Home and Condo Insurances Rates By Province: 2021 Price Index

Condo insurance prices are rising in Canada. Global warming and rising deductibles are putting upward pressure about this product, and the costs are being passed onto consumers. This is the main conclusion from the latest LowestRates.ca Property insurance Price Index, which we publish so consumers can easily see how property insurance costs are changing and explain why.

Our data shows that in the last year, home insurance prices remained relatively stable, while condo insurance rates spiked in British Columbia, Alberta and Ontario. While B.C. and Alberta have dealt with rising prices for more than a year, the rise in Ontario is totally new.

We're also continuing to look at if the COVID-19 pandemic will affect property insurance prices. Despite more people now working at home, it has not resulted in any notable increase.

Key highlights in the report:

• Rising condo insurance costs creep into Ontario: Prices continue to skyrocket in Alberta and B.C. As predicted, insurance costs are now rising in Canada's most populous province.

• COVID-19 hasn't affected property insurance costs: While Canadians now use working at home en masse in early 2021, this hasn't translated to higher premiums. However, migration from cities to the suburbs and rural parts of Canada may impact insurance rates in the future.

• Extreme weather is exposing aging infrastructure: Extreme weather events are the new normal, putting pressure on aging infrastructure and increasing costs.

How to make use of this index: Property insurance can be complicated. This is exactly why LowestRates.ca publishes the Home Insurance Price Index. The index is created from the thousands and thousands of insurance quotes we obtain every year and shows whether prices inside your province are rising or falling. Here's how it works: Our baseline is placed at 100. This means that if our index increases from 100 to 101, prices have increased by roughly 1%. (Think about note: this index doesn't factor in inflation.)

Part 1: Provincial introduction to house and condo insurance costs (Q4 2021 – Q4 2021)

Year-over-year, Alberta and Ontario home insurance costs are down 4% and 1%, respectively. In B.C., property insurance prices rose 3%. Condo insurance prices continued to spike throughout 2021 across the 3 provinces. Before getting in to the analysis, here's a look at the trends.

Ontario

Alberta

British Columbia

Part 2: Condo insurance costs spike in B.C. and Alberta. Higher prices also spread to Ontario

Condo insurance premiums in B.C. and Alberta increased among LowestRates.ca users by 18% and 20%, respectively, between Q4 2021 and Q4 2021. So that as experts speculated in LowestRates.ca's last report, rising condo premiums are actually starting to creep into Ontario. Year-over-year, condo insurance premiums in Ontario rose 8%.

Premiums are rising as insurance companies increase deductibles for condo buildings in Alberta and B.C. A deductible may be the quantity of insurance companies require individuals or businesses to spend of pocket before they are able to tap into insurance coverage.

There are two kinds of policies which cover condo buildings: one for that unit owner that covers the unit itself, personal property and liability, and something for that condo corporation that covers the structure, common areas and exterior. In addition to spending money on their personal insurance plan, unit owners pay for a share from the corporation's policy through monthly condo fees. Once the condo corporation's policy faces coverage gaps or more deductibles, those additional risks are forwarded to the unit owner.

The concern is especially pronounced in B.C., where about 50 % from the province's 5.1 million residents reside in strata housing. In B.C., “strata” can be used to describe a property divided into individually owned units with shared common areas. The term encompasses condos, townhomes, duplexes and single-family homes in strata subdivisions.

Strata home owners started seeing rates spike around July 2021 as a result of “substantial reorganization of the insurance industry,” says Tony Gioventu, executive director from the Condominium Home Owners' Association of B.C. Skyrocketing real estate prices have eaten into insurance companies' profitability and caused many to withdraw from the market altogether.

“Competition basically nosedived in the condo marketplace for insurance,” he states. “With so few insurers historically, rates just exploded.”

Gioventu says rising premiums and deductibles are mainly affecting larger buildings using more than 50 units, where the risk goes sky high, or buildings where you can find a higher quantity of claims.

With big increases in tangible estate value, you appear behind the curtain and every industry behind insurance – construction, restoration, materials supply – increases at the same rate

“We saw deductible rates for larger properties go from $25,000 or $50,000 to $200,000 to $250,000 for claims,” he states. “A large amount of claims became self-insured or had become the responsibility of the individual unit owners on their insurance policy.”

When a claim becomes self-insured, this means there's no reimbursement from the third-party insurance provider – the money comes directly out of the homeowner's pocket.

This issue isn't exclusive to B.C., and it is bleeding into cities across the nation as more condos are built and the frequency of claims and price and value of real estate are rising.

In Ontario, condo insurance costs are rising because the province catches track of B.C.'s strata-heavy culture and weather-related risks spread across the country. In condo-centric Toronto, existing stock is aging while more and more buildings fill the skyline to have an increasing population. Even though B.C. and Alberta have grappled with more risks around earthquakes, forest fires and floods, weather-related risks are increasing everywhere – particularly when you are looking at water.

“With big increases in tangible estate value, you look behind the curtain and every industry behind insurance – construction, restoration, materials supply – increases at the same rate,” Gioventu says, leaving strata and condo corporations without basic predictability around costs.

Many condos are also beginning to age. If they're poorly built or poorly maintained, it leads to losses. And while harm to a single-family house is relatively contained, flood or fire inside a condo unit can often mean other units in the building are affected.

“Insurance isn't supposed to be a maintenance contract, but if the railings aren't placed on properly and someone falls, you're going to get sued,” says Dave Dyer, LowestRates.ca's chief operating officer. “If the plumbing was installed poorly, you're going to have water damage.”

Legislative and regulatory changes announced by the B.C. government in June 2021 targeted at curbing rising insurance costs are starting to be implemented. For instance, insurance brokers previously did not have to disclose their commission rates, that have been reported to be as high as 20%. By Nov. 1, 2021, brokers in B.C. are actually necessary to disclose the quantity of commission they receive for insuring strata properties, which Gioventu says leaves room for negotiation between clients and brokers.

Key takeaway: Rising condo insurance costs has turned into a national issue for major cities across the nation as more condos are made, existing stock ages, weather and water damage batter buildings and the prices of building materials and replacement costs rise.

But while insurance costs rose steadily throughout 2021, that does not necessarily mean they'll carry on up indefinitely.

“Insurance is like a pendulum, it swings between a soft and hard market,” says Victor Adesanya, v . p ., insurance at DBRS Morningstar. He states Canada's insurance sector happens to be in a hard market, caused by low interest and much more money flowing from insurance companies from losses and expenses. In a hard market, there's more interest in coverage from consumers but less supply as insurers tighten their business and write fewer policies. What this means is insurers need to raise premiums to enhance profits. Inside a soft market, less demand for insurance and more competition in the market leads insurers to reduce their rates. Because the pendulum swings, it means some volatility for consumers.

Part 3: Property insurance prices unaffected by COVID-19

As Canadians began to work at home en masse from March 2021, there was speculation around whether this shift would affect home insurance rates due to the increased likelihood of accidents or damage. So far, that hasn't materialized.

“The concern for insurance companies continues to be widespread, catastrophic losses instead of isolated events,” says Elektra Hilton, director of operations at DirectRate.ca. “Increases in home premiums happen to be driven by water along with other weather-related catastrophes.”

Even with additional risks to some property and its contents from families being home constantly, most damage caused by individuals could be on a much smaller scale when compared with major disasters such as flooding, hailstorms or forest fires, or water damage from bathroom or roof leaks, frozen burst pipes or corroded plumbing.

When you insure a house, you're insuring the reconstruction costs. As prices increase, the price of rebuilding rises, too

One COVID-related consequence that may affect property insurance costs: people leaving major cities into surrounding suburban areas. Many buyers have recently left cities for example Toronto and the suburbs in search of extra space and therefore are finding it in smaller municipalities. Consequently, this has driven prices up in those places. While rising real estate values don't directly drive property insurance prices, there's some correlation. Mortgage brokers typically want to insure homeowners for at least the value of the mortgage, no matter a home's rc.

Rising home prices in the suburbs and rural areas also reflect the increasing price of labour and materials, which could mean higher insurance prices, says Adesanya of DBRS Morningstar.

“When you insure a house, you're insuring the reconstruction costs,” he states. “As prices increase, the price of rebuilding goes up, too.”

Key takeaway: Property insurance costs have not been affected so far through the COVID-19 pandemic. However, there may be some fallout effects as migration from cities to suburbs and rural areas drives up prices. Whether this will occur remains seen.

Part 4: Wild weather exposing weak and aging infrastructure

“Climate change isn't going anywhere,” says Adesanya, and remains a key driver behind rising home and condo insurance prices.

Severe weather caused $2.4 billion in insurable damage in 2021, according to the Insurance Bureau of Canada (IBC). The June 13 hailstorm in Calgary caused $1.3 billion in insurable damage alone. Storms and floods also hit areas of Ontario, B.C., Quebec and Alberta, pushing 2021 towards the #4 spot on IBC's listing of the Top 10 Highest Loss Years on Record.

As more homes and buildings are made in concentrated areas populated by an increasing number of people, it puts pressure on aging infrastructure that was not upgraded to meet the demand.

“The infrastructure is weak, leading to excess water getting into people's basements,” says Dyer of LowestRates.ca.

In November 2021, the federal government acknowledged that “natural disasters are increasing in frequency and severity.” It announced a task force to look into developing a low-cost national flood insurance program for people without enough insurance and develop relocation plans for homeowners in flood-prone areas. The job force will submit its final report by spring 2022.

Key takeaway: Insurance experts agree that climate change and extreme weather conditions are the new normal, and will still influence property insurance rates. Particularly, flooding and water damage and mold continues to push insurance costs higher as extreme weather becomes more frequent. The IBC called the federal government's flood task force “a foundational step,” but it could still be years before a cohesive national plan's formed. In the meantime, insurance providers – and consumers' insurance costs – continues to deal with the brunt of water damage costs unless more immediate action is taken.

Conclusion

Home and condo insurance rates are always changing. Dyer says insurance costs will rise a little every year based on inflation alone, but not all insurance companies raise their rates every year, or by the same amount – that's where comparing comes in. There's also individual factors that could lower or raise premiums, such as the deductible, the home's postal code, the quantity of coverage, personal claims background and more.

“For consumers, looking around is the best method for saving money as insurance charges rise from inflation and climate change,” says Dyer. “By comparing the marketplace, you know you're getting the cheapest price based for your unique situation.”