The future of homeowners insurance is uncertain in Minnesota. Here's why.
MINNEAPOLIS — Wednesday's severe weather left damage across parts of Minnesota. Each time we get weather like this, the damage adds up and so do the insurance costs.
Minnesota insurance companies have lost money six out of the last seven years.
The main culprit is hail. Last August's hail storm here caused $1 billion in damages. With mounting losses for insurance companies, there is an increasing risk of insurers deciding to pull out of our region.
"The effects of climate change are really having their most direct and financial impact to people as it relates to insurance," said Aaron Cocking, the president of the Insurance Federation of Minnesota.
Homeowners insurance rates have soared. In Iowa, insurers are not renewing policies leaving homeowners like Dave Langston of Cedar Rapids searching for new coverage.
"We got a notification in January of this year that Pekin insurance, who was our insurer, was going to withdraw from the Iowa market," said Langston.
He finally found new insurance but it came with a steep price. The association's previous insurance was $18,500 while the new insurance is now $26,500, an increase of 43%.
Langston warned Minnesotans this could happen here.
"I think that everybody needs to be aware that the Midwest is coming under scrutiny as a potentially poor investment for insurance companies," said Langston.
Minnesota has joined high-risk states, like Florida, in creating a state-backed high-risk insurance product called FAIR — an insurance of last resort.
"We've had our FAIR plan in place for quite some time. Some states didn't have that," said Grace Arnold, the Commerce Department's commissioner.
WCCO Director of Meteorology Mike Augustyniak believes warming global temperatures are a factor.
"We know from eighth-grade science that the more you warm an air mass the more moisture it can hold. We are increasing the amount of moisture that is in the air. The question of other factors that form severe weather, how are they changing? That's the piece where we are not sure," said Augustyniak.
