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home insurance

Every April, it's the same old song.

I call it The Home Insurer's Blues, and I hear it when I telephone the insurance company covering our house to question the year's annual premium increase.

You probably know yourself how this tune goes: Bad weather and rising costs cut into our profits. So we're charging you more, from your foundation to your soffits .

Inflation has averaged just under 2 per cent over the past five years, but the average annual increase in our home insurance bill was 10.2 per cent. I live in a four-bedroom home in the suburbs of Ottawa with my wife, two boys, a dog and cat. We think it's a pretty nice house, but the Taj Mahal it's not.


The problem isn't just that my insurer is raising its rates. It's that all companies are doing it to one extent or another, and it's near impossible to find a better deal.

That was my experience when I used a couple of online home insurance quote websites. In each case, the quotes were higher than what I'm paying now. At least I think they were. Home insurance policies differ so widely from company to company that it's almost impossible to know if you're making apt comparisons.

So it was back to my insurer to see if anything could be done to lower my premiums.

"Let me check for any discounts that might not have been applied," the sales rep said. It turns out that, no, my insurer has not been holding out on me. It's such a relief to know that the bloated renewal rate I've been quoted is their very best offer.

Ready to Cut Coverage Instead?

The next avenue for rate cutting is to take a lower level of coverage. With the gold package instead of platinum, we get two-thirds less coverage for jewellery and savings of $68. I'm sure there are other aspects of the coverage that are less generous, but never mind because we're soon onto the next option - raising the deductible.

It happens that our deductible is lower than I thought at $300; I would have guessed $500. The sales rep suggested jumping all the way up to $1,000, which when combined with a drop to gold from platinum would put our annual premium $8 below last year.

I decided to think about it. But before signing off, I politely made the point that our premium is soaring at a time when the country's working through a recession and inflation is low.

"I do understand," the well-prepared rep said before explaining that claims have been soaring, in large part because of sewer backups and other forms of water damage. Also, with a recession on, more people are using their insurance coverage to pay for damage rather than covering it out of pocket.

This lines up pretty well with what the Insurance Bureau of Canada is saying about high premium increases. In the first half of 2009, property insurers paid out 15 per cent more in claims.

Claims related to sewer backups are indeed a problem, the IBC confirms. The sewer system in many cities is part of a problem of decaying infrastructure, and that means more flooding in homes. This is exacerbated by yet another challenge for those unlucky property insurers, which is worsening weather.

IBC spokesman Peter Karageorgos said there were three major weather events for insurers last year. Wind storms in Alberta cost the industry $365-million, rainstorms in Ottawa and Hamilton last summer cost $196-million and tornadoes in Vaughan, north of Toronto, cost $76-million.

"Insurers have factored in a one-in-100 years storm into their premiums, but we're seeing those occurring more often," Mr. Karageorgos said. And then there are repair and replacement costs, which he said are up 12.7 per cent over the past couple of years.

With most financial products, you can find a wide variation in pricing if you shop around. Not so with home insurance. All the quotes I received were more expensive by about $50 to $200, and that was often without sales tax included.

Why this subdued level of competition? One reason is regulatory requirements, Mr. Karageorgos said. "If you're not generating enough premiums or you're paying too much in claims, there are flags that go up."

He's also seen studies showing that when insurers compete on low premiums, they end up with a clientele that is more likely to submit claims.

This latest rendition of The Home Insurer's Blues now concluded, I've come to a decision. I'll stay with my current insurer, raise my deductible and wait to hear about better deals in home insurance elsewhere. You'll read about them here - if and when I find them.

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