MINNEAPOLIS (AP) -- Minnesotans could see double-digit increases in their homeowners insurance premiums as the industry struggles from severe weather, an ailing economy, costly home repairs and the Sept. 11 terrorist attacks.
Home insurers in Minnesota have paid more money in claims than they collected in premiums from 1998 through 2000, according to the state Commerce Department.
As a result, Minnesota's four largest home insurers, which make up more than half the market, all had rate hikes approved by the state Commerce Department last year and have requested more.
The increases were 6.5 percent for American Family, 14.8 percent for State Farm, 20 percent for Allstate and 22 percent for Illinois Farmers.
"The numbers are pretty stark," said Rick Fetherston, spokesman for American Family Insurance.
The costs go back to 1998 when losses were classified as catastrophic after the St. Peter tornado and several other major storms in its wake.
That year, companies paid out $1.5 billion in claims and expenses, more than the total for the previous 50 years combined, said Mark Kulda, spokesman for the Insurance Federation of Minnesota.
The payout amounted to $2.95 for every dollar the insurers received in premiums from Minnesota homeowners, according to the Commerce Department.
"That was really a groundbreaker for Minnesota," said Michele Engdahl, spokeswoman for State Farm Insurance. "We typically look at other states as catastrophe-prone, like California and Florida. As an industry, that was unprecedented."
The average cost per policy -- a combination of payouts and expenses -- went from $210 in the mid-1990s to $900 in 1998, the highest in the country.
Recent bouts of hailstorms and wind damage have kept the claims coming.
In 1999 and 2000, the per-policy costs were $420 and $470 -- high enough to keep the insurance companies in the hole. They paid out $1.13 per premium dollar in 1999 and $1.30 in 2000.
The premiums also are pushed by the rising costs of medical services and home repairs, Engdahl said.
The Sept. 11 terrorist attacks, Kulda added, also have been a factor. Reinsurance companies -- companies that shield insurance companies from excessive losses -- have paid most of the $50 billion-plus losses from the attacks. As a result, premiums for insurance companies are increasing, which is being passed on to policyholders, he said.
There also is the economy. Kulda said insurance companies have seen a significant drop in their investment returns.
"We take the premium dollars and invest them, and when they perform well, it helps us do what we do -- to be available and deal with the claims," Engdahl said. "Our results were less favorable in 2001 than they had been in the past, and that is a factor."
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