Only answer to rising home insurance rate increases is to shop around

Gail Etherington is angry about the $ 116 increase to her annual homeowner’s insurance bill.

“I haven’t had any claims or made any improvements,” said Etherington, a realtor who relocated from Mississauga to Kingston about five years ago. “I talked to my agent and he told me that everyone is increasing their rates.

“It’s unconscionable during the pandemic. So many people are seriously affected by it and now they choose to put the rates up? People are just trying to make it through this crisis.”

She isn’t the only homeowner affected. Data from Applied Systems, a global provider of cloud-based systems for the insurance industry, shows that personal property insurance premium rates in Ontario began increasing in early 2019 and continued to rise throughout 2020, levelling off in the first quarter of this year. During the first quarter of 2019, the rate increased by an average of 7.4 per cent over the same quarter the previous year; in the first quarter of 2020, that rate climbed an average of another 10.4 per cent. By the first quarter of 2021, the year-over-year average was only 0.3 per cent, but the damage had been done.

Daniel Goldhar, a North-York based insurance broker with Canadian Insurance Brokers Inc., said rates generally increase a bit each year and are always affected by major weather events the previous year — events that are becoming more common due to global warming.

“For example, if there’s a flood or tornado one year, I anticipate seeing rates rise the following year,” Goldhar said. “With the pandemic, there have also been a lot of business claims and many insurance companies took a loss. They have to make it back one way or another.

He shops around for better rates for clients, but notes that in the current market the number of companies offering coverage has shrunk.

If consumers do find themselves a better rate, he advises that they make sure that the necessary coverage is included, especially with regard to water damage.

“Water is the new fire,” Goldhar said. “Be sure that the company doesn’t take away any water damage coverage. It’s important to have your broker keep an eye on this for you. You don’t want to save $ 300 and discover you don’t have all the coverage you need.”

Ken Whitehurst, executive director of the Consumers Council of Canada, noted by email that when it comes to flood risk, it may be time for a larger conversation about who has responsibility for the risk.

“A lot of homes have been sold on properties in the past based on floodplain modelling which may or may not reflect more recent assumptions about climate-change associated risks,” he wrote. “People bought homes in good faith, often located on a flood plain, assuming land use policy was being responsibly managed.”

Peter Karageorgos, director of consumer & industry relations for the Insurance Bureau of Canada (IBC), says insurance is all about losses and what it costs to pay the associated claims. He agrees with Goldhar that rate increases are generally based on events of the previous year. Such events may not even be something close to home — Alberta’s 2019 wildfires, for example — because companies spread the risk across their entire customer base.

“We’re all paying to help everyone else and that could be people on the other side of the country,” he said. “It’s always upsetting to see prices increase and, while we’re dealing with a pandemic, it’s not a good time. However, pandemic or not, claims come in.”

Additionally, home insurance isn’t based on the market value of a home, but on what it would cost to rebuild it. During the pandemic, with the cost of building materials and labour increasing, it’s only to be expected that insurance premiums will reflect some of those costs, too, says Karageorgos. In addition, there has been a renovation boom during the pandemic, since so many people are working from home. Improving homes means the replacement costs will be higher, so, Karageorgos noted, “it stands to reason that premiums would increase.”

He reminds homeowners to alert their insurance companies if they make improvements (a material change) to their homes, because their existing coverage is designed “to restore the home to the condition that they understood it to be in prior to the loss.” For example, if you’ve added a family room without notifying your insurer and the property burns down, the added value of the family room won’t be covered when it comes time to rebuild.

There’s not much a consumer can do to fight insurance price increases other than shop around, says John Lawford, executive director and general counsel of the Public Interest Advocacy Centre in Ottawa. “Since we don’t regulate insurance prices, you need to shop around to get out of a bind. There’s upward pressure on the insurance market because there is upward pressure on the real estate market.

“The Financial Services Regulatory Authority for Ontario has insurance under its umbrella, so you can always complain to the ombudsperson, but the underlying ethos for home insurance is that the market sets the rates.”



In addition to shopping around for a better deal, Karageorgos of IBC says consumers can always increase their deductible to achieve lower rates.

Nonetheless, Etherington, the homeowner, remains frustrated.

“Many people have bundled their home and auto insurance together and received refunds for not driving during the pandemic,” she said, “so the insurance companies give on one hand and get it all back.”