Condo owners faced with skyrocketing insurance premiums for their buildings and massive deductible costs are stuck in an “unhealthy” insurance market that is likely to get worse, a report by a government oversight agency says.
The interim report by the BC Financial Services Authority found condo properties in the Lower Mainland have seen an average of 50-per-cent increases in insurance premiums over the past year, about 40 per cent in British Columbia over all. Deductibles have risen to more than $100,000 in many cases.
But the authority, which has collected data from the 6,000 strata properties since the beginning of the year, didn’t have any recommendations for immediate relief or even suggestions for long-term solutions, saying it will now start conversations with stakeholders to figure that out.
Rising insurance costs for condos, which have also hit Alberta and Ontario, are a problem that everyone from condo owners to brokers to the real-estate industry is clamouring to solve. In B.C., there have been warnings that the situation could cause a collapse in the province’s condo market if nothing changes.
The BCFSA report indicated one big part of the problem is with strata corporations themselves.
“Insurers are incurring losses mostly from minor claims (particularly those resulting from water damage) due to poor building maintenance practices and initial construction quality issues,” said the agency’s letter to Finance Minister Carole James, which was attached to the report. It also said corporations in newer buildings were filing insurance claims rather than going to their new-home warranties for compensation.
The agency’s directors said solutions will be complicated and that every party involved has a part to play in getting the market back to normal.
“We believe bringing this market back to a healthy state is achievable,” vice-president Frank Chong said in a news conference Tuesday.
However, the executive director of the organization that represents many of the province’s 32,000 strata corporations said the report was unhelpful. Tony Gioventu of the Condominium Home Owners Association of BC said the report did little more than acknowledge the reality that everyone has been talking about for months – premiums and deductibles are rising by stunning amounts.
“They basically just said what the insurance industry has told them.”
But the report did not address the high commissions that insurance brokers are charging, the lack of competition in the insurance market, and the lack of transparency when it comes to how insurance costs are arrived at, he said.
As well, by including in the statistics strata corporations that are small projects, the report painted a misleading picture of how bad the situation is, he said.
Mr. Gioventu said the number of units affected by stratospheric insurance-premium and deductible increases overall is much greater than the percentages the authority cited in its report, because it’s the larger buildings with more units that have had the biggest problems.
“It’s overwhelmingly the number with 50 units or more that have had significant increases.”
Rob de Pruis, a spokesman for the Insurance Industry of Canada, said the report is an accurate reflection of what’s going on with the market. He said insurers are facing extraordinary cost pressures and the increasing costs of premiums are necessary to keep the market functioning.
That’s the case for Monica Drake, whose 189-condo building on Cambie Street saw its insurance premium rise from $127,000 last year to $306,000 this year. As well, the deductible for individual strata owners rose to $250,000, forcing the owners to try to get a separate insurance policy just to cover the deductible.
“It puts the homeowners in a terrible situation,” Ms. Drake said.
She found the financial-services authority’s report a comfort, in that it at least acknowledged the scope of the problem.
And she agreed that some of the problem stems from some stratas not managing their properties well. But she didn’t understand why there seemed to be no allowances made for stratas like hers that do.
“We have a very active plan for maintenance and renewal.”
Like Mr. Gioventu, she said the idea of requiring all homeowners to have personal insurance as well is probably a good idea – though with a deductible that’s reasonable – so that the cost of repairs is spread out to different companies.
Special to The Globe and Mail
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