Part 1 of a 2-Part Series
A 3-year old, 181-unit strata complex in the Metro Vancouver area had their insurance premium increase 282%.
Are you a condo owner in Metro Vancouver? Or maybe a property manager of a condo building?
Did you know that strata insurance rates are rising? And not just rising but RISING! Countless headlines have hit the news recently:
“BC Condo Owners Brace for Sticker Shock”, “BC Strata’s Plea After Insurance Bill with 780% Hike”
There are over 30,000 strata corporations in British Columbia and although a 780% increase is an extreme case, Tony Gioventu from the Condominium Home Owners Association of British Columbia states that increases of 50-300% are being seen, along with deductible increases. Gioventu expects these increases to continue through 2020.
Why are Strata Insurance Premiums Increasing?
The Insurance Brokers Association of BC indicates that there are a few reasons why strata insurance premiums are increasing in British Columbia:
Rebuild Costs – The cost to rebuild a strata building is much higher today than it was a few years ago. It is now more expensive to cover the rebuild cost, causing higher insurance premiums and deductibles.
Suppressed Premiums – Insurance premiums follow market trends. When there was a high growth in the condo market, this caused high competition and normal premium rates were suppressed. Now, the market is changing, along with the premiums.
An increase in catastrophic events – A catastrophic event will cause losses of more than $25 million dollars and these events are increasing worldwide. In Canada alone, there was a 60% increase from 2017 to 2018 of underwriting losses from natural catastrophic events, amounting to approximately $2 billion dollars, according to the Insurance Bureau of Canada. This is one of the main reasons for the premium increases seen nationwide.
Insurance companies rely on reinsurance companies to maintain reserves for catastrophic losses; this helps keep premiums lower but when catastrophic events happen worldwide, that will affect local insurance premiums. And catastrophic events are on the rise so many smaller insurance companies are choosing to not insure strata building properties. This in turn, means less options for strata corporations and increased premiums due to the decrease of competition in the industry.
Claims History – In addition to the market, catastrophic events and the overall risk of this sector, each strata building’s actions will also affect what their insurance premiums will be. Is your strata building keeping up-to-date on maintenance requirements? What bylaws do they have in place to mitigate insurance claims? How many claims have been made on the strata insurance policy? Is your strata hiring reliable, insured contractors?
How Does Strata Insurance Increases Affect Me?
An increase in an insurance premium will somehow need to be covered. This may result in all condo owners footing the bill for a portion of it. It may also result in an increase in your own personal property insurance because you have a higher deductible portion to cover now. Worst case scenario, it could be a personal financial disaster, depending on your situation.
One Slip-And-Fall Claim Can Affect Your Strata Insurance Situation
You may have read recent articles about what to do if your strata building has received a significant increase in its insurance premium and/or deductible. But what if you have not received an increase yet? You want to be proactive and not reactive. Don’t be a strata building that waits for something to happen and then reacts or you may end up being one of those strata buildings that are currently in the news.
Did you know that one slip and fall injury on your property can affect your premium going forward? Just one slip and fall claim. Metro Vancouver’s mid-January snowstorm had strata properties struggling mid-snowstorm to find available snow removal companies to keep their properties cleared and safe. Not being prepared may have thrown some of these strata buildings in harm’s way of being hit with a significant insurance premium increase.
What Can Strata’s Do to Mitigate Risk?
What can you do to make sure that your strata building is doing their due diligence in keeping you best protected against preventable risks, and in turn, increased insurance premiums? And what seemingly unrelated industry that is also facing recent insurance premium increases can directly affect your strata claims history and your future insurance premiums?