Will Strata Deductibles Rise Again in 2023?
Will Strata Deductibles Rise Again in 2023?
For that last couple of years or so now, a hot button topic for many BC residents remains the rise in strata insurance fees.In previous years, condos and townhome owners have especially bared witnessed to their fees steadily increasing, with home insurance costs overall continuing to creep up.
The reality is that there are now over 30,000 strata corporations spread across BC, with nearly 1.5 million residents in the Metro Vancouver area alone.To shed some more light on what 2023 will bring, let’s take a closer look at some of the surrounding issues impacting strata unit owners in BC.
Strata Construction Materials
According to Canadian Underwriter, the type of materials that are used in strata builds have played a major role in the higher costs of insurance premiums.
As such, wood frames versus concrete are typically used in BC construction, and the high price of lumber has driven prices upwards. So much so that, Opta Information Intelligence pointed to a 400% increase in the cost of lumber between 2019 and mid-2021.
Weather-Related Risks
Ranging from fire to water damage, strata deductibles have been on the rise due to harmful weather conditions across the region, which includes significant fire and water damages.
Earthquakes across BC have also let to expensive re-builds, lending themselves to higher premiums.
Building and Repairs
With construction materials more in demand and costing more on the whole, rebuilding and repair costs could still bring higher rates, in terms of the amount of insurance coverage required to offset the costs the BC strata markets will face.
Higher Claims
The reality is that with higher deductibles coming out of condo corporation budgets, premiums have had to also increase. As a result, many strata groups have acknowledged the need to shift towards more prevention methods. To help offset these both present a greater challenges when it comes to increased damage and in turn, higher claims.
Strata Outlook
Thankfully, there are signs that do have market experts pointing towards more stable strata fees in the new year.
With positive steps being taken toward preventative measures, this may also point towards a more favourable home insurance market, including the outlook for strata corps. in 2023.
Some Promising Solutions
In a major attempt to improve strata insurance fees, the Insurance Brokers Association of BC (IBABC) has made some recommendations that they feel will help to clarify any ‘grey’ areas when it comes to differentiating between the ‘insurance duties’ of unit owners and insurance corporation.
For starters, a $50 000 cap on loss assessment has been proposed, since as it stands, unit owners can be left with giant insurance bills that pose a major risk to their financial stability.
This is ultimately, one way that strata corps. feel they can lessen insurance deductibles moving forward.
The IBABC also suggests that all parties would benefit from a more comprehensive ‘standard unit’ definition within the BC Strata Property Act. The goal being that this would ensure units are being kept up to code, in terms of construction criteria, i.e. the walls, subfloor, electrical, plumbing, ceilings, etc.
Again, the idea being that this will help to distinguish between what is the responsibility of the owner and what is the responsibility the corporation when it comes to insurance payments.
IBABC goes on to add that these steps could mean that ‘millions of strata owners’ would be protected from the risk of losing their homes, because they simply can’t afford the rebuild or repair costs.
With these refinements on the horizon, it would seem there is hope for lower strata deductibles in the future – not a rise in high rises!
At Leaders Insurance, our brokers are here to assist you with finding ways to mange you home insurance. We look forward to continuing to support you in 2023 with all of your insurance goals.
Why Insurance Rates Go Up
Why Insurance Rates are Rising
As reported by Canadian Underwriter at the beginning of 2022, home insurance policyholders were expecting an average 5% rate increase in 2022.The average cost for home insurance in Ontario in 2021 was $1,342, per RatesDotCa. A 5% increase would translate into a rise of $67 per year, making the average cost $1,409 annually.
The main reasons for the 2022 increases come down to several things, including renovations, rebuilds, and climate change. Although RatesDotCa and the Insurance Bureau of Canada issue a caveat that home insurance rates are extremely difficult to predict. So, what is causing these 3 drivers to create a rise in home insurance?
Climate Change
Extreme weather caused by climate change has resulted in millions worth of insured damages, pushing up premiums. Many provinces saw extreme weather hit them and this caused a major rise in claims.
Although 2021 marked a year of many catastrophic weather events, two notable ones include the tornadoes that tore through Barrie, Ont., in July 2021, costing $100 million in insured losses. Also. flooding in B.C. in November 2021 cost more than $450 million, per IBC’s estimates.
“There was significant severe weather across the country last year and, in fact, it’s over $2 billion dollars in insured losses,” says Rob de Pruis, director of consumer and industry relations at Insurance Bureau of Canada (IBC). “That includes all kinds of events, from tornadoes in Ontario, flooding and wildfires in BC, a big hailstorm in Alberta, and another hurricane event on the east coast, as well as many others across the country.”
Renovations
With people bunkered down during the pandemic and not travelling, insurers note that more people were staying home and making improvements to their home.
However, home renovations increase the cost of rebuilding, which in turn drives premiums up. According to Statistics Canada, Canadians across the country applied for 212,523 residential alteration and improvements permits from January to November 2021.
If your replacement cost is increasing, your premiums just fall in line with replacement costs.
Rebuilds
Pandemic-induced supply chain disruptions and changes in consumer purchasing behaviour have led to rises in building material costs such as lumber, RatesDotCa said, which in turn drives up insurance rates.
Insurance rebuilds are often more expensive than the construction costs arranged through private contractors, since insurers must rebuild quickly to move the homeowner back into their home. Depending on the policy, insurers may also be paying homeowners for accommodation costs during the rebuild.
De Pruis lists inflation costs of materials, the age of your home, your postal code, and fluctuations in crime rates as other factors that affect home insurance premiums.
Insurers issue a note of caution about predicting home insurance rates.
As the article notes, since home insurance pricing is unregulated in Canada, it’s difficult to determine exactly how much home insurance premiums will rise by, but premiums are definitely on the way up.
Canadian Underwriter also reported that it is hard to predict rates. “It’s almost impossible to predict future home insurance rates, because there’s so many factors and influencing and pressures that are on premiums, and they vary across the country as well,” the article noted.
How to Save Money
Some insurers offer discounts that can help bring down premium prices, including discounts for properly installed and monitored security systems, fire alarms and claims-free discounts. Also, insurers can run a soft credit check that may lead to lower premium prices if a homeowner has good credit. Another option for people is to Increase their deductible. Normally, the higher your deductible, the lower your insurance premium would be. Policyholders should choose a deductible that they are able to pay in case of an insurance emergency. With the rising cost of living, including insurance, it’s important for us all to spot ways to save money. One way individuals and companies can save money on insurance is through group discounts. Some companies and professional organizations offer group rates for insurance. This is true if you are an alumni of a specific university or part of an association. Consumers can save by bundling home and auto insurance together with the same provider. The article highlighted that it’s important for policyholders and insurance representatives to connect and review their policy on an annual basis.
At Leaders, we pride ourselves on the relationships we have with clients. We want to help you find the right insurance for a competitive price. We always try our best to ensure that you have the right level of protection for your needs, and we survey a range of providers to find you the best rate. Contact us today to learn more and for us to provide you with a free quote and consultation for your insurance.