Condo insurance rates – what’s happening?
Condominium insurance continues to climb, and this surge is likely to last through the first two quarters of 2022, a new report from LowestRates.ca says.
The insurance comparison website’s latest “Home Insurance Price Index” took a look at LowestRates.ca data for the second quarter of 2021. While there was not enough data to confirm the impact of the COVID-19 pandemic on home insurance prices in Canada, LowestRates.ca consulted with insurance experts who believe that rising condo insurance premiums are being driven not only by the increase in the volume of claims related to extreme weather events, but also by the surge in building material costs.
Condo insurance prices considerably spiked in the provinces of BC and Alberta, which experienced quarter-over-quarter increases of 22% and 10, respectively. Meanwhile, while Ontario saw a 2% quarter-over-quarter increase in condo insurance costs, it still represented an 8% year-over-year increase.
Although the price increase in condo insurance is partially the result of premiums being long underpriced, industry experts also believe the pandemic has had an effect as well.
Surex.com co-founder and CEO Matt Alston said that carriers have no choice but to increase premiums when their underwriting profits are being challenged by both more expensive building materials and a higher volume of expensive claims related to natural disasters.
“In Alberta, carriers are having an over 100% loss ratio on condos in part due to extreme weather – hail, flooding, fires from BBQs,” said Alston.
The CEO added that in a low-interest-rate environment, carriers are “being forced to make more money on underwriting profit” if they are not seeing significant returns on their investment revenue. But Alston also noted that carriers are not swimming in profit despite condo increases.
Severe weather is driving up insurance costs, and if recent data is any indication, these disasters are becoming more frequent, the report said. Citing data from the Insurance Bureau of Canada (IBC), LowestRates.ca said that in the last 10 years, 10 years, claims costs from severe weather in Canada have increased to $2.1 billion.
Condo insurance carriers are also reporting more claims from inexperienced renovators, LowestRates.ca additionally found.
“One of the reasons for building materials cost increasing is that the supply side was shut down while with people being at home for a year, increased renovations went through the roof,” said Alston.
“Demand was up, supply was down and building went through the roof.
“We were seeing renovations in home without homeowners letting the carrier know, reno fires, people messing with plumbing,” he added.