Mpls. tornado follows two years of record insurance payouts for disasters

The destructive storms and tornado that hit Minnesota Sunday follow two years of record insurance payouts to homeowners for catastrophic losses.

That's according to Mark Kulda of the Insurance Federation of Minnesota. Kulda said insurers look at 20 to 40 years of average claims before deciding whether to bump up rates.

However, Kulda said the trends could increase the likelihood of a rate hike in the next 1 to 3 years.

"We do know that last year, 2010, was the worst catastrophe year we've ever had in Minnesota," Kulda said. "The year before that was the worst before that. So the top three-four catastrophe years in Minnesota have all happened in the past 10 years. So what that means is there is definitely a pressure on homeowners' insurance premiums."

Kulda said any potential premium rate spike could be moderated by declining property values. He said rates go down as home values sink.

Ann Avery with State Farm Insurance, the leading homeowners insurance carrier in Minnesota, said the company looks at several years of claims data before deciding whether to boost rates. Avery said the damaging tornado and storms would not, alone trigger a rate hike; other factors would be considered.

"Other examples might be costs of construction, medical payments ... other variables," Avery said.

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