For how long will condo insurance rates continue to climb?

Rising condo insurance premiums will continue at least through the first two quarters of 2022, according to LowestRates.ca’s latest Home Insurance Price Index.

Condo insurance premiums are continuing to rise in Canada, sustaining a years-long increase, the rate comparison site said in a blog Wednesday. Condo rates are skyrocketing in British Columbia and Alberta in particular, with quarter-over-quarter increases of 22% and 10%, respectively.

LowestRates.ca’s latest home insurance price index examined data for the second quarter of 2021.

“While there isn’t enough data to confirm specific effects the pandemic has had on home insurance prices in Canada, we spoke to insurance experts who believe that the recent increase in the cost of building materials is driving up condo insurance premiums across the country,” the blog said. “Experts believe that the combined impacts of more expensive building materials amid a higher volume of expensive claims from extreme weather events help explain the increases.

“Anecdotally, experts report that carriers are receiving a higher volume of claims due to DIY [do-it-yourself] renovations after so many Canadians have started updating their properties during the pandemic.”

Canadian Underwriter has heard the same thing. In late spring, Greg McCutcheon, president of Opta Information Intelligence, said that supply shortages and the skyrocketing price of lumber in particular contributed to raise property reconstruction costs in Canada. At the time, overall lumber price increases were approaching 400% from 2019.

And more people are staying at home due to the pandemic, so more are renovating their homes. Nearly one in every 20 homes inspected by Opta Precise Services had significant renovations underway and included a Course of Construction (COC) supplement.

According to LowestRates.ca, condo insurance rates in B.C. increased 22% in Q2 2021 from the previous quarter and 34% from a year prior. In Alberta, the quarter-over-quarter increase was 10% and 23% from Q2 2020.

Ontario’s rates only increased 2% quarter-over-quarter, but 8% compared to Q2 2020.

While it remains true that the price increase in Canada’s condo market is the result, in part, of premiums that had long been underpriced, the effects of the pandemic are also driving up prices, LowestRates.ca said in the blog.

Matt Alston, CEO and co-founder of Magrath, Alta.-based Surex.com, said that carriers have no choice but to increase premiums when their underwriting profits are challenged by more expensive building materials and a higher volume of expensive claims from extreme weather events that are becoming more common.

“In Alberta, carriers are having an over 100% loss ratio on condos in part due to extreme weather – hail, flooding, fires from BBQs,” Alston said. “It feels like I hear about a condo fire in Lethbridge every year.”

Alston expects condo insurance premiums to stabilize in the next 12-24 months. “Do I have a magic ball? No, but when I look to other industries, building costs are starting to go down…”

Rob de Pruis, director consumer and industry relations at Insurance Bureau of Canada, also pointed to increasing claims costs from severe weather. As well, he anticipates that when more data is available, it’s likely that carriers will be affected by a higher volume of claims resulting from homeowners renovating their homes.

“Anecdotally, at our consumer information centre, we’ve been getting more calls from people with claims for kitchen fires,” de Prius says. “More of us are at home, we can get caught up on a call and forget about what’s on the stove.”

Alston is optimistic that the years-long upward climb of condo insurance premiums will cease toward the end of 2022. But he says that carriers will likely be navigating the effects of the pandemic for some time, trying to gauge how the risk profile of some homeowners may have changed.

 

Feature image by iStock.com/crazycroat