Homeowners in Yellowknife and the South Slave region may be surprised to learn that rising insurance rates have less to do with wildfire risk, according to an insurance broker who works with Northern clients.
Richard Wahl, senior account executive with NationNorth in Winnipeg and a member of the Canadian Broker Network, said the primary factor driving insurance costs is the expense of rebuilding homes in remote areas.
“Part of it is going to have to do with the availability of trades, material, and the cost to build the house,” Wahl said.
Skilled tradespeople in Northern communities command higher wages due to limited availability and elevated living costs. Building materials are also more expensive to transport to remote locations.
“Insurance is rated at the replacement cost of the home,” Wahl pointed out. Insurers must cover the full expense of rebuilding, making Northern policies substantially more expensive than those in metropolitan areas such as Edmonton or Winnipeg.
While wildfire risk does factor into premium calculations, Wahl said its impact is often overstated.
“I get calls from clients all the time going, ‘Yeah, my insurance company told me that it’s because of the forest fires, ’ but maybe a small amount,” he said. “It has more to do with the cost to build that home, to rebuild that house.”
However, Wahl noted that some insurers are using forest fires as justification for dramatic rate increases.
“Some companies are doubling their costs, which is crazy,” he said. He cited one example where a homeowner’s annual premium jumped from $7,000 to over $14,000.
“So that, to me, is unacceptable,” Wahl said. Moderate annual increases of 4% to 6% due to inflation are expected, but doubling premiums is “not right.”
Other factors affecting insurance costs include a home’s distance from fire hydrants or fire halls, roof material, heating source, age, and plumbing and electrical systems.
Wahl recalled an insurer that dramatically increased rates on mobile homes several years ago simply to drive away that business.
“It wasn’t a morally correct decision to make, in my opinion, to just bail on these people that have been your client for 10 years and all of a sudden now you’re kind of hanging them out to dry,” he said.
In Nunavut, where communities lack road access, insurance costs climb even higher due to reliance on air transport or sealift for materials.
“In Iqaluit, I’ve got some home insurance policies that are in excess of $12,000–$14,000 just because of the cost to get materials and trades up there,” Wahl said.
What are your thoughts on this story? Share your insights in the comments below.
