At the CAI MN Tradeshow and Expo on Friday, February 7th, Gavnat’s COO, Adina Bergstrom, participated in a panel on the State of the HOA Insurance Market, alongside industry experts Eric Skarnes (President – Insurance Warehouse), and Maureen Porter (Founder – Community Association Insurance Consulting). The three panelists led a two-hour panel and active discussion on the changing HOA Insurance landscape and considerations for community leaders and property managers. Key insights from the panel are detailed below:
The Growing Insurance Crisis for HOAs
“Insurance is likely your biggest headache or at least your biggest line item.” – Eric Skarnes
- Minnesota has gone from one of the most profitable states for insurers to one of the least, largely due to hail-related claims. Many carriers are pulling out of the state, and those remaining are implementing stricter underwriting policies.
- For older buildings, options are dwindling: most insurers won’t cover properties built before 2000, and pre-1990 buildings are often limited to just two carriers.
Higher Deductibles and Stricter Claims Management
- “Deductibles are skyrocketing, often reaching 5% or higher, which can create financial strain for associations.” – Maureen Porter
- Coordination between master policies and HO6 policies (individual unit owner policies) is crucial. Claims often involve both, so HO6 policies need to be tapped for coverage in addition to the Master policy.
Policy Structuring and Governing Documents
- Governing documents and bylaws significantly impact how insurance claims are handled. Many associations lack clear guidance on what should be covered by the master policy vs. unit owners.
- Amendments to governing documents can help HOAs adapt to rising costs and coverage challenges.
Non-Standard Market & Increased Costs
- Many HOAs are being forced into the non-standard insurance market (25-30% of associations), which is more expensive, includes more exclusions, and requires upfront premium payments.
- These policies are not held to the same standards as standard policies, often featuring manuscript terms, exclusions, and unique deductibles.
- There is a greater need for proper coordination of coverage forms by an educated broker/agent when the policy is sold and for professional adjusting assistance from a licensed public adjuster when the claim is made and adjusted.
Loss Control & Risk Mitigation
- Insurance carriers are focusing heavily on loss control and expect HOAs to be proactive:
- Reserve studies are being scrutinized—lack of reserves can lead to denied coverage.
- Carriers expect responses to loss control recommendations; failure to comply may trigger policy cancellations.
- Building materials, roof sizes, and even grilling policies are factors in underwriting decisions.
- Grills have become a contentious issue—restrictions vary by carrier, and there is no universal standard.
Emerging Risks: EVs & E-Bikes
- Electric vehicles and e-bikes are being flagged as the next big insurance concern. Carriers are starting to discuss potential coverage restrictions, citing the risk of catastrophic fires.
- Exclusions related to EV charging may be introduced, shifting responsibility to HO6 policies.
The Claims Process: Strategy & Consideration
“The master policy now often takes a backseat in claims processing, with HO6 policies frequently being tapped first. “Master policy has gone from first up to last up.” – Eric Skarnes
“When filing a claim, proper valuation is key. Once an insurance company sets an initial claim number, it’s difficult to increase it”. – Adina Bergstrom. Public Adjusters (PAs) can help HOAs navigate complex claims but cannot work for insurance companies.
Future Outlook: Market Stabilization?
- While rates have been climbing rapidly (some buildings seeing 300-500% increases), experts believe the market is starting to plateau.
- “Think we’ll see more carriers enter in.” – Despite the current challenges, some experts are optimistic about future improvements.
- Carriers leaving high-risk states like CA, FL, and TX may eventually shift focus back to Minnesota.
What Can HOAs Do Now?
- Reduce risk – Implement and document proactive loss control measures.
- Prepare for higher deductibles – Budget accordingly and communicate with homeowners.
- Amend governing documents – Clarify what is covered under the master policy and what falls under individual HO6 policies.
- Improve claims management – Carefully evaluate claim potential to ensure that the Board complies with its fiduciary duties under MCIOA and the governing document and ensure that all available coverages are utilized during the claim process.
- Work with knowledgeable agents – Ensure policies are structured correctly to maximize coverage and minimize costs.
- Work with a public adjuster – Public adjusters represent the Association’s interests only, can ensure that the policy coverage is properly applied and the Association is not short-changed on the claim for repair costs, and can assist with HO6 and Master policy coordination of benefits.
- Adjust renewal timing – Avoid end-of-year renewals (e.g., 12/31 and 1/1 are the worst renewal dates).
Final Thoughts
The Minnesota HOA insurance market is in flux, with high rates, fewer carriers, and stricter policies. HOAs must be proactive in loss control, claims management, and policy structuring to navigate these challenges effectively. As panelists stated, “Insurance adjusters used to be ‘Minnesota nice’—that’s not the case anymore.”