Why Is It Difficult to Find HOA Insurance for Minnesota Properties?

There’s been a disruption in the HOA insurance market in Minnesota for some time now. As they attempt to recover from many years of high claims, many insurance companies are increasing premiums or pulling out of the HOA market completely. Those that remain are charging exorbitantly high premiums and imposing much stricter underwriting requirements. In this post, we’ll take a look at what led up to this situation and what it means for Minnesota HOAs. 

Why Your HOA Insurance Has Changed

While Minnesota accounts for less than 2% of the U.S. population, it also represented 2.7% of all claim losses in 2019. Additionally, Minnesota ranked fourth for losses per capita and fifth per capita for 2015 to 2019. As a result, many HOAs have been forced to examine the open marketplace to secure new insurance. However, with all of this going on, underwriting has become more difficult as fewer companies are even willing to provide quotes—much less coverage—for Homeowner Associations in Minnesota. 

Result 1: Stricter Underwriting Requirements

Underwriters are making it more challenging to even obtain HOA insurance for Minnesota properties. But, why is that? Aside from the overall situation described above, there are some specific things that can make you less attractive to underwriters for HOA insurance: 

• Claims. If you have an open claim or have had more than one or two claims in the last three to five years, you’ll be viewed as a higher risk and will find it more difficult to find insurance. 
• Loss ratio. Those who have had large losses relative to the premiums paid over the past three to five years will also find it difficult to obtain insurance.
• Size of the insurance risk. Living in a larger community can make it more difficult to find an underwriter because insurance companies know larger communities require higher limits, which concentrates their risk exposure. 
• Age of roofs. If your roof is older than 15 years the likelihood of a claim increases so age of the roof is critically important. 
• Building age. Buildings constructed before around 1990 typically face insurance penalties. 
• Community risks. If your HOA allows grilling near buildings, has aluminum wiring, has Federal Pacific electrical panels installed, etc. you may be considered a higher risk in the eyes of insurance underwriters. 

If one or more of the above risk factors applies to you, you may find traditional insurance carriers will not be willing to underwrite your risk and you will be forced to shop amongst the “extended lines” or insurers of last resort.

Result 2: Significantly Higher Insurance Premiums

If you are left with no choice but to shop the open marketplace “extended lines,” it’s going to cost you. What we’ve usually seen is that those with one or fewer of the risk factors mentioned above wind up paying a 50% to 150% increase if they’re able to secure a quote from a regular, admitted carrier. If, however, you must turn to the extended lines, you may be facing an increase of 100% to 350%. We have seen communities paying $80,000 forced to pay $370,000.

Result 3: Receiving Quotes Close to Renewal Dates

Although we request quotes with more than enough time prior to renewal dates, we are regularly seeing that underwriting can take around nine weeks to receive a quote. With the increasing difficulty in securing one with a regular, admitted company, the current situation with underwriters often results in us providing quotes closer to renewal dates. We do everything we can within our power to ensure that isn’t the case, but we can’t speed up the review process with underwriters. 

Final thoughts 

Despite the above—seemingly dismal—news on the state of HOA insurance, it’s still a good value for homeowners. While we do understand that insurance can be a harrowing topic that creates a lot of stress, we also want to assure you that our Insurance Specialist is dedicated to continuing to work with and find insurance agents willing to write insurance in Minnesota.