Canadian Underwriter

What IBC and brokers think would improve condo insurance affordability in B.C.

March 2, 2020   by Jason Contant

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Insurance Bureau of Canada (IBC) has issued a series of policy recommendations to help improve the affordability of strata insurance in British Columbia, some of which touch upon suggestions made by the province’s broker association.

IBC’s recommendations include:

  • Mandatory education for strata board councils – Educating strata board directors on best practices would allow them to run their stratas in a way that will maximize their resources and reduce risks that could impact elements of building operations, including insurance.
  • Review and implement Building Code changes to reduce risk – Amend building codes to ensure buildings have the appropriate measures to prevent and mitigate extensive water damage and other losses in both new and existing stratas. This may include measures such as water leak detection devices.
  • Amend depreciation report requirements for strata corporations – A depreciation report (also known as a reserve fund study) provides a guide for strata corporations to set their short, medium and long-term maintenance goals. Currently, B.C. requires strata corporations to obtain depreciation reports however, legislation allows exemptions to this requirement. As a result, many stratas have relied on insurance to fill the gap, which has resulted in an increase in claims and costs.
  • Define a standard strata lot in the Strata Property Act – A clear definition of what a standard residential strata lot is. It clearly determines what strata lot owners are responsible for and what the corporation is responsible for, and may help reduce the number of claims made by stratas in B.C.
  • Capping loss assessments on strata lot owners – A monetary cap for deductible assessments and non-insured loss assessments. This may assist strata lot owners in accessing adequate, affordable insurance products to protect their residences and themselves from a potential financial loss.

Last month, Canadian Underwriter asked Chuck Byrne, the executive director and chief operating officer of the Insurance Brokers Association of B.C., what he thought would help address rising strata premiums and deductibles. Some of Byrne’s suggestions (such as capping loss assessments and defining a strata unit) were reflected in IBC’s recommendations.

Others were similar: Byrne suggested that the industry start a campaign to entice strata (condo) buildings and strata unit owners to adopt technology, such as water detection sensors, flow meters and shut-off valves to mitigate losses. Insurers need to publish their loss mitigation requirements and pass this knowledge to brokers and, by extension, consumers, Byrne said. Eventually, premium and term reductions to strata building owners must be offered. For its part, IBC recommended the amending of building codes to ensure buildings have the appropriate measures (such as water leak detection devices) to prevent and mitigate extensive water damage.

Byrne also suggested that insurance should be mandatory for all condo unit owners in the condo corporation.

According to IBC, there are over 35,000 strata corporations in B.C. As a result of increases in the number of claims and cost of repairs, many insurers have changed how they price policies. As building values have risen, so too have reconstruction and replacement costs when these properties experience an insured loss.

Related: Brokers on what would help bring down skyrocketing condo insurance premiums

As a result, IBC said in a press release Thursday, the cost of strata insurance in the province has increased by about 35% on average. “Strata insurance remains widely available, and IBC is not aware of any buildings that cannot access coverage. Stratas experiencing difficulty should shop around or contact IBC for assistance.”

IBC’s recommendations build on the work of the association’s National Commercial Task Force, which seeks to bring together insurers, government, and other stakeholders to develop recommendations to help keep insurance affordable and available across the country. Actions taken to date include:

  • Engaging a risk manager to assist condominium corporations to improve their insurability
  • Providing education and information on insurance and the importance of risk management and loss prevention strategies for condominiums
  • Providing the government with best practices used in other jurisdictions
  • Engaging insurers, stakeholders and government to assist condominium corporations facing insurance issues in the marketplace.

The first task force roundtable was held in Edmonton a few weeks ago. The second roundtable will be held in Vancouver March 17. Participants at that roundtable will discuss the IBC recommendations presented to government, the factors contributing to the current challenges, and to work to identify further solutions to improve the affordability of insurance overall.

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8 Comments » for What IBC and brokers think would improve condo insurance affordability in B.C.
  1. Jeff B. says:

    When they rewrite the BC Strata Act and Definition of a Strata Lot, there need to be better clarity and distinctions between apartment building strata units and Bare Land strata units.

    All the problems with the strata insurance are coupled to strata “apartment buildings” and not bare land strata units. There is a world of difference between the two – and bare land strata corporations are being penalized for excessive insurance claims that only affect apartment building and not bare land stratas that are comprised only of rancher/bungalow style homes.

    I live in a 250 strata lot bare land strata. All homes are rancher style. Our strata corporation has not had a single insurance claim in the 15 year history of the strata corporation. This is because when one home has a water line break and water damage to the “home” it does not affect the neighbouring homes as in the case of apartments that are stacked on top of each other. And, thus does not affect the common property, either.

    The deductibles on our policy just doubled this year – why? Bare land stratas are not in the same risk category as apartment strata buildings.

    Strata legislation and insurance policies need to make clear and distinct differentiation between these two types of strata corporations and their liabilities.

  2. Ron Peters says:

    I can’t see what good insisting on mandatory insurance for condo owners would do, mainly because enforcement seems to be impossible. How would you assess the adequacy of the coverage, and who would do this, and how would you know if someone dropped their coverage the day after they were assessed?

    • Rob P says:

      We are a two year old townhouse development in Langley. We have never had a claim. We are located close to a fire hall and every unit is sprinklered. Our policy was Due March 23 2020. We received our new proposal March 21, 2020 . We paid 88000 for our policy and the deductibles were 5000 for for and flood. Our new policy was provided from BFL for 250.000 and deductibles went to 100.000 flood and fire. With a discussion with there representative the reasoning is we are on a higher earthquake zone. Fire surpression is low. And we live in a wood structure. These three reasons didn’t change from our last policy . We have top rated fire surpression. The one that is very disturbing is that they say if you have a policy with a provider you can’t get a quote from the other two providers Hub or CMW because they all use the same underwriters . Unfortunately at this time we don’t have the finances to fund this and many home owners will not be able to fund it. This insurance situation is in need of a overhaul . Any suggestions .

  3. Emma V says:

    How about we start by getting educated, intelligent, business minded property managers who know how to effectively communicate and advise the strata councils they are supposed to direct. Next, let’s limit the number of properties to 6 that any one manager is allowed to manage. I have been told many are trying to manage 12-18 and it’s not possible to do a good job in that situation. Let’s get rid of proxy voting at strata meetings, which is the main cause of repair votes failing. Depreciation Reports should be mandatory every 3-4 years, we should not allow a strata to vote them down. And necessary repairs should be mandatory, within 6 months of an expert report being published. These reports need to be standardized and simplified by the gov’t, there are far too many variables and ways I have seen them drafted, and many don’t make sense to the average reader. Confusion and lack of understanding is another reason repairs get voted down. Owners should only have the option to vote on HOW the repairs will be funded, not IF the repairs will happen at all. I have many years experience dealing with property managers and being on council, and these things would go a long way to improving the situation.

    • Strata Strata says:

      I personally don’t see much value in repeat depreciation reports. The reports are mainly an accounting exercise. The identify the cost to replace the roof, replace the roads, the siding etc. They don’t identify problems with the buildings.

      Adjustments in depreciation costs can be determined year-over-year by taking one report and multiplying current building value divided by the building value at the time of the report.

      You can’t really limit Strata Managers to a certain number of units. There is already a lack of Strata Managers. The industry would need 3 times as many managers to fill this requirement. Also Strata Managers are typically paid as a percent of the Strata Management fee (~<20%). So 3 times as many Strata Managers would be needed and be willing to work at a one third of the current rates.

      Instead, Strata Corporation's should recognize that Strata Management is a misnomer. They don't provide any management services, rather they provide administration services: accounting, banking, receiving quotes, paying contractors, resident correspondence etc.

      Strata Corporation's should hire building assessment companies to identify maintenance and repairs items and put together maintenance plans.

  4. Beverlee Alaric says:

    What is the British Columbia government going to be doing in regards to COVID-19 and the increase in our strata fees.
    The fact that so many people are going to be facing an economy disruption in their lives I think it’s only fair that government steps in and puts a cap on this strata insurance this is absolutely ridiculous some of them have gone up over 300% with you my estimation is criminal

    • Jim Making says:

      IBC says that strata insurance has gone up by 35% on average. I wonder where IBC is getting their figures because, likewise, our strata’s insurance has gone up 300% and we had a 10x increase in deductibles and no claims.

  5. Strata Strata says:

    You’ve identified some of the problems in the industry. The problem is anti-competitive practices, you have identified one of the practices, i.e. that underwriters will only quote to one broker. This practice dissolves competition among brokers and brokers can maintain their 20% commissions on policies. For example, our strata plans policy premium is $240k. Our brokers make $48k for a few hours work placing this policy. We can’t shop around because other brokers can’t quote because there’s not enough underwriters left in the market so they maintain that commission.

    The second and most significant anti-competative practice is a practice called Best Term Pricing. In Best Terms Pricing, the price of coverage is based off the price of the highest underwriter’s quote. So if the brokerage placed 99% of a policy at $0.50 per $1k coverage and they fill the last 1% at $1.50 per $1k coverage then all underwriters get the highest quoted price for coverage and the strata corporation pays triple the price then if coverage was paid based on what each underwriter quoted.

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