In 2016, 1.9 million Canadian households lived in condominiums, making up more than 13% of Canadian homes, according to Statistics Canada. In highly dense cities like Vancouver, this number is higher, accounting for more than 16% of homes in the city. As the number of people living in condominiums increases, so do the number of claims, and this has caused a major shift in the insurance industry.
“Condo now accounts for a far more complex line business,” said Julie Skelton, vice president, personal insurance operations at HUB International Insurance Brokers. “This shift is making it necessary for brokers to pivot their approach to counselling clients.”
Currently, condominium corporations/stratas and unit owners across Canada are experiencing hikes in their insurance premiums, citing climate-related weather events as one of the major contributing factors.
Not only has this shift in the industry caught the attention of the media, but concerned unit owners are now turning to brokers to further understand their policies and how the current climate may affect them. At RSA Canada, this has not gone unnoticed: in the past year, prior to COVID-19, underwriters and RSA sales representatives have received many questions from brokers on condo.
As a result, RSA hosted a one-hour webinar in April on the grey area of condo insurance. To provide full coverage on the topic, a diverse line-up of industry professionals including Skelton; Rob de Pruis, director of consumer and industry relations at Insurance Bureau of Canada (IBC); Jason Rivait, partner, Condominium Practice Group at Miller Thomson LLP; and Michael Caron, regional sales manager at RSA; shared their respective viewpoints on the condo coverage crisis in Canada.
“Brokers have identified that the complexity of business they are dealing with when it comes to servicing condo clients has drastically increased over the years,” said Caron. “They’re looking to update their knowledge on the current state of the market, legal considerations, and how to best move forward as a broker and an industry.”
Understanding the root of the crisis
Rob de Pruis said that IBC first started to hear about the condominium corporation/strata crisis in fall 2019. After the wildfires Fort McMurray experienced in 2016, some condo corporations/stratas in the area saw an extreme increase in premiums—in some instances of up to 700%—primarily due to significantly increased risk factors. The shift in the industry can be pinned down to a few major elements, said de Pruis. Insurers have more discipline in commercial underwriting and are reviewing their risk appetite to provide coverage to these condominium corporations/stratas. Moreover, there’s been an increase in claims frequency that can be tied not only to ongoing repair and maintenance issues, but to extreme weather incidence as well. Historically low interest rates and low industry returns on equity also play a factor.
Knowledge is power
As more condominium corporations/stratas and unit owners across Canada experience the effects of the crisis, it is critical that brokers continue to educate themselves on the topic so that they may be able to support their clients by arming them with knowledge as well. From providing claims mitigation tips, to getting involved at Annual General Meetings, RSA has started to see the shift in some brokers’ commitment to stepping up their client service. The insurer hopes to inspire others to do so as well with this webinar.
“If our broker partners were to retain only one thing from this webinar, it would be that despite current challenges, things will get better,” said Caron. “With various stakeholders—brokers, regulators, insurers and legal professionals—all working in collaboration to find a solution, I am confident we will achieve a positive outcome in the months to come.”