As the saying goes, a person’s home is their castle. In the midst of a global pandemic, those castles have been doing double duty as offices as companies have scrambled to deploy work-from-home policies that have left many office buildings temporarily vacant. Now spending the workweek in a home office and most of the remaining hours living in the same space, many homeowners have been maintaining near constant oversight of their dwellings.
This change in domestic living habits has helped prevent theft and fire and water damage while leading to a 10.26% drop in home insurance claims in Canada – saving insurance companies about $1.1 billion in 2020, according to Hellosafe.ca. As temporary working situations become more and more permanent, drastically changing work-life practices for the Canadian workforce, the home insurance market will likely see a similar or greater reduction in claims costs throughout 2021.
Meanwhile, the work-from-home trend has led to some interesting dynamics regarding the repurposing of office buildings. “While some businesses are planning to make work-from-home more permanent and others are simply reducing their square footage, the office market is similarly being retrofitted for residential use,” reports HUB International. “Whether it’s a downtown high-rise or an old two-storey Art Deco office building renovated into condos, shrinking office space in highly populated areas will give way to a rise in residential properties.”
Climate change has likewise had a major impact on the home insurance market. In 2020, extreme weather events, ranging from the Fort McMurray flooding to the Calgary hailstorms, led to $2.4 billion worth of damages in Canada, according to Catastrophe Indices and Quantification, as well as $270 billion globally, according to Munich Re. And HUB International predicts that rates will rise between 15% and 25% or higher in areas exposed to catastrophes such as earthquakes, flooding, hail and windstorms. Whether from wind, hail, fires or flooding, Mother Nature is bound to be back in 2021 with increasing risks for homeowners.
Meanwhile, condo and multi-family home insurance rates are also rising due to an increase in the frequency and severity of claims in the sector; a rise in repair, rebuilding and property maintenance costs; and general hard market trends.
“Following an increase in claims and resulting payouts, many insurers are retracting coverage altogether or increasing costs by as much as 300%,” reports Ratehub.ca’s Tyler Wade. “Unfortunately, a building could lose its insurability and ask unit owners to assume responsibility of the damage and repair bills.”
According to HUB International, “an uptick in claims in the apartment and condominium market due to fires, water escape, wind/hail and flooding have reduced the number of insurance carriers willing to write this class. For this reason, moving into 2021, multi-family residential can expect to see another 20% to 50% increase, along with further increased deductibles in their general property coverage. Residential apartment and condominium properties looking to weather this storm will need to show underwriters what type of controls they have implemented to prevent common, high-frequency and -severity water and fire claims.”
Together, these trends should keep home insurance providers busy in the coming year.
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