Whats happening to homeowners insurance rates?
If you see a rise in your homeowners insurance premiums this year, you are not alone. Almost all insurance companies in Minnesota are raising their rates for 2002. Why are rates increasing? The fact is, insurance companies haven’t been charging enough to cover the unexpected losses we’ve seen in the past five years. Minnesota’s home insurance rates used to be a “bargain buy” compared to other states, but the weather-related catastrophes in the late 1990’s have created a new reality. Generally, insurance companies expect to pay about 60 cents in claims for every $1 in premium. However, in 1998 alone, a year of unusually severe hail storms and tornadoes, claim costs were 295% of premiums. In other words, for every dollar received in premium, the companies paid out $2.95 in claims. If costs had returned to normal in the succeeding years, we wouldn’t be seeing these big rate increases now. Unfortunately, the weather did not improve enough to bring costs down. In 1999 insurers losses were 1
