota is the only state that prevents insurance companies from dropping people with multiple weather claims and putting them into a higher-risk pool, like Minnesota's FAIR plan.

"Unfortunately, we are probably seeing those higher risks in the general pool, which raises general rates," Kulda said.

Lesicka and her husband kept their insurance company for another year after their premiums increased. Once they moved, though, they changed.

"I say look at different companies because for us, it paid off," she said.

The Department of Commerce did release a statement about the report. It said: "The Department has launched a review of the report and industry data and practices to get to the bottom of the issues, so that Minnesota consumers can be protected from unjustified, large premium increases."

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