Jane Dotson
Strata insurance rates in British Columbia have been skyrocketing, with insurance premiums for condos and townhouses climbing 50 to 300%, and in some cases, nearly 800%. This crisis is impacting up to 10,000 strata corporations and countless homeowners across the province, leaving many worried about their ability to continue owning their homes. The reasons behind this surge are multi-faceted, including rising claim costs, an increase in property values, and a reduced number of insurers, which has resulted in higher insurance premiums for strata and building owners.
| Characteristics | Values |
|---|---|
| Rate of increase | 50 to 300% |
| Highest increase | 780% |
| Number of affected corporations | 8,000 to 10,000 |
| Previous deductible range | $5,000 to $25,000 |
| New deductible range | $100,000 to $300,000 |
| Number of insurers | 3 |
| Cause of increase | rising claim costs, reduced number of insurers, rising costs for insurance companies |
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What You'll Learn
- Deductibles are increasing from $25,000 to as high as $300,000
- Premiums have tripled, and deductibles have increased from $5,000-$25,000 to $100,000-$200,000
- Rising claim costs, especially for water damage
- Fewer insurance companies are offering strata coverage
- Reinsurers are demanding higher rates from insurers
Deductibles are increasing from $25,000 to as high as $300,000
The rise in strata insurance in British Columbia is causing concern for many homeowners, with rates climbing between 50% and 300% and, in some cases, nearly 800%. This issue is affecting both homeowners and businesses.
One of the key factors contributing to the increase in strata insurance premiums is the rise in deductibles. Typically, deductibles for strata insurance policies range from $5,000 to $25,000. However, in recent times, these deductibles have seen a significant surge, with some increasing to $100,000-$200,000, and even reaching $300,000 in certain instances.
The impact of these soaring deductibles is felt by homeowners, as many personal home insurance policies have a coverage limit of $150,000. Consequently, if the deductible surpasses this insured amount, the homeowner becomes responsible for covering the difference out of their own pocket. This can place a substantial financial burden on the homeowner, potentially forcing them to sell their home, arrange a payment plan, or seek refinancing options.
The situation is further exacerbated by the fact that some strata corporations may opt to impose a special levy on all unit owners to cover the cost of the deductible if they lack sufficient funds in their contingency reserves. This means that even homeowners with adequate insurance coverage may still face additional expenses to contribute to the deductible payment.
The challenges presented by the increasing deductibles in strata insurance have prompted concerns from homeowners in British Columbia, with some anticipating that the government will intervene to implement a cap on deductibles, similar to the measures taken in other provinces.
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Premiums have tripled, and deductibles have increased from $5,000-$25,000 to $100,000-$200,000
Strata insurance premiums in British Columbia have been increasing, with some condo owners in Abbotsford seeing a 780% increase in one year, going from $66,000 in 2019 to $588,000 in 2020. This issue is not isolated, as up to an estimated 10,000 strata corporations across the province are expected to be impacted by these insurance rate increases.
The increases in strata insurance premiums are a result of rising claim costs, particularly concerning water damage, which has now surpassed fire as the leading cause of insurance claims in Canada. In addition, there has been a reduced number of insurers in the market, with some insurance companies backing out of multi-family policies, citing unprofitability. This decrease in competition has allowed remaining insurers to demand higher rates.
As a result of these factors, premiums have tripled, and deductibles have increased from $5,000-$25,000 to $100,000-$200,000. This significant increase in deductibles has led to concerns about insufficient coverage, as many home insurers will not insure over $150,000. If a deductible exceeds this amount, the homeowner may be responsible for the difference, potentially resulting in financial strain or the need to sell their home.
The government of British Columbia has recognized the issue and is working with the BC Chamber network, the insurance industry, and strata associations to find solutions and ease the pressure on strata property owners.
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Rising claim costs, especially for water damage
Strata insurance rates in British Columbia have been increasing, with some condo owners in Abbotsford seeing their rates increase by 780% in one year. This is due to a variety of complex factors, including rising claim costs, especially for water damage. Water damage claims have increased in severity and frequency, surpassing fire as the leading cause of insurance claims in Canada. This has resulted in insurance companies backing out of multi-family policies, deeming them unprofitable.
Water damage claims are often related to sewer backups, which are covered by strata insurance. Sewer backup claims can be costly, as they often require extensive repairs and replacements to affected areas and items. In addition to the direct costs of repairing and replacing damaged property, water damage can also lead to secondary issues such as mould and mildew, which can further increase the cost of claims.
The increase in water damage claims can be attributed to several factors. One factor is the aging infrastructure of many strata buildings, which can lead to leaks and burst pipes. Another factor is the increased frequency of extreme weather events, such as heavy rainfall and flooding, which can cause water intrusion and damage to buildings. Additionally, some strata owners may not be properly maintaining their units, which can contribute to water damage issues.
To mitigate the impact of rising water damage claims, strata corporations and owners should take steps to prevent water damage and mitigate its effects. This includes regularly maintaining and inspecting buildings, fixing leaks and other water issues promptly, and ensuring proper drainage systems are in place. Strata corporations should also review their insurance policies to ensure they have adequate coverage for water damage and sewer backup claims. This may include increasing their deductible or obtaining additional coverage for water-related incidents.
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Fewer insurance companies are offering strata coverage
Strata insurance rates in British Columbia have been increasing dramatically, with some seeing hikes of up to 800%. This is due to a variety of factors, including an increase in property values, rising claim costs, and a reduced number of insurers.
One of the main issues contributing to the increase in strata insurance rates is the decreasing number of insurance companies offering strata coverage. This reduction in insurers is causing a significant impact on the market. With fewer companies providing strata insurance, the remaining insurers are under increased pressure to meet the demand for coverage. This has resulted in higher insurance premiums for strata and building owners.
There are a number of reasons why insurance companies are backing out of providing strata coverage. One key factor is the profitability of the business. In recent years, strata properties have experienced a high frequency of water damage claims, which have become increasingly costly for insurers to cover. As a result, insurance companies are finding it no longer profitable to insure multi-family homes and are instead choosing to focus on other areas of insurance.
The reduced number of insurers has also led to challenges for homeowners in obtaining adequate coverage. With fewer companies offering strata insurance, there is limited competition in the market, allowing insurers to demand higher rates. Homeowners are facing difficulties in finding insurers that will cover high deductibles, which are becoming increasingly common in strata insurance policies. This has resulted in homeowners being responsible for covering the difference between their insurance coverage and the deductible, which can amount to significant out-of-pocket expenses.
The shortage of insurers offering strata coverage has contributed to the overall increase in strata insurance rates in British Columbia. This, coupled with rising claim costs and higher property values, has resulted in a challenging market for both homeowners and insurance providers.
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Reinsurers are demanding higher rates from insurers
Strata insurance rates in British Columbia have been increasing dramatically, with some owners experiencing hikes of up to 800%. This crisis has been attributed to several factors, including rising claim costs, an increase in property values, and a reduced number of insurers.
One of the primary factors contributing to the increase in strata insurance rates is the demand from reinsurers for higher rates from insurers. Reinsurers, also known as insurance companies for insurers, are facing rising claim costs themselves, particularly regarding sewer backup and water damage claims. Water damage has now surpassed fire as the leading cause of insurance claims in Canada, and reinsurers are passing on the increased costs to the insurers they provide coverage to.
The reduced number of insurers offering coverage for strata properties further exacerbates the situation. With fewer companies in the market, the remaining insurers face increased pressure and are more likely to yield to the demands of reinsurers for higher rates. This results in higher insurance premiums for strata and building owners, as these increased costs are passed on to them.
The impact of these rate increases is significant, affecting up to an estimated 10,000 strata corporations and countless homeowners across the province. The skyrocketing deductibles, which have risen from $25,000 to as high as $300,000 in some cases, have left many homeowners unprotected or struggling to find affordable coverage.
The crisis has prompted the British Columbia government to take action, with the BC Financial Services Authority (BCSFA) researching the strata insurance market and publishing reports to inform the government's response. Additionally, the government passed legislation, Bill 14 – 2020, which includes amendments to the Strata Property Act and the Financial Institutions Act, demonstrating their efforts to address the challenges in the strata insurance market.
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Frequently asked questions
Strata insurance rates are rising in BC due to an increase in property values, a reduced number of insurers, rising costs for insurance companies, and an increase in claims, particularly those related to water damage.
The increase in strata insurance rates in BC has resulted in higher monthly premiums for owners. Some owners may struggle to afford the new rates and there may be a risk of them having to sell their homes or refinance.
Strata insurance policies in BC typically include coverage for the building's deductible in the event of a major claim and liability insurance for damages that originate in the unit and extend to common areas or other units.
Strata insurance is a commercial property insurance policy that covers the shared areas and systems of a strata building. Homeowner's insurance is an additional policy that individual unit owners purchase to insure their personal property and any upgrades they have made.
To address the increase in strata insurance rates in BC, the government and industry professionals are working together to find solutions. Individuals can also take steps to ensure they have adequate coverage, such as discussing their needs with an insurance broker and considering the cost of deductibles.
