ST. PAUL — Some insurance carriers in Minnesota are making changes to policy language that eliminate coverage for wind and hail damage except when siding or shingles are punctured or torn, a trend emerging across the state driven by an increase in extreme weather due to the changing climate.
That’s according to the Minnesota Department of Commerce, which issued a consumer alert late last summer advising homeowners to check their insurance coverage for wind and hail limits.
The alert was prompted by growing complaints from homeowners concerned about denials of coverage or unexpectedly high out-of-pocket costs after storm damage, according to the Commerce Department, which advises consumers to check their insurance policies for changes since their last review and to ask their insurance agents about policy coverage, exclusions, deductibles and options.
According to the agency, a good time to do this is around insurance renewal time, when carriers sometimes make changes to premium costs, coverage amounts and exclusions.
Julia Dreyer, Deputy Commissioner of the Minnesota Department of Commerce’s Division of Insurance, recently released an op-ed on the impact of climate change on the nation’s weather and the damage it causes.
Dreyer noted that Minnesota was hit by at least six weather disasters in 2022, each causing at least $1 billion in damage, the most such storms in the state since federal agencies began tracking.
As for the number of storms that brought severe hail last year, Dreyer said Minnesota was third in the nation behind Texas and Nebraska.
According to Dreyer, in some states insurers are reducing their exposure to a large number of claims by dropping coverage or exiting the market altogether.
Another way insurance carriers are dealing with the situation is to increase premiums or change benefits to cover the expected risks, according to Dreyer.
“In Minnesota, this trend has led to more dissatisfied consumers,” Dreyer said, adding that since 2020, the Commerce Department has seen a 55 percent increase in homeowner insurance complaints.
Many of the complaints are from consumers concerned about denial of coverage or unexpectedly high out-of-pocket costs after wind or hail damage, she said.
North Dakota is also seeing an increase in insurance providers writing so-called “cosmetic damage” exclusions into policies, according to Jacob Just, director of communications for the North Dakota Department of Insurance.
He added that the department is also listening to consumers concerned about the cosmetic damage exclusion.
“This is a common complaint we get at the department, especially after the first hail of the season,” Just said, adding that when they get such calls, consumer assistance staff can help policyholders better understand that part of their policy.
“Consumers should have regular conversations with their insurance agent to ensure that whatever they want covered has the appropriate coverage,” said Just, who noted that insurance companies’ use of cosmetic damage exclusions is nothing new and said they are not necessarily related to effects of climate change or recent stormy weather.
“We would say it has nothing to do with either (climate change or storms). It is more of a business/economic decision by the insurance companies,” he said.
Dreyer, who looks at the potential impact of climate change on insurance coverage differently, said one way Minnesota can meet the threat posed by increasingly severe weather is to adopt a program that the Department of a trade proposal called Strengthen Minnesota Homes, which is on display in House Bill HF2300.
Modeled after a similar setup that was successful in Alabama, the program would do two things: provide grants to retrofit homes to make them more weatherproof, and establish mandatory reductions in some homeowners’ insurance premiums .
The proposal would prioritize low-income populations that are disproportionately affected by climate change and have the fewest resources to protect their homes or rebuild after a storm.
Dreyer said such a program would benefit homeowners, the insurance industry and the state.
“While investing to make a roof storm-proof may only benefit one homeowner, individual actions multiplied across an entire community or communities can significantly reduce the insurance risk posed by climate change.” , she said.