Rising auto and home insurance rates remain major concern

MINNEAPOLIS — It’s no secret that home and auto insurance premiums have been skyrocketing in recent months. Last year, in fact, the average cost of car insurance increased by 19 percent, the largest recorded jump in roughly a half-century.

This persistent issue remains a topic of national conversation at the start of the 2024 calendar year, as evidenced by the Wall Street Journal‘s report that showed how some insurance carriers are reducing services or pulling out of certain states. In Florida and California, for example, hurricanes and wildfires have made it hard for some companies to do business, with the industry as a whole suffering billions of dollars in losses.

Grace Arnold, the commissioner of the Minnesota Department of Commerce, testified last year before Congress about this very topic. Speaking both from a Minnesota perspective and with the National Association of Insurance Commissioners, Arnold described how inflationary pressures, natural disasters driven by climate change and other factors are creating immense challenges in the insurance industry.

In an interview with KARE 11 on Monday, Arnold said that Minnesota has not seen insurance companies fleeing the state like in Florida or California. However, she said it’s well known that auto and home insurance policies are rising widely across the state, although each situation is different depending on what kind of car someone drives or what type of home they own.

“There are a variety of factors. Industry factors are that, insurance companies buy insurance for themselves. The costs for that are going up. Things like climate change, more severe storms are impacting premiums across the country and here in Minnesota,” Arnold said. “We tend to have really big dollar-value storms, even if it seems like a normal thunderstorm to us, that hail will really increase claims. And then there are other things like your auto insurance. There have been increased severity of accidents and cars are just more expensive to fix.”

Despite not seeing major companies reducing business in Minnesota, Arnold said that there has been something called “market hardening,” where insurers are “taking a look at risk across the board and reducing risk when they can.”

Arnold suggested that people shop around for insurance to find the best deal, and she said customers should always ask for discounts. (If Minnesotans are having specific issues dealing with insurance claims, they can go through a complaint process with the Minnesota Department of Commerce).

“Luckily, for the major lines, we are not in a position to have those big withdraws like we’ve seen in other states. We have a competitive market,” Arnold said.

Aaron Cocking, the president and CEO of the Insurance Federation of Minnesota, said this week’s Wall Street Journal article describing so-called insurance “deserts” is something worth paying attention to.

“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,” Cocking said. “We want to make sure insurance is not only available but also affordable.”

Cocking said the public should know that Minnesota is considered to have the second-most extreme weather of any state in the U.S.

“A lot of it really is localized. You’re paying your premiums based on what your risk is relative to Minnesota,” Cocking said. “We live in a state that has incredibly extreme and volatile weather. We pay for that as a result, whether it’s hail, windstorms, tornadoes, all that stuff that we deal with and that produces losses that insurers have to pay for. That’s what reflects and ends up back in what people pay in premium.”

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