Hefty car insurance rates take toll on low-income Minnesotans

Minnesotans looking at their homeowner and car insurance statements lately might feel a sense of dread as premiums spike. For low-income vehicle owners, consumer watchdogs highlight how painful the rising costs can be.

Industry data show Minnesota has seen some of the fastest growing premium hikes for both home and car insurance. Analysts say it's due in part to climate change producing heavier storm damage.

Anna Odegaard, coalition director with Minnesotans for Consumer Financial Protection, said that makes it hard for low-income drivers to afford their monthly insurance bill.

"There are socio-economic factors," she said, "like credit score[s], marital status, education level and occupation – often are a much bigger factor in how much you're charged for auto insurance than your driving record."

For example, she said, on average, Minnesotans with lower credit scores pay three times as much for car insurance as someone with excellent credit, even if they're both perfect drivers.

Odegaard urged state lawmakers to take another look at a bill to establish the Minnesota Lifeline Insurance Program, a low-cost alternative for car owners who qualify. The Commerce Department would work with the industry on setting the rates. Opponents warn it could push rates higher for other drivers.

The plan also creates three regions, with backers saying that's another way to make ZIP codes less of a deciding factor when insurance premiums are calculated. A premium charged in one region couldn't be more than 25% higher than that charged in another.

Odegaard said this was crafted with input from the people most affected by expensive auto insurance, including older adults on fixed incomes.

"So often an older Minnesotan sees their income decreases if their spouse passes away," she said, "and because they're suddenly in a different insurance class as a non-married person, they see their rates go up, but their income isn't keeping up."

Other bill supporters such as Mid-Minnesota Legal Aid say unaffordable premiums contribute to more people driving without insurance. It cites estimates that there are nearly 360,000 uninsured licensed drivers in Minnesota.

As for rising costs, the state saw car insurance rates spike by 58% in 2024 and by 20% last year.