Eight per cent: that’s how much Ontario condo owners’ insurance prices rose from the fourth quarter of 2019 to the same period in 2020 — about 7.5 times the 2020 rate of inflation (0.62 per cent).
As you absorb that shock, be grateful that you don’t reside in Alberta or British Columbia, where condo insurance premiums jumped by 20 per cent and 18 per cent, respectively, during that same period, said Jane Switzer, content manager for LowestRates.ca and author of the report that shows the increases.
“While B.C. and Alberta have dealt with rising prices for more than a year, the rise in Ontario is new,” notes the report.
Switzer attributes the increase in premiums to a few factors: the construction boom; increased weather-related risks; and aging housing stock.
The pandemic notwithstanding, the number of construction cranes in Toronto as of February 2021 leads all North American cities with 208, according to the upcoming Rider Levett Bucknall Crane Index for the first quarter of 2021, with 125 of those cranes dedicated to residential construction and another 32 to mixed-use buildings.
“We have a condo boom going on in Toronto and the pace has been accelerating over the last 15 years,” Switzer said. “More condo buildings mean more residents, which means more insurance claims. If condos go up quickly, there’s also the chance the developers may be sacrificing quality and workmanship, too.”
As a portion of the condominium housing stock ages, any construction flaws become more apparent.
“If you have a water leak, for example, it can damage your neighbour’s condo, too,” Switzer said. “This leads to a larger loss, and someone has to pay.”
Weather damage, too, is on the rise, as climate change leads to more extreme weather events, and Ontario is vulnerable. Two of the top six extreme weather events in Canada during 2020, based on insured damage as reported by the Insurance Bureau of Canada (IBC), were the Jan. 10 rainstorm and snowstorm in Southern Ontario and Quebec ($ 98 million) and the Nov. 15 Ontario windstorm ($ 88 million).
Peter Karageorgos, director of consumer & industry relations for IBC, also cited severe weather events as a contributing factor in premium rate increases, noting that as recently as 2008, the resulting claims totalled $ 422 million annually nationwide; today, that number is $ 2 billion annually. The cost of materials and labour for repairing damage has also increased, and, said Karageorgos, damage that requires insurance intervention usually needs to be fixed quickly, which is generally more expensive.
“We’re also in a hard market,” said Karageorgos, “with higher risk. Companies are exiting the condo insurance market and putting their money in insurance that is more profitable for them. The supply is dropping a bit, but there is still demand, which can drive prices higher.”
Linda Pinizzotto, a Mississauga realtor and president of the Condo Owners Association of Ontario, says condo owners need to be mindful of their individual premiums, but also the insurance held by the condominium corporation to cover damage to the common areas of the building.
“Individual owners’ insurance rates may be going up because they now need to cover things that the condominium corporation previously covered,” Pinizzotto said. “Many condominium corporations have put bylaws in place to change what’s covered for a standard unit. For instance, years ago, floor damage was covered, but condos found people were putting in lots of claims, so most corporations have removed that from the definition of a standard unit.”
In addition, if the condominium corporation’s own insurance premiums have increased because there have been numerous claims, the increase can be passed on to unit owners through increased monthly maintenance fees.
“Many condos are putting new bylaws in place to allow fewer things to be covered by the building insurance, putting the burden on the owners,” she said. “However, during the pandemic, these bylaws are usually put to an electronic vote, leading to less accountability.
“The strength of a condo’s governance is that all owners usually attend an annual general meeting where they see the board and the corporation’s lawyer and can hold them accountable or ask questions. That is less likely to happen individually online.”
She advises owners to pay attention to what their boards are doing with the money that everyone contributes. Is it being spent for ongoing maintenance? Are there corners being cut that will result in myriad claims? Is the reserve fund adequate to handle an unexpected crisis?
“Mismanagement can create problems, which can lead to liability claims and higher premiums, which are passed on to the unit owners. It can be a problem, especially in buildings with many investors who own units, since they aren’t around to pay close attention.”
So, how can an individual condominium owner fight back against increasing premiums and possible increases in monthly maintenance fees? Here are a number of suggestions from Switzer, Karageorgos and Pinizzotto:
- Shop around. Insurance companies have different rates; compare rates from various carriers and brokers. Insurers each insure individual risks at different prices.
- Review your coverage annually; your material needs might change, allowing you to adjust the amount of certain types of coverage included in your policy.
- Ask your insurer about discounts. Do they give a discount to alumni from your university or your organization?
- Increase your deductible; this is a surefire way to see your rates drop, but there is risk involved.
- Be sure to obtain coverage for any upgrades you make to your individual unit, since the building’s insurance won’t address those.
- Understand what is included in the coverage for the standard unit in your building.
- Find out if your building has a maintenance strategy and a reserve fund. See what is being done to mitigate risk.
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