From global warming to the COVID-19 pandemic, many forces are presently affecting property insurance prices.
That's why we're introducing the LowestRates.ca Home Insurance Price Index. We would like customers to be quickly able to see how prices are changing and explain why. Our data shows that residential property insurance prices have mostly risen previously year in Ontario, Alberta and B.C.- echoing a trend that has been noticed in the within the last several years.
Key highlights in the report:
- The financial impacts of global warming: Overall, property insurance costs have increased in the last year. Experts chalk this up to both inflation and global warming.
- COVID-19 has not impacted premiums the way in which many feared: While more people are working at home, this change hasn't resulted in higher insurance prices for consumers.
- Condo insurance costs have raised by 16% in some provinces: This really is likely because of several factors, together with a surge of new condos being built and potential difficulties with quality, in addition to water and weather event damage because of climate change.
- Comparing prices can help you save: Shopping the market can help you save cash on property insurance.
The reasons for these increases could be attributed to numerous factors, as described above. Included in this are increased replacement costs because the value of Canadian homes rise with inflation coupled with the increased chance of tornados events, such as flooding or ice storms, resulting from climate change.
This report also looks at how COVID-19 has impacted home insurance premiums in Canada along with the double-digit increase in condo insurance costs some provinces have seen over the past year.
Lastly, the information confirms that shopping the market remains the easiest way homeowners can ensure they're getting the cheapest price on their own property insurance costs. Our data implies that between Q3, 2021 and Q3 2021, LowestRates.ca users have seen average premiums have decreased in Ontario, while rising between 1-6% in B.C. and Alberta. That compares to increases in the broader home insurance market as high as 10%.
Part 1: Provincial introduction to house and condo insurance rates (Q3 2021 – Q2 2021)
Home insurance costs in Canada saw increases in all segments across Canada, except for a 1% reduction in Ontario. Condo insurance prices, on the other hand, have experienced considerable increases in most three provinces. We start our report having a consider the trends, before diving in to the analysis.
Part 2: Weather, inflation result in higher home insurance premiums.
Home insurance continues to be going up steadily for quite some time due to a mixture of inflation and climate change. Specifically, these costs could be attributed to rising replacement costs due to the effects of inflation on home values combined with an increased risk of weather-related events.
The Insurance Institute echoes these concerns and predicted inside a 2021 report that the total amount paid out by Canadian insurance companies for extreme weather-related claims could double to achieve $5 billion within the next Ten years. Those rising costs won' doubt be increasingly forwarded to consumers, making finding the right rate more essential than ever.
LowestRates.ca data shows increases as well, although they're mainly concentrated in condo insurance. From Q3-2021 through Q3-2021, condo insurance premiums go up consistently in Ontario, B.C. and Alberta, with increases which range from 3% to 16%. In terms of homeowners insurance, rates have remained mostly flat in Ontario and Alberta, while rising 6% in B.C.
According to LowestRates.ca COO and insurance industry veteran Dave Dyer, water-related incidents really are a major cause of these increases, which are consistent industry-wide.
“A lot of that is caused by water,” says Dyer. “That's through an inflationary effect on the price of homeowners insurance. This really is virtually happening everywhere, but Quebec, Alberta and Ontario are the big ones. You have some aging infrastructure and you have more weather events.”
Elektra Hilton, the Director of Operations at DirectRate.ca, agrees that home insurance rates have – and can continue to be – impacted by severe weather events.
“Climate change has affected home insurance. For instance, flash flooding and hail happen to be major events in recent years which resulted in significant costs to the industry. Home insurance rates will probably continue being impacted by tornados events,” she said concerning the data.
Stefan Tirschler, an underwriting manager with Where you started insurance, explained that because insurance premiums are calculated according to data collected from previous years, the effect of climate change is already represented in premiums today according to increased water damage and mold and wildfire occurrences in the last decade.
“When we're exploring the alterations in rates, when we're setting rates and determining what they should be later on, we're setting them according to past trends,” he explained. This also means, he added, the premiums of the future will require into consideration the weather-related events we're seeing today.
“We can say for certain that the effect from it is already there according to what we've seen previously. The conditions that cause certain types of loss have become more acute,” he stated.
Therefore, the chances are the increases we've seen over the provinces will begin to rise more aggressively as global warming worsens and weather-related damages be extreme.
Part 3: COVID-19 hasn't impacted property insurance rates – yet.
LowestRates.ca's data can confirm that COVID-19 hasn't caused an increase in property insurance premiums in the last several months.
LowestRates.ca COO Dave Dyer explains that any increases we're seeing in home and condo insurance could be largely related to non-COVID factors – for example global warming and inflation – as opposed to the increase of Canadians working from home. Unless working from home poses additional risks to the structure or contents of the home, most Canadians don't have to be worried about seeing increases within their property insurance premiums in the near future.
Just because property insurance premiums haven't increased yet, that doesn't mean the higher amount of people working at home won't cause premiums to improve later on. It is because we don't yet understand what the outcome of working from home en masse will be.
It perfectly might mean more harm to homes due to increased use – and for that reason more claims filed. It could also mean less damage to homes due to increased monitoring – and therefore fewer claims filed. Stefan Tirschler of Where you started explained this phenomenon.
“People will work at home constantly. That alone does not mean property insurance must cost any more. This might very well mean a rise in the types of damage we're seeing in the home. What we will have to watch out for is, what's the actual effect of so many people being at home,” Tirschler said.
Regardless of methods COVID-19 will impact insurance in the future, right now, consumers do not see higher prices due to it.
Part 4: Condo premiums in B.C. and Alberta increased by 16% year-over-year.
Condo insurance costs in B.C. and Alberta increased among LowestRates.ca users by a factor of 16% between Q3 2021 and Q3 2021 These increases are largely concentrated in Alberta and B.C., but may eventually creep into other regions too.
The increases are rooted in the skyrocketing deductibles for condo corporations of buildings in B.C. and Alberta. An insurance deductible may be the amount of cash an individual or business needs to pay out of their own pocket included in an insurance coverage claim. So for example, for those who have a $1,000 deductible, you would have to pay $1,000 of your money if one makes a $5,000 claim.
In B.C. and Alberta, condo corporations are seeing their deductibles massively increase because of more claims as well as an rise in the average quantity of claims. This is due to several factors, including global warming resulting in more claims from items like water or wind damage, and more expensive materials and labour costs resulting in an increase in the average value of those claims.
Higher deductibles hit condo owners too, and more claims mean that individual condo insurance for owners also rises. Whenever a building makes a claim on something such as water damage, the apartment corporation's insurance cost rises and those costs get passed on to owners in the form of higher maintenance fees. Condo corporations could also ask that owners use their insurance to cover certain damages, such as if negligence results in a tap being left open and flooding damaging the owner's condo, as well as multiple units below it.
When more condo owners claim on their own policies, that raises their premiums along with a rising number of these claims means an increase in the cost of condo insurance overall.
On top of this, some insurance companies have scaled back offering insurance to condo corporations in B.C. and Alberta due to a increase in claims and more frequent claims. Less competition means that the providers left may charge higher prices.
“In accessory for the steep increases in condo insurance around the commercial side, deductibles are also being increased on building policies. Consequently, a flat unit owner has to be covered for that new, higher deductible on their personal condo policy to bridge the gap – higher coverage results in higher premiums,” explains Hilton of DirectRate.ca.
In response, both the B.C. and Alberta provincial governments have introduced new legislation that puts caps around the amount that the unit owner could be assessed for. While this helps, experts expect this is an issue that spreads to other provinces.
“It's flying individually distinct and it is costing consumers money,” says Justin Thouin, CEO of LowestRates.ca. “We'll be watching to ascertain if the new government policies actually work.”
While we're not seeing the same increases in Ontario, it is something that warrants watching. Over the issues in B.C. and Alberta, our experts explain that the lots of of new condos have been built-in many cities previously decade. Some cities, such as Toronto, have rushed to construct condos to maintain a rapidly increasing population. Condos being built so quickly boosts the risk of lower workmanship, potentially leading to building issues that may require an insurance coverage claim afterwards. This might contribute to the trend of a rising number of claims.
For now, with condo insurance prices only up 3% in Ontario year-over-year, we've yet to determine a significant impact on consumers. But it is certainly something which the insurance coverage industry is aware of and we'll still watch and report on if it creates a surge in prices in Ontario.
Part 5: Shopping the marketplace means lower rates.
While there's still some uncertainty by what the next few years will bring for home insurance premiums, one thing is true – shopping the marketplace means you will probably look for a rate plan.
Price increases on LowestRates.ca are, on average, lower than the increases being seen over the industry today.
Insurance skillfully developed said in 2021 that the property insurance sector likely to see increases home based insurance costs of 5%-10% related to weather-related incidents along with a 2%-4% inflationary increase because of rising home values.
“While the industry predicts increases in the double digits on home insurance for consumers, we're seeing much smaller increases for consumers comparing home insurance on LowestRates.ca – as well as seeing decreases in some cases . This is the power shopping,” Thouin explains.
Home insurance premiums can be challenging to trace due to the lack of public regulation round the sector (unlike car insurance, that is regulated provincially). However, LowestRates.ca data can provide insight into how premiums have changed in the last year along with the advantages of comparing the market.
Key Takeaway #1 – The financial impacts of global warming.
Home insurance experts agree that property insurance rates have increased because of climate change in the last many years, and that this trend is likely to continue. Experts confirmed that water-related weather events, such as flooding, have played a principal role in premium increases across Canada.
Furthermore, experts include that property insurance premiums are largely calculated according to claims history from previous years. Therefore, as climate change worsens and also the impacts of the trend become more severe, this will retroactively be reflected home based insurance premiums.
Key Takeaway #2 – COVID-19 has not impacted property insurance rates, yet.
Canadians fear that working from home en masse may cause property insurance premiums to improve. LowestRates.ca data will tell you this is not the case. Over the past year, premiums have remained relatively flat among many markets and also have seen expected increases in other people.
One expert warns however, that we don't yet understand what the impact of working at home will be on the type and number of claims filed this year. We'll learn more concerning the impact of COVID-19 on property insurance premiums when next year's minute rates are calculated.
Key Takeaway #3 – Condo insurance prices in B.C. and Alberta are surging.
Condo insurance premiums in B.C. and Alberta have raised substantially between Q3 2021 and Q3 2021. This is often related to strata building deductibles increasing by astronomical amounts because of the frequency and severity of claims, driven by severe weather events and rising rebuilding costs.
While this issue happens to be isolated to B.C. and Alberta, most professionals expect this to become a national issue.
As well, we'll still watch whether claims costs will rise in provinces for example Ontario as a huge amount of new condos continue being built-in Toronto. Condos being built so quickly introduces the potential of workmanship issues, which may result in more insurance claims and better premiums for consumers.
Key Takeaway #4 – Shopping the market helps Canadians reduce house insurance.
While the predicts that property insurance prices rose 5-10%, on top of inflation,in the past year, users on LowestRates.ca are seeing smaller increases than this typically. This can be a proof of the power of comparing the market to save cash. Even when all property insurance companies are raising their prices, not every one is doing so equally. You can make the most of that to ensure you always obtain the best price.