Why did auto insurance rates go up so much in Minnesota?

Between 2022 and 2024, auto insurance premiums experienced double-digit inflation nationwide. That surge occurred in many Ninth District states also, but especially in Minnesota, which reported some of the highest premium inflation in the nation.

Today, premiums are on their way down, including in Minnesota. But, compared with what premiums were before the surge, Minnesota drivers appear to be paying a lot more relative to 2022 than drivers in other states.

Why have premiums increased so much, and how do insurers decide how much to change insurance rates?

According to Aaron Cocking, president and CEO of the Insurance Federation of MN, premiums have risen with the cost of auto repairs and jury awards in lawsuits nationwide. In Minnesota, premiums have been exacerbated by severe storms that led to more cars being damaged in the state.

“These are all the things that stack up as far as the risks that insurers have to evaluate to get to the premium that you and I pay,” Cocking said.

When risks go up, rates go up so insurers are able to pay claims; when risks go down, rates go down again as insurers compete for market share, he said.

Reports produced by regulators show that Minnesota drivers have indeed seen exceptional increases in the cost of insurance coverage associated with cars damaged by storms and by traffic collisions. There is some indication that rate increases could’ve been higher based on how insurers assessed risks. But they chose to spread the increases out in some cases because regulators stepped in, and, in other cases, because they didn’t want to lose customers.

Emerging patterns

Publicly available data about auto insurance costs are often not up to date and measure different things, making comparisons difficult. But they do show a pattern of premiums rising in 2023, peaking in 2024, and falling again in 2025 across the nation. Minnesota followed a similar though exaggerated trend, with premiums first increasing faster and then decreasing faster than in most other states.

One up-to-date measure of insurance cost is the total premiums earned by auto insurers, as reported by the National Association of Insurance Commissioners (NAIC). Adjusted for changes to the number of insured vehicles, the data show premiums surging by 27 percent between 2022 and 2024 across the nation. In Minnesota, premiums increased faster at 29 percent, the ninth highest among states. Premiums in other Ninth District states didn’t increase by nearly as much (Figure 1).

More recent premium totals are not available, but there are indications that premiums are falling nationwide. According to Insurify, a website that allows consumers to shop for the best rates, price quotes for Minnesota users fell 11 percent year over year as of March 2026. Nationwide, quotes fell 6 percent (Figure 2).

But this was not enough to return quotes anywhere close to 2022 levels because increases during 2023 and 2024 were so steep. Insurify data show that price quotes in Minnesota in March 2026 were still 63 percent higher than in March 2022. Nationwide, quotes were 41 percent higher.

Note that Insurify’s price quotes aren’t the same as premiums actually paid to insurers. For one, many of those shopping around could be people with higher rates than the average insurance customer.

Deconstructing premiums

To understand the recent price hikes, it helps to deconstruct premiums.

Auto insurance premiums are a combination of premiums for different types of coverage, the most important of which are:

• Collision, which covers damage to the policyholder’s vehicle from traffic accidents.
• Comprehensive, which covers damage to the policyholder’s vehicle from other things, such as hail storms.
• Liability, which covers injury or property damage caused by the policyholder’s vehicle.

NAIC adds the average premiums for each coverage to produce a measure called “combined average premiums.” In 2023, the latest year these particular data are available, combined premiums increased 14 percent year over year nationwide. That’s the biggest increase in nearly 40 years. In Minnesota, this measure increased by 15 percent, while in other Ninth District states, it increased less than the national average.

The biggest factor behind the nationwide increase was liability coverage, followed by collision, according to NAIC (Figure 3).

In Minnesota, however, the biggest factor was comprehensive coverage, followed by collision. The only other Ninth District state where comprehensive coverage made such a big difference was South Dakota.

Billion-dollar storms

In 2022, the National Weather Service reported 581 severe hail storms in Minnesota, meaning storms with hail 1 inch in diameter or larger. The following year, it reported 350. That’s a lot more than the 10-year average of 301.

Several recent storms were deemed “billion-dollar” disasters by the federal government based on the estimated damage inflicted on homes, vehicles, and even crops. South Dakota had a slightly above-average number of severe storms and a billion-dollar storm of its own.

Cocking said one severe storm probably won’t affect rates much because insurers expect these and price accordingly. What they don’t count on is a string of severe storms, he said.

Another factor that may have made the most difference in recent years was the location of those storms.

The Twin Cities, easily the state’s largest metropolitan area, is home to nearly 60 percent of the motor vehicles registered in the state. That means a single severe storm in the Twin Cities metro has the potential to damage proportionally far more vehicles than in states where populations are spread out across more metro areas. Two of the 2022 hail storms struck the Twin Cities metro and nearby areas, causing more than $5 billion in damage, the state Department of Natural Resources said. Another storm struck the Twin Cities in 2023, causing at least $1.5 billion in damage.

In South Dakota, the 2022 derecho cut a swath through the state’s eastern edge, including Sioux Falls, its biggest metro area with 28 percent of registered motor vehicles. That storm caused around $2.8 billion in damage but spread across several states.

Supply chain shocks

The cost of collision coverage largely reflects the frequency of traffic accidents and the cost of repairing damaged vehicles. Since the COVID-19 pandemic, crash rates have been relatively low. Repair costs, however, have risen significantly because of higher labor costs and the pandemic-related supply chain shocks that made auto parts more expensive.

As a result, the average claim amount for collisions increased by 19 percent year over year nationwide in 2021, and by 18 percent the following year, according to the latest available NAIC data.

In Minnesota, repair costs grew by 23 percent and 19 percent, respectively. One difference may be labor costs. According to the Bureau of Labor Statistics, wages for Minnesota body shop workers increased 16 percent year over year in 2021. Nationwide, the increase was 4 percent.

Forecasting costs

But severe storms and supply chain shocks of the recent past aren’t the whole story.

Insurers aren’t just raising rates to recoup the costs of those events, according to Phillip Vigliaturo, an actuary with the Minnesota Department of Commerce, which regulates insurance. Instead, they’re using statistics to determine how past events changed their costs, and then using that change to forecast where costs will be in the future. This allows them to set rates high enough to ensure they have the financial reserves to fully cover future costs and to earn a profit.

But using the past to tell the future can make it hard to know if a sudden change is a temporary anomaly or an emerging long-term pattern. Typically, anomalies are excluded from the rate-setting process because they likely will be over before new rates are fully implemented (this can take many months because implementation means going through a full policy term at the new rate). It’s likely that insurers initially believed the sharp increase in car-repair costs was temporary, because they waited to increase their reserves, according to one analysis.

As a result, the “underwriting loss” insurers suffered nationwide in 2022 was the worst in at least 30 years, NAIC data show. Underwriting loss is a measure of the gap between the income earned from premiums and expenses, the biggest of which are claims paid. In 2022, losses nationwide averaged 12 percent of income. In Minnesota, losses averaged 16 percent, the eighth highest among states. Losses shrank the following year when premiums surged.

Insurers do have constraints on how much they can raise rates, however.

As premiums surged, consumers have been shopping around more, increasing pressure on insurers to keep rates competitive. That may explain why regulatory filings sometimes show insurers raising rates less than indicated in their forecasts. When this happens, though, they may not decrease rates right away even when forecasts allow them to.

Insurers may also be deterred by laws that most states have prohibiting “excessive” rate hikes. In Minnesota, rate hikes of more than 25 percent in 12 months are subject to public hearings to determine if they’re excessive. Regulatory filings show that the threat of a hearing is enough to cause insurers to change course.

According to Cocking, it’s challenging for insurers to find the balance between having premiums low enough to stay competitive but high enough to pay for potential claims. “Insurance is the only thing that you buy where the seller doesn't know what the cost to them is going to be.”