Extreme weather, higher construction costs driving up insurance rates – Grand Forks Herald

David Colter has owned an insurance agency in eastern North Dakota for 20 years. He said he’s never seen a more difficult time for businesses to find insurance carriers. He believes anyone who gets a renewal offer should take it.

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“Carriers are tightening up their underwriting. It’s hard to find a company in the industry that has made money on business insurance,” said Colter, who has offices in Fargo, Grand Forks, Rugby and Cando. “Our wind and hailstorms (claims) have quadrupled in the last 10 years. The average claim was $20,000 and now it’s closer to $40,000. Companies’ insurance premiums have tripled.”

Extreme weather events are increasing in size and frequency across the country. In 2023, the United States experienced 28 separate weather or climate disasters that each resulted in at least $1 billion in damages, according to

federal figures

. One of those was a storm producing baseball-sized hail over the Minneapolis area on Aug. 11, causing damage to windows, siding and roofs of many homes, businesses and vehicles. Add in the high cost of construction to rebuild year after year, and it’s all driving property insurers to increase their prices significantly.

The Federal Reserve Bank of Minneapolis published a

report in August

using data from S&P Global showing an increase of up to 34% in homeowners’ insurance premiums across the U.S. over a seven-year period (2017-2023), while inflation grew by 24%.

Homeowners’ insurance premiums have increased the fastest in states prone to tornadoes, hail or wildfire. In the Midwest, those states include South Dakota (41% change), Minnesota (39.1% change), and Montana (34.1% change). North Dakota has seen premiums increase 16.6% over that time.

Colter said a number of insurance companies are not renewing many of their policies, or are cutting back on the service lines they will cover. Some insurers have left particular states entirely. The challenge for insurers is balancing charging an appropriate premium while continuing to stay profitable and competitive.

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“Take a renewal offer if you can get it,” Colter said. “Eventually this will level off and inflation will decrease.”

In late October, North Dakota Insurance Commissioner Jon Godfread

announced health insurance rate changes

for individual and small group plans for 2025 that comply with the Affordable Care Act, citing the rise in health care costs in recent years as the driving force in rate changes. His office approved increases ranging from 6.38% (Medica Health Plan) up to 15.23% (Blue Cross Blue Shield of North Dakota) for the small group market. Individual health plan increases for 2025 range from 4.6% for Medica Health Plan to 16.5% for Sanford Health Plan.

North Dakota is one of only nine states that have prior rate approval. That means every rate filed in the state goes through the insurance commissioner’s office for review.

“It goes into a number of different factors we have to balance to make sure that not only the company stays solvent but also maintains affordability for the consumer. That law was passed decades ago but there are a number of states envious of our ability to have that prior rate approval,” Godfread told Prairie Business.

“Insurance is a pool of funds that needs to be filled at a faster pace than what is being released. Because of the pace in costs imposed by health care providers and facilities, the pool is being drained at an unsustainable pace,” Godfread said in the October release. “This is the first time in my nearly eight years as insurance commissioner that all health insurance plans purchased on the market will see increased premiums. High costs impact those who purchase their health insurance, and it affects businesses in the state that offer health insurance as an employee benefit.”

On average in 2023, health insurance companies in North Dakota kept less than one cent for each dollar received in premiums for individual health plans. Since the start of the pandemic, health insurance companies have, on average, kept one or two cents for every dollar collected in premiums, according to his office.

“Whether it’s health insurance or property insurance, the underlying thing you’re insuring is more expensive to repair or to treat, your insurance is going to increase,” Godfread said. “The thing that’s difficult is that you feel it all at one time during a renewal. Everything is up – homeowners’ insurance is up 15%, health insurance is up 15%. Where does it end?”

He said his office is dealing with consumer frustration, noting that his own rates have increased as well.

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“In some respects, it shows the insurance market is working. As things become more expensive, those rates have to adjust,” Godfread said. “It’s a state-based system and we have 150 years of track record in this space. We don’t like these hard market scenarios, but we’re in one, unfortunately. We’re pulling all the levers we can to make it affordable for consumers.”

North Dakota’s perils are wind and hail, and buildings are constructed to withstand those weather events. But when hurricanes damage properties on the east coast, or destructive wildfires decimate west coast communities, insurance rates go up for everyone.

“Insurance is all about spreading the risk,” Godfread said. “We spread the risk across as big a pool as we possibly can, so yes, it does have an impact here. It also has an impact on the reinsurance side, where insurers go to get insurance.”

When multi-billion-dollar storms are happening consistently, the reinsurance market contracts quickly, he explained.

“The reinsurance changes for the (insurance) companies here in North Dakota, and they’re not able to get as good a deal on reinsurance. They have to pay a higher premium to the reinsurer, which then gets turned around to a higher premium on the consumer. It’s all interconnected. As much as I’d love to say we’re immune to it, it’s all part of the shared risk system we have,” Godfread said. “Our insurers are financially stable, they’ve got reserves, but they can’t maintain that for a long time without adjusting their rates.”

He advises shopping around for insurance to find the best rates, and calling his office for help with the buying process or the claims process.

“We’re here to help. We’re a state agency that’s no cost to call. We’ll give you unbiased advice and we’re happy to do it,” he said.

This piece was written for Prairie Business, a free monthly business magazine published by the Grand Forks Herald that covers business trends in the Dakotas and Minnesota. To receive a free digital edition each month, go to

grandforksherald.com/prairie-business

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