Condo premiums & deductibles – moving on up

Condo premiums & deductibles – moving on up | Insurance Business Canada

Condo premiums & deductibles – moving on up

The condominium market in Canada is no stranger to change. In a tightening market, with fewer and fewer insurance companies in the space, brokers have been having a tough time trying to find carriers that offer adequate coverage.

John Slattery, the VP of condo/strata accounts at Sedgwick Canada told Insurance Business that, as a result, over the last five years deductibles had increased significantly.

“When I first entered the industry, a standard deductible was $5,000, now the standard is $25,000,” he said.

Read more: Condo prices – a “new baseline”

Premiums and deductibles are getting higher and higher for condos, with the hope that it facilitates some stability in the marketplace.

Slattery noted that there is still money to be made in the condo market, but insurance companies need the right underwriters and property management brokers to be successful.

“I can also see the situation where a condominium, due to a poor claims history, finds themselves in the position where they can’t find a broker who can insure their building,” he added.

According to Slattery, having either the government or insurance industry establish a facility association for ‘bad risks’ would give condo corporations the ability to obtain insurance and be compliant with the Condominium Act, which states that condo corporations must have cover in place.

“If, after five years for example, clients maintain a claim-free history, they can go back into the regular market where a broker can find them insurance at a more affordable rate,” he suggested.

“This also benefits the rest of the market, such as condominiums who haven’t had a claim as these bad risks are removed from the regular market.”

With the removal of ‘bad risks’ within the market, condominiums with a good claims history would no longer be penalized by having their premiums increase because the building next door had made a claim. When it comes to who would fund this facility market, Slattery said it could be set up similarly to the guidelines used in the auto industry.

“We have it for auto insurance, why not the same with condos,” he added. “If unit owners have adequate insurance, the market will have the room to write more insurance as more companies will be writing in a more competitive environment.”

For now, however, the emphasis is on brokers to help condo owners properly understand their risk.

“The market is still growing and we, as an industry, need to do a better job when it comes to education,” he said. “Incident management processes need to be in place to understand what happens after a loss. I recommend this to property managers and that the process be shared with unit owners so, in the event of unit damage, they know what their responsibility is.”

Slattery added that over the next three years, Canada is expected to welcome 1.2 million new residents, and historically 80% of new immigration in Canada comes to the GTA. Condominiums will continue to be built in order to accommodate this demand. As such, there’s a growing need to control rates and get condos at an affordable level, and Slattery emphasised that working together and educating consumers about insurance and claims risks is the key.

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“With more and more condominium buildings going up across the country, meaning increased demand for condominium insurance, the insurance industry will need to work together to meet this demand with new carriers entering the condominium market and looking at MGAs and perhaps the condominium market setting up its own mutual type of company to help underwrite the market,” Slattery suggested.

“MGAs starting to get involved writing condos will help the health of the market overall - I think they will be more active players in the space,” he said.