September 27, 2012


Weather Related Claims Affecting Agency Contracts 


Over the last several years Minnesota has experienced record-breaking weather related homeowners insurance claims.  These claims have created a very difficult homeowners insurance market in Minnesota.    In response to this situation, several companies have or will be considering changes to their insurance policies like returning to actual cash value, age limits for roofs and siding or wind and hail deductibles.  Clearly the standard replacement coverage has become problematic. 


The MIIAB along with the Insurance Federation of Minnesota has attempted to educate the public, our members and our state elected officials about this growing problem.  Additionally your association also helped educate local television stations and newspaper reporters on the changes in the weather patterns and the financial effects on the insurance industry in Minnesota.  Minnesota is now in the top three of states with weather related claims losses.  It also appears that weather patterns, particularly wind and hail, will not dramatically improve in the future. 


Our attempts to address this crisis through legislation have had limited effect.  Legislation attempting to curtail the rise in "storm chasing contractors" has been passed.  However, broader changes to our homeowners' insurance statutes were unsuccessful, but we were hand in hand with our insurance company partners 


It is extremely unlikely that an industry-wide or state legislative response to the issue will address this problem.  It is more likely a company by company response will occur and we are witnessing it today. 


You may have received information from your carriers regarding changes to their underwriting practices on roofs and sidings.  Others may have made changes to their policies.  Discounts are being offered for ACV policies.  It is important that you know what your companies are doing and more importantly what your competition is doing.


Members have contacted the MIIAB office indicating other companies have responded by restricting access to homeowners insurance through cancellation of agency contracts.   You should know there have been a couple changes to the state's insurance agency cancellation laws since many of you looked at them last. 


First, the MIIAB met with insurance company executives to review our insurance agency cancelation and termination statutes.  It was agreed that the mandatory rehabilitation provision of the law which was enacted in the mid-1980s was not working. 


Second, it was agreed that the rehabilitation provision would be repealed.  In its place, agents would be given an additional nine months in which to continue to renew business with the terminating carrier.  This would result in an 18 month run-off period for terminated agents.  This was adopted by the Minnesota Legislature and signed into law in 2005.   You can find the latest version of the law, Minnesota Statutes 60A.171 


Under this law, a company must provide to any agency with which it has had a contractual relationship for three years or more, a termination notice 60 days in advance of the termination.  This notice should include the reasons for termination.  The company must, at the request of the terminated agent, renew existing insurance contracts during the 18 months after the effective date of the termination.   The contracts may be limited to a one year period and a company may decline its renewal if the risk does not meet the current underwriting standards of the company.  If the company decides to non-renew, it must give the agent 60 days notice of its intention not to renew.   Furthermore, a company may not reduce a terminated agent's commissions unless the company is reducing commissions for other appointed agents in the state at the same time. 


The cancellation law is administered by the Minnesota Department of Commerce.  If you have concerns how the law may be affecting your agency, contact the Commerce Department.    


If you have any questions for me, please email me at  I hope this will help clarify the revised agency termination language.


Dominic Sposeto

MIIAB Lobbyist

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Email Dominic Sposeto
MN Dept of Commerce

7500 Flying Cloud Dr
Suite 900
Eden Prairie, MN 55344

P: 800.864.3846
F:  952.835.4774