Could a housing boom increase insurance claims?

Could a housing boom increase insurance claims? | Insurance Business Australia

Could a housing boom increase insurance claims?
Climate change and weather-related natural disasters not only affect our environment but also our realty industry.

The Canadian construction industry has left itself vulnerable to weather-related risk by opting for cheap building materials in a booming realty market, according to Kevin Lea, commercial insurance broker at Rogers Insurance.

Calgary-based Lea told Insurance Business of a particular trend in Alberta, where a “seeming desire to build all new construction in the past 20 years out of the cheapest available building materials has led to a real vulnerability to weather related natural disasters”.

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“Since 2010, Calgary and greater Calgary has suffered a loss of $3 billion in hail damage,” said Lea. “This is primarily a result of new residential properties (single-family houses and multi-family developments) being built with materials like asphalt shingles and vinyl siding, which are very easily destroyed by hail compared to some more expensive but much more hail resilient materials in the marketplace today.”

Canada is no stranger to extreme weather conditions. The 2013 Alberta floods and the devastating Fort McMurray wildfire in 2016 are just two examples of nature showing its dominance. Despite this, realtors continue to skimp on weather proofing buildings. This trend will result in a rise in the number of catastrophe claims and therefore push up policy prices and deductibles, according to Lea.

Brokers have an opportunity to step in and assist clients during construction and renovation. “They should make their clients aware of the various alternative materials that are available and they must learn how to defend against hail, windstorm damage or fire damage,” Lea commented. “Yes, it may cost an extra X% to construct a building with hail resilient building materials – but that will pay off if a client has to file a big claim or worry about increasing deductibles.

“The other thing to note is that brokers know their clients well and are aware of clients that have taken measures to weather-poof their buildings. The brokers can then turn around and sell that knowledge to the insurance companies and get better rates and coverage for their clients in return.”

Weather-vulnerable realty is not just a problem in Alberta. “It does reflect nationally as well,” added Lea.

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