Journey from Oz: The Real Impact of Tornadoes on Insurance in the Midwest

“Toto, I’ve a feeling we’re not in Kansas anymore” is one of the most popular quotes from The Wizard of Oz. Much like Dorothy’s unexpected journey, where a sudden tornado whisked her away from the familiar comforts of her Kansas home to the unpredictable land of Oz, Midwesterners often find themselves at the mercy of nature’s wrath, particularly with severe storms spawning fierce and destructive tornadoes. 

Last year (2024) was one of the worst on record for severe storms causing tornadic activity and the aftermath (derechos, flooding, hail, etc.) in the heartland, which includes Kansas, Iowa, Nebraska, Minnesota, Missouri, Michigan, Wisconsin, South Dakota, and North Dakota.

According to recent data, at least 1,735 tornadoes were confirmed in the U.S. in 2024, with the number of strong tornadoes (EF2 or higher) being the highest in over a decade. These types of severe weather events are on the rise. For example, from 1980 to 2024, Missouri experienced 120 severe weather events with losses exceeding $1 billion. The number of catastrophic events has increased from 2.7 to 8.2 per year in Missouri alone. Some reports say last year’s devastating weather events were the most expensive—ever—in the Midwest, contributing to rising insurance rates across most Midwestern states.

Spring weather came in like a lion
(and not the cowardly one)

Most spring seasons in the Midwest are typically active with severe thunderstorms and tornadoes, but this past spring was the most active period in 74 years. Here is a summary of these weather events and their impact across the heartland:

April 26-28: An outbreak produced more than 140 tornadoes across multiple states, including Nebraska, Iowa, Kansas, and Missouri, causing widespread damage to homes, businesses, vehicles, agriculture, and other infrastructure.

• Eastern Nebraska was particularly impacted by numerous strong tornadoes. One storm spawned a mile-wide tornado that heavily damaged the towns of Elkhorn, Bennington, and Blair on the outskirts of Omaha. Near downtown Omaha, another EF-3 touched down at Eppley Airfield, destroying several hangars and airplanes.
• Several tornadoes also touched down near Topeka, Kansas, while an EF-3 tornado caused extensive damage to the town of Westmoreland.

May 18-22: Severe storms caused widespread impacts from dozens of tornadoes, severe hail, and high winds. The states most affected included Nebraska, Kansas, Iowa, and Wisconsin, as each experienced significant damage to homes, vehicles, businesses, agriculture, and other infrastructure.

• Iowa experienced an EF-4 tornado on May 21 that cut a 44-mile path across southeast Iowa, with peak wind speeds reaching 175 to 185 mph, heavily damaging the town of Greenfield and causing an estimated $4.9 billion in damages.

June 12-14: Damaging hail, high winds, and tornadoes impacted Missouri, Iowa, Kansas, Nebraska, and Minnesota. Central and northern Minnesota experienced damage from quarter- to golf-ball-sized hail, while the Omaha metro region in Nebraska experienced up to baseball-sized hail damaging homes, vehicles, and businesses. Additionally, there were two dozen tornadoes and hundreds of wind damage reports across these states.

June 16-23: Heavy rainfall created destructive flood conditions that damaged thousands of homes, vehicles, businesses, and other infrastructure across a multi-state region.

• Across southern Minnesota and northwest Iowa, June precipitation totaled 10 to 15 inches. This rainfall caused widespread catastrophic flooding that breached dams and levees, closed interstate highways, forced evacuations, and required numerous water rescues.
• Heavy rainfall also inundated crops in parts of Minnesota, South Dakota, Iowa, Wisconsin, and Michigan.

June 24-26: High winds, hail, and tornadoes impacted Nebraska and Iowa. On June 25, an EF-3 tornado hit Whitman, Nebraska, and the surrounding area, marking the first tornado to impact this area in more than 70 years.

Whirlwind of escalating insurance rates

Over the past five years, Midwesterners have faced significant increases in home and auto insurance rates due to severe storms. 

Auto insurance:

Premium insurance rates across the U.S. increased by 14% in 2024. In the Midwest, Minnesota saw the largest rate hike at 19.8%. Projected rate increases for 2025 are expected to average 5% nationwide.

Home insurance:

Residents have seen a cumulative increase of 31% in home insurance rates since 2019, with Nebraska experiencing the largest increase at 59.9% over five years.

These rate increases can be attributed to heavy storm activity and the following factors:

Changing risk landscape:

Climate change is leading to more frequent and severe weather events, causing insurers to pay out larger claims for property damage caused by tornadoes, derechos, storms, floods, and other natural disasters. This compels insurance companies to adjust their rates and underwriting criteria to manage the increased risk.

Inflation and cost of repairs:

Inflation, along with advancements in products and technology, has led to more expensive repairs for vehicles and homes. Today’s vehicles feature more sophisticated safety systems and electronics, which can be more costly to repair or replace. Similarly, homes have more electronic and smart devices and are using more resilient materials, leading homeowners to invest more in their properties, resulting in higher repair and replacement costs for insurers.

Fraudulent claims:

Insurance fraud costs insurers billions of dollars each year. As fraud becomes more prevalent, insurance companies raise rates to offset losses, unfortunately passing the burden onto policyholders.

Reduced competition:

Providing insurance in states with high claims can be cost-prohibitive for carriers, leading some to exit the market. The departure of these carriers reduces competition, driving up insurance costs.

Calming the storm

In response to the instability of insurance rates throughout the region, state officials and the insurance industry are taking several steps to assist residents:

01. State initiatives: Midwestern state officials are acknowledging the challenges posed by extreme weather events and are working on initiatives to bolster the region’s resilience and disaster preparedness, as well as to create funds to assist homeowners in their recovery.

02. Engagement with insurers: Various state insurance divisions and commissioners are actively engaging with insurers to understand their concerns and explore potential solutions to keep them in the market.

03. Industry advocacy: The insurance industry advocates for a balanced regulatory environment in their underwriting practices while ensuring fair and affordable coverage for homeowners. Discussions are also underway to create incentives for homeowners to invest in disaster-resistant improvements.

04. Attracting new insurance providers: Many Midwestern states are working to attract new insurers by promoting their state’s strengths and opportunities.

Don’t rely on the wizard: Prepare for nature’s wrath with these tips

Just as Dorothy and Toto were resilient and found their way home, residents of the Midwest should remain resilient, understand their risks, and take steps to protect themselves, their families, and their property in the future. Here are some basic tips for tornadoes or severe storms:

• Designate a safe place, ideally a basement or storm shelter. If those aren’t available, an alternative is an interior room, like a closet, with no windows or exterior openings (doors or windows).
• Upgrade your home to be storm ready. Consider installing a wind-rated garage door and impact-rated windows and doors.
• Have a fully charged portable power bank for electronic devices to stay updated. If possible, install a backup generator paired with a dedicated fuel source.
• Install lightning rods. Find a certified installer at lightning.org and check for proper grounding every three to five years. 
• Consider replacing your roof with more resilient materials. Reach out to your insurance advisor for specific roofing recommendations in your state.
• Bring in and secure outdoor items such as patio furniture and toys. Moveable gas and charcoal grills or smokers should be secured or stored in the garage for safety if winds pick up during a storm. 
• Park vehicles in the garage or under carports to prevent hail and wind damage.
• Trim trees by cutting back branches five to ten feet to prevent them from breaking and hitting your home.
• Keep gutters clear of debris so rainwater can flow freely and away from your home.  

While tornadoes and severe storms frequently affect the Midwest, residents are also at risk for winter storms, wildfires, flooding, and severe drought.
 

There’s no place like home: Seek guidance from an experienced advisor

An expert risk and insurance advisor can help assess your risks of natural disasters in your area, inform you of regulations and initiatives in your state, and determine what home resiliency measures you can take to mitigate those risks.