Will Iowa tornado outbreak damage Iowans' home insurance rates?

Will Iowa homeowners see higher insurance rates because of the April 26 tornadoes?

Iowa insurance professionals don't think so. But, they concede, the storm's damage comes at a bad time.

Claims on Iowa homes have piled up since 2019, leading some insurance companies to raise rates in recent years. Others have exited the state altogether.

Industry leaders say companies need a loss ratio − paid-out claims as a fraction of revenue − of at least 60%. But, according to Iowa Insurance Division annual reports, homeowners' policies in the state missed that mark in 2020-2022. The state has not released figures for 2023.

Independent Insurance Agents of Iowa CEO Tom O’Meara said Monday that industry leaders will need months to tally up the cost of the storms. Customers are still without power, O'Meara said, and some haven't even been able to contact their insurers yet.

More: NWS: There were at least 17 tornadoes in Iowa last week. Here's what we know so far.

He expects the largest companies, like State Farm Insurance and Nationwide Mutual Insurance Co., to park mobile offices in Minden, Iowa's hardest-hit town.

For the Iowa market as a whole, though, O’Meara doesn't think the tornadoes will impact customers’ future premiums and deductibles. Most of the tornadoes hit small towns, which don’t hurt companies’ balance sheets as deeply as storms rushing through a metropolitan areas.

More: Farm insurer joins others in pulling back from Iowa after increased storms

By comparison, the 2020 derecho − the most expensive storm in state history − hit customers in the Des Moines and Cedar Rapids metros. Loss ratios around Iowa hit 209% that year.

“The companies do plan on some of these storms, right?” O’Meara said Monday. “It’s not that they’re totally unexpected. They are in the budget.”

Storm may not have negative effect, 'but it sure isn't going to have a positive impact'

Brent Scheve, owner of The Agency Insurance in Harlan, about 25 miles northeast of Minden, said tornadoes struck a couple of customers' properties. One of his company's employees saw the storm destroy her machine shed and rip away half her home, uprooting it from its foundation.

After a couple of years of significant losses in Iowa, many insurers had increased premiums. Scheve said the most recent bout of storms may not lead to higher rates.

At the same time, companies want to see several calm years before they start decreasing premiums. Homeowners' polices in Iowa have exceeded the 60% loss ratio in six of the last 10 years.

More: Readers' Watchdog: Home damaged by weekend storms? Here's what you need to know

"You never want a storm like this," Scheve said. "It may not have a negative impact (on premiums). But it sure isn't going to have a positive impact."

Jeff Brehmer, president of the Smith Davis Insurance agency in Council Bluffs, worries that building material costs will increase in the wake of the tornadoes. With so many homeowners rebuilding, he said suppliers of goods like lumber might struggle to find enough material.

The price will rise. Insurers will pay a higher cost on behalf of customers. The companies will then increase future premiums.

Hans Boehm, of Boehm Insurance Agency in Ogden, said representatives from Cincinnati Insurance Co. and Safeco Insurance predicted a year of intense thunderstorms in the area during sales meetings this winter.

“Boy," Boehm said, "so far they were right. They were right on the money.”

Tyler Jett is an investigative reporter for the Des Moines Register. Reach him at tjett@registermedia.com, 515-284-8215, or on Twitter at @LetsJett. He also accepts encrypted messages at tjett@proton.me.

This article originally appeared on Des Moines Register: How likely are Iowa tornadoes to drive insurance rates higher?