The erosion of homeowners insurance

Opinion editor's note: Editorials represent the opinions of the Star Tribune Editorial Board, which operates independently from the newsroom.

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Climate change is coming for Americans' homes and wallets. And in a pretty spectacular fashion: In Iowa, insurers lost $1.3 billion in 2023 alone due to an unprecedented series of storms that devastated the state. The Midwest, normally considered a safe haven from homeowner nightmares such as hurricanes and wildfires, is now getting wracked by increasingly destructive weather, as warmer temperatures are heightening the severity and frequency of storms.

In June alone, record floods overwhelmed communities in southern Minnesota, leading to major infrastructure and property damage and costing millions in repairs. Hail is the most expensive weather event, even more than tornadoes. Damages from hail now total in the billions annually and are steadily increasing with warming temperatures.

Unfortunately, this is a nationwide trend, and the insurance companies responsible for covering homes damaged by severe storms simply cannot keep up. In six out of the past seven years, in Minnesota alone, home insurance companies have lost money, and the losses are rapidly increasing. This is positioning Minnesota insurance companies to drop high-risk homeowners from insurance plans en masse, something already happening in high-risk states such as Iowa, Florida and California. The remaining insurance companies subject desperate homeowners to explosively expensive premiums, which, in Iowa, have increased by over 40% for some high-risk homeowners.

This phenomenon continues to worsen in the storm-ravaged Midwestern states bordering Minnesota, as well as flooded Florida and fiery California, as they struggle to contend with their new realities. High-risk, government-run insurance providers such as FAIR and the Citizens Property Insurance Corp. have stepped up to insure the properties most insurance companies now refuse to cover, though the expense is unsustainable for homeowners.

These government programs are meant to be a temporary fix, not a realistic long-term solution. However, they've become a critical lifeline for millions: In Florida, Citizens Property is now the largest insurer for property in the state. Bad news for Minnesotan snowbirds and Floridians alike.

Part of the reason for this issue is construction quality of houses in the United States. Minnesota has taken small steps to encourage sturdier houses — it now requires insurance companies to offer discounts to homeowners who reinforce their homes against natural disasters, promoting measures such as strengthening roofs against high wind and hail. It's not enough. The macro forces creating this problem are greater than Band-Aid-level measures can this counter.

The insurance companies will be fine. They will narrow and adjust their markets and policies as needed to be profitable. Homeowners are the ones paying the price, literally. They have no choice but to pay.

What can be done? Climate change isn't going to reverse itself overnight. Storms, fires and floods aren't going anywhere. American contractors aren't going to suddenly start embodying the brick-house style from the "Three Little Pigs." But there is a silver lining to this hardship, and a potential remedy within it.

Many of the states devastated by these storms are predominantly red states, run by governments that historically have denied climate change and have pushed against sustainable developments. Perhaps lawmakers will pursue policies with the new hardships their constituents are battling in mind.

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