COVID-19 compounded a crisis in British Columbia regarding condo insurance. Strata corporations have seen insurance hikes as much as 300% over the past two years while coverage limits have declined.1
Several factors resulted in the premium increases, including rising claims, higher property values and catastrophic events due to climate change. Over the past decade, premiums were stagnant or decreasing, resulting in a dramatic correction in pricing today.
Seeing little relief in sight, last year the B.C. government stepped in with new regulations in the form of Bill 14.
Regulatory changes increase transparency
Bill 14, which went into effect in November 2020, is designed to take the pressure off some of the challenges facing the B.C. strata insurance market. The new law limits the fees associated with purchasing an insurance policy: Brokers must disclose their commissions and third parties (including property managers) cannot collect referral fees.
Insurers must also notify the strata corporation of any material changes or non-renewal notices at least 30 days in advance.2
The changes also eliminated “best terms pricing,” a factor leading to rising premiums. Best terms pricing entails several insurers subscribing to a policy, with each insurer taking a portion of the risk. Although each brings its own bid, the final premium to strata owners is based on the highest individual bid, regardless of other subscribers’ pricing.3
Managing risk leads to better coverage
Strata corporations need insurance and current conditions can make it seem bleak for getting affordable coverage. However, working through a broker, strata corporations can help minimize premium hikes through better risk management.
Here’s four tips for strata corporations to keep in mind to improve their risk profile in the eyes of insurers:
- Implement common-sense guidelines. Building bylaws that improve risk are simple to implement and demonstrate a disciplined approach to building protection. For example, many buildings ban BBQs on the balconies or forbid smoking to mitigate fire risk.
- Address water issues. Many buildings suffer from aging plumbing infrastructure: half of commercial property claims are water claims.4 Check out pipes and water heaters, and repair or replace faulty equipment. Water detection and shutoff systems show a careful approach to damage mitigation.
- Perform regular maintenance on the building. COVID-19-related restrictions may have postponed regular maintenance for many property owners. Some strata corporations discontinued regular maintenance during the lockdowns or couldn’t find trades to perform the service. However, regular maintenance like cleaning dryer vents and flushing drains goes a long way toward demonstrating care of the building for insurers.
- Build a contingency fund. A strong cash cushion demonstrates fiscal responsibility to insurers. Make sure your corporation’s contingency fund is sufficient to pay for small issues rather than turning to insurers: Ideally, it’s a good idea to aim for five years without any claims.
Making the strata corporation a stronger insurance client while mitigating risk will help lower premiums when it comes time for renewal.
Contact HUB Risk Services to learn more about the changing regulations and how to prepare your strata corporation for renewal.
1 Eli Report, “Strata insurance premiums are on the rise,” accessed June 18, 2021.
2 BC Government News, “Amendments to bring greater transparency to strata insurance,” September 13, 2020.
3 BC Financial Services Authority, “B.C. Acts on Rising Strata Insurance Premiums, Eliminates Best Terms Pricing,” December 1, 2020.
4 Canadian Underwriter, “Why water damage claims cost the industry more each year than severe weather claims,” September 14, 2020.
