Insurance Companies Crushing Canada’s Renters and Owners
Insurance Companies Crushing Canada’s Renters and Owners

Watch out if you are a homeowner, condo owner, renter or Rental Housing Provider, a shock is coming your way via the dramatic Property Insurance increases and policy changes across the country.

During a period of unaffordable housing, some are calling an affordability crisis, owners and renters are about to discover that it is about to get MUCH more expensive and risky to own/live in a multi-family property.

Densification through multi-family properties is not only going to help with solving the affordability ‘crisis’ but it is also a much more environmentally friendly dwelling type. Positive momentum in that part of the market has begun after a LOT of pressure and assistance from industry, governments and a shift in lifestyle choice.

HOWEVER, while this momentum felt like it would eventually lead to being a partial solution to the coming increase in housing demand, the property insurance industry has begun to undermine this solution through DRAMATIC insurance cost increases, huge deductible increases and new demands on owners and eventually renters. in fact, some condo buildings have seen their building rates rise nearly 700% over previous years with large increases in deductibles for any instances.

These costs and policy changes will undo ANY of the positive momentum that so many have worked hard to start.

With the insurance industry even stating that developers need to make better choices of WHERE to build in order to reduce their insurance costs. Completely undermining city and provincial zoning decisions. Not to mention that cost of land, availability, demand and location play a HUGE role in where properties are built.

In addition, all cities and provinces, especially those that are being progressive on taller multi-story wood-framed buildings as an affordable and environmentally-aware building solution, should pay close attention to the insurance industry’s comments on “Wood Frame Building” comments. This insurance issue could quickly put a lid on any progress on that solution as well.

Now imagine the impact on rental and ownership costs as property operations costs skyrocket. the negative fallout will be strong over the coming years, here are just 7 of the dozens of issues these insurance changes in cost and policy wording will have:

  1. Fewer affordable rental properties being built. Further reducing supply below demand
  2. Fewer property owners feeling inclined to rent out their property. Reducing supply below demand
  3. Rental increases being much above inflation, especially on turn-over.
  4. Renter insurance costs jumping dramatically as the renter-insurance terms will now have to cover the HUGE deductibles that are being pushed onto condo corporations and property owners
  5. Fewer dollars available for building maintenance and repair, leading to less desirable living conditions for renters and owners
  6. Large ‘cash-calls’ on those who own and live in condo buildings.
  7. These rates will also eventually hit government-owned ‘assisted living’ and ‘affordable’ housing projects which of course will make them less desirable to build and operate and thus increase government collected taxes to pay for these increases.

The List goes on and on. I guess the one silver-lining strategy is if one owns insurance company stocks as their dividends should be protected. <yes, a touch of sarcasm>.

To get an insight into some of the dozens and dozens of stories already occurring, as well as some of the justifications that are coming out of the insurance industry, here are a few stories to read and react to:

#1 New rules mean condo owners could be on the hook for $50,000 in deductible costs

#2 Insurance skyrockets 780% for Abbotsford condo owners

#3 Insurance premiums jump as much as 700% at some condo buildings and still rising

The following is an excerpt from World Insurance News

Condo insurance rates will continue to rise in 2020 as the hardening of the commercial market continues, insurance professionals say.

“I’m concerned about the condo insurance market and the hardening we’re seeing there. We’re doing a lot with brokers and stakeholders to try to come up with outside of the box solutions,” said Celyeste Power, VP West of IBC.

“We’re going to be sending in a risk manager in 2020 to try to help these condos that are having difficulty to try to find their way back to a sustainable premium.”

It is difficult to pinpoint exactly why condo insurance rates have risen so quickly and dramatically, but several issues seem to be contributing.

”We’ve seen high loss ratios in this market segment, so that’s one challenge. We’ve seen an increase in severe weather from coast to coast to coast — that’s causing further challenges. And we’ve also got condo corporations that have got a history of claims and they’re likely seeing a change in their premium to reflect that,” said Aaron Sutherland, VP Pacific of IBC.

There has also been a reduction of capacity from insurers in the commercial market, including in condo insurance. “One insurance market has left Alberta, and they were undercutting on price quite substantially over the years. So other companies are somewhat unwilling to pick that up, because it’s quite expensive,” said George Hodgson, CEO of the Insurance Brokers Association of Alberta.

Mr. Sutherland agrees that prices are being affected by high claims and maintenance issues. “Condos and stratas that have a history of claims or of maintenance issues really need to work with their insurer to find ways to ensure they’re getting the most affordable product available on the marketplace,” he said.

Another way to keep rates down will have to be mitigation, said Ms. Power.

She pointed out that building materials and where condos are built both affect insurance prices. For example, some large condo buildings in Alberta are built with wooden frames, which are going to be higher risk buildings to insure, she said.

Making better choices in the future about where to build new buildings could also reduce insurance costs.

“Certainly we can make better decisions now, because we have flood mapping. We need to get that out to people and municipalities. People need to understand the risks they’re taking and it will have an impact on insurance,” said Ms. Power.

* * *

Whatever the justifications, whether real or imaginary, the result is the same. More expensive housing for renters and owners across Canada. EXACTLY when industry and government and advocates are all focussing on finding a way to do the exact opposite.

The time to get your voice heard is yesterday – but just as effective is to be heard today by your MP, MLA, Mayor, City Council, Insurance company representative, housing advocates et al. If this doesn’t become a REAL issue that remains on the radar, the result will NOT be pretty for Canadians across this great country.

Insurance Companies Crushing Canada’s Renters and Owners was last modified: February 18th, 2020 by Don R. Campbell
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