REPORT: Condo insurance rates keep rising amid more expensive building materials and claims

Condo insurance premiums are continuing to rise in Canada, sustaining a years-long increase that experts believe will last through the first two quarters of 2022, at least.

This is the core finding of our most recent Home Insurance Price Index, which examined LowestRates.ca data for the second quarter of 2021.

While there isn’t enough data to confirm specific effects the pandemic has had on home insurance prices in Canada, we spoke to insurance experts who believe that the recent increase in the cost of building materials is driving up condo insurance premiums across the country.

Key findings

• Condo insurance premiums are skyrocketing in B.C. and Alberta, with quarter-over-quarter increases of 22% and 10%, respectively.
• The quarter-over-quarter increase in Ontario sits at 2%, but 8% compared to a year previous.
• Experts believe that the combined impacts of more expensive building materials amid a higher volume of expensive claims from extreme weather events help explain the increases.
• Anecdotally, experts report that carriers are receiving a higher volume of claims due to DIY renovations after so many Canadians have started updating their properties during the pandemic. 

Part 1: Condo insurance premium increases by province

LowestRates.ca data for the second quarter of 2021 reflects that condo insurance rates in British Columbia increased 22% from the previous quarter and 34% from a year previous.

In Alberta, the quarter-over-quarter increase was 10% and 23% from the second quarter in 2020.

The Ontario market reflected a 2% increase between the first and second quarters of 2021 and an 8% increase from the second quarter in 2020.

Part 2: Condo insurance increase exacerbated by effects of the pandemic

While it remains true that the price increase in Canada’s condo market is the result, in part, of premiums that had long been underpriced, insurance experts believe that the effects of the pandemic are also driving up prices.

Matt Alston, CEO and co-founder of Surex.com, says that carriers have no choice but to increase premiums when their underwriting profits are challenged by more expensive building materials and a higher volume of expensive claims from extreme weather events that are becoming more common.

“In Alberta, carriers are having an over 100% loss ratio on condos in part due to extreme weather – hail, flooding, fires from BBQs,” Alston says.

“It feels like I hear about a condo fire in Lethbridge every year.”

In a low interest rate environment where carriers are not seeing significant returns on their investment revenue, they’re “being forced to make more money on underwriting profit.”

Because regulation precludes carriers from easily increasing (or decreasing) car insurance rates, carriers have increased home insurance premiums. However, Alston says, “it’s not like carriers are swimming in profit despite condo insurance increases.”

The good news? Alston expects condo insurance premiums to stabilize in the next 12-24 months.

“Do I have a magic ball? No, but when I look to other industries, building costs are starting to go down…”

And, depending on the economic policies of the next federal government, he says, there’s an opportunity for inflation to go down, or at least stop increasing.

More frequent severe weather driving up condo insurance rates

Rob de Pruis, director consumer and industry relations at the Insurance Bureau of Canada, notes that any pressure the pandemic has put on insurance carriers is taking place amid increasing claims costs from severe weather. 

“In 2019, we started to see more severe weather and claims cost increasing from what we call slip and fall events. Investment income was declining and these global events were happening such as wildfires, earthquakes and floods,” he says.

According to IBC data, in the last 10 years, claims costs from severe weather in Canada have increased to $2.1 billion. In 2021 alone, incidents such as the hailstorm in Calgary, AB, wildfires in Lytton B.C and a tornado in Barrie, Ont. have estimated insurance costs of $500 million, $78 million and $75 million, respectively, he said.

“These are significant costs,”he says. “We’re seeing more frequency and more severity of these losses.”

de Pruis anticipates that when more data is available, it’s likely that carriers will reflect a higher volume of claims resulting from homeowners renovating their homes. 

It’s too soon to tell, he says, but with Canadians having spent so much time at home during the second quarter of 2021, it was easy for many to conclude their environment needed to be upgraded. 

“Anecdotally, at our consumer information centre, we’ve been getting more calls from people with claims for kitchen fires,” he says.  “More of us are at home, we can get caught up on a call and forget about what’s on the stove.” 

Condo insurance carriers report more claims from inexperienced renovators

Alston agrees that while it’s too soon for data revealing how many home insurance claims have resulted from home renovations during the pandemic, anecdotally, carriers are seeing more claims from difficulties that arise from inexperienced renovators. 

“One of the reasons for building materials cost increasing is that the supply side was shut down while with people being at home for a year, increased renovations went through the roof.

“The industry saw companies that specialize in adding everything from porches, outdoor spaces, to garages and offices, unfinished basements to finished basements being very busy.

“Demand was up, supply was down and building went through the roof. 

“We were seeing renovations in home without homeowners letting the carrier know, reno fires, people messing with plumbing,” he said.

“Insurance carriers are just catching up.”

While Alston is optimistic that the years-long upward climb of condo insurance premiums will cease toward the end of 2022, he says that carriers will likely be navigating the effects of the pandemic for some time, trying to gauge how the risk profile of some homeowners may have changed. 

For example, he says, home renovations will have increased the replacement cost of homes and some policy holders will not have thought to alert their carrier. 

Equally, during the pandemic many people have started running businesses out of their homes. 

“A side hustle run from a home can affect the kind and amount of liability coverage,” he says.

As building material costs come down, so should condo insurance premiums

Despite years of increasing condo insurance premiums in Canada, rates continue to climb as carriers navigate a perfect storm of increasing replacement cost values after so many Canadians began updating their homes during lockdown and an increasing volume of claims from severe weather events.

These pressures were largely unanticipated and have taken place amid historic low interest rates, which have precluded carriers from earning significant investment revenue. 

Carriers see increased premiums as their only path to profitability until this particular industry cycle ends.

With the pandemic still underway, there is yet enough data to predict the long-lasting effects on the insurance industry. However, as the cost of building materials comes down, experts anticipate that condo insurance premiums will stabilize. 

It will take yet more time for carriers to gauge how the risk profile of some policy holders may have changed after many Canadians have taken the opportunity during lockdown to update their homes and properties and, in some instances, start running businesses from their homes. 

Like Alston, LowestRates.ca spokesperson, Justin Thouin, is cautiously optimistic that condo insurance rates will stabilize within the next two years, but underlines that until then consumers’ best shot at controlling their insurance costs is comparison shopping. 

“The factors helping drive up condo insurance rates in Canada in the last number of years are compounded by the costs of climate change and the pandemic,” he said. 

“While we await more data to confirm specifics, consumers can gain some control by comparison shopping for the lowest rate.”