Vacant homes are too often being insured at unfair rates, and the sector needs to evolve, says one retail broker.
According to Brody Stonehouse, general manager at AC&D Insurance in North Vancouver, BC, the market for vacant building insurance from MGAs is “inflexible” and needs to change.
AC&D has Lloyd’s underwriting authority and writes vacant dwelling insurance on a case-by-case basis – but Stonehouse says MGAs too often quote standard fees, regardless of the location or quality of a vacant building.
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“The market is generally quite inflexible,” he says. “My thinking is that a lot of times vacant properties are charged too much because they’re not really assessed properly.”
If an insured has homeowners’ insurance, their carrier will generally cover the home as vacant for a couple of months, Stonehouse says, before removing coverage. The risks involved in a vacant home are generally considered more perilous than an occupied house.
Yet seasonal homes, which are full of actual belongings, are considered more easily insured than a home that’s vacant, and have much cheaper premiums, Stonehouse says.
“You find that the rates tend to be the same from a managing general agent [MGA] regardless of whether it’s a nice, brand new house with a security system or it’s an older house that’s kind of dilapidated, sitting in the middle of nowhere,” he notes. “They tend to have a pretty set rate. The same is the same is the same, is what they kind of think of it. Over the years their thinking has kind of never changed.
“In my experience, retail brokers who have a contract that allows them to write business can be better at writing it because they don’t style this old style of underwriting where they have to charge a certain rate. If it’s a brand new house that’s just been completed and it has an alarm system in West Vancouver, that’s better than an old house with no alarm that’s sitting in East Vancouver. That’s less likely for break-ins, less likely for vandalism, those kinds of things.”
Stonehouse says the cost for insuring vacant homes and commercial buildings is often “unfair rates … mostly [from] the managing general agents in Canada who are often stuck in the past in terms of assessing risk.”
Insurance coverage for vacant properties – particularly from MGAs – needs to “evolve”, he says.
“The underwriters come and they have this book and it says you’ve got to charge this and they charge that,” he explains. “They don’t consider the differences between the risks that much.
“While MGAs are probably the best at underwriting stuff these days … there are certain areas they haven’t caught up with changes. You just haven’t seen that evolution in vacant property insurance that you’ve seen in other areas.”
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