Insurance woes continue for some condo owners, but government and industry promise better days are ahead
Lori Culbert
The Province
The condo insurance crisis began just before the pandemic began. Government and insurance industry action was delayed, but changes are now being made.
John McEwen outside Koret Lofts in Gastown.
The strata coffers are mostly empty at Koret Lofts in Gastown after the council used its reserve funds to try to lessen the blow of a more than 300 per cent hike to the insurance rate and soaring deductible fees that condo owners have faced since 2019.
“This has devastated our finances, to the point that our contingency has been completely drained two years in a row,” said John McEwen, strata council president. “It’s truly unsustainable.”
Annual insurance for the 118-unit Gastown building, which is just 15 years old and has had no claims on its insurance policy, has jumped from $63,000 in 2018, to $163,000 in 2019, to $280,000 last year. Even though the strata council used its savings to offset part of the rate hikes, it still had to boost the owners’ monthly fees by 35 per cent.
Now McEwen is worried about the price tag attached to this year’s renewal, which is due in August.
“If the market at one point was $63,000 for our building, and with no significant claims goes up to $280,000, there’s something wrong here,” said McEwen, who is the mayor of Anmore.
Escalating insurance fees, deductible hikes and, in some cases, buildings being unable to find full coverage have been major concerns for the last year and a half for many of the 1.5 million British Columbians — one third of this province’s population — who live in condos and townhouses overseen by strata councils.
Some insurers left B.C.’s market between late 2019 and early 2021 because it was too risky and not profitable, industry insiders have said. As a result, the few companies that remained could demand higher and higher fees.
Now, providers are making profits again because insurance rates are higher, and because fewer stratas are making claims on their policies due to the higher deductibles. That has lured more insurers back to B.C. this year. The increased supply means that change is slowly happening: renewal rates are beginning to flatten for some buildings while others are seeing a slight decrease — but a few are still facing increases.
Change is happening — but slowly
“From about March 1 on, we’ve seen renewals at a much better and manageable rate. We’ve seen (insurance) prices dropping, we’ve seen deductibles dropping. There’s certainly more capacity and competition in the market,” said Tony Gioventu, executive director of the Condominium Homeowners Association of B.C.
“Over the next one to three years, I think we’ll turn a healthy corner on this.”
Tony Gioventu, executive director of the Condominium Homeowners Association.
In the short term, at least, “alarm bells” will continue for buildings that haven’t done upgrades or planned for major repairs, Gioventu added. “They’re still facing fairly high (rates), are still facing high deductibles, they’re still facing exemptions on their policies. And that’s probably not going to change.”
Some buildings over the last year have faced an even greater challenge: Brokers have been unable to find them full, or even partial, insurance — and buildings are required by law to have 100 per coverage.
Gioventu said this problem has been less common in recent months.
But Kathy O’Connor’s Metro Vancouver building was without insurance for two weeks this month, creating worries for unit owners who were warned to be extra careful with water and fire to avoid any damage to the building. A policy was finally secured this week.
“It’s really good news because I was concerned about claims in an uninsured building,” she said, adding it was also a relief for two of her neighbours who want to sell their suites but were unable to do so until the insurance was resolved.
A notice from her strata council said insurance rates would not increase, although deductibles would be “substantially higher, especially for water claims.” So owners were warned this week not to leave washing machines, dishwashers or sinks running unattended — because they could be financially responsible now for any damages, given the high deductible.
“That’s kind of stressful,” O’Connor said.
“It’s time that the provincial government take action. … Higher cost deductibles, especially for buildings without a high claims record, is not fair and equitable to owners in B.C. Also, people wanting to sell their strata home should not have to worry that prospective buyers will not be able to obtain a mortgage because the unit they are considering does not have building insurance.”
Kathy O’Connor outside her condo building.
‘Government should not take their foot off the gas’
The Insurance Bureau of Canada hired auditors Deloitte and Touche earlier this year to poll insurers, brokers and condo representatives, and found the state of condo insurance in B.C. has started to stabilize, said insurance bureau vice-president Aaron Sutherland.
“We continue to hear from consumers and from brokers in the space that the situation for consumers certainly continues to improve,” he said.
“And that’s optimistic. (But) in no way do I think that suggests the government should take their foot off the gas as it relates to the reforms they’re exploring.”
He applauded the provincial government for holding consultations this year with industry insiders, but said action needs to be taken soon on even simple issues such as putting the definition of a strata lot into law, which should reduce dragging out claims.
Liberal critic Todd Stone called for a similar solution in legislation he introduced in February 2020 that said “strata unit” needs to be defined in law, which would provide greater clarity on what is covered in condo insurance claims and what isn’t.
“The quicker government moves on its reforms, the more that will increasingly drive more insurers to the marketplace,” Sutherland said. “If we want to bring forward long-term solutions, we need government to to be part of that.”
Aaron Sutherland, vice-president of the Insurance Bureau of Canada.
The government did take some action in late 2020, which included ending referral fees between insurers and property managers, requiring brokers to disclose their commissions, and allowing stratas to use their contingency reserve fund to pay for premium increases. And it banned a system called “best terms pricing,” which inflated rates when insurers banded together to offer coverage.
Exactly when government will bring in more changes is unclear.
“It is important to see how our government’s recent changes improve the landscape of insurance pricing before taking further steps, but it is welcome news to hear about more stability and more options for coverage,” said a statement this week from the finance ministry, which oversees B.C.’s insurance regulator, the Financial Services Authority.
A second ministry, the one responsible for housing, is in charge of reforms to the Strata Property Act. In February, the housing ministry said changes would be regulated starting in the spring, but this week said that timeline would now be “later this year,” after they have completed consultations with various stakeholders.
So far this year, the government has met five times with strata councils, property managers, insurers, realtors and developers to gauge feedback on some of the reforms. These include setting clear guidelines for which parts of the development the strata is required to insure; if there are situations when stratas don’t need to get full coverage; and adjusting the minimum contributions by stratas and developers to contingency reserve funds.
The housing ministry said, however, that consultations on one of the most important changes won’t begin until this fall: limiting the ability of stratas to use “loopholes” to avoid completing depreciation reports, something insurers have flagged as a major concern in B.C.
Other potential changes the government said in the winter it was considering, but did not say this week are part of the current consultations, include sharing insurance information with prospective buyers and protecting unit owners from strata council lawsuits if damage is legally their responsibility but the damage was through no fault of their own.
The finance ministry also said this week that it is committed to exploring a public insurance model, something like ICBC but for condos rather than cars, if insurance prices have not stabilized by the end of 2021.
Calls for maximum deductible
Port Moody condo owner Tarrance Grieve has written multiple times to government officials demanding action after his building, which he said is well-maintained with few claims, struggled last year to find full insurance coverage and when it did, the rates went up by more than 50 per cent. This year, the strata was able to renew its insurance at no higher cost, which was a relief, but water damage and sewer backup deductibles jumped from $50,000 to $75,000.
Grieve notes Alberta, for example, has set the maximum deductible that condo owners can be charged at $50,000, and wonders why B.C. has not considered that option.
Grieve, the former superintendent of schools in Kamloops, has also written to various officials involved in real estate to lobby for changes to the building code so the threat of water damage in new buildings can be mitigated. He notes, for example, that a new development in Langley is putting floor drains in all washrooms and laundry rooms to reduce the risk of floods, and believes making that mandatory could lower insurance costs.
The province promised swift action to address the condo insurance crisis in early March 2020, but weeks later the pandemic was declared, which delayed most government business. Grieve said any answers he gets to his queries are merely boilerplate.
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“I really wonder if the province has put this on the back burner when it was a big issue, because of COVID,” he said. “In my mind, it is still a big issue.”
John McEwen outside Koret Lofts in Gastown.
McEwen, a two-term mayor, believes the provincial government should regulate insurance hikes in B.C. the way it froze rent during the pandemic and has capped future rent increases. He would also like the government to remove restrictions that prohibit stratas from banding together to provide self insurance, saying that model is something he would like to pursue for his building.
One of the challenges facing his building may be its historic designation, he said. But the condos, which contain spaces for both living and working, were constructed new in 2006 and are situated inside the facade of a historic warehouse in Gastown.
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McEwen, who lives in Anmore but his partner uses the commercial space in the Gastown condo, said deductibles rose to $100,000 in 2019, even though the building has not had a major claim. Now, when windows get broken in the street-level units on East Cordova Street, on the edge of the Downtown Eastside, it is cheaper for the strata to pay out of pocket to fix them than to make an insurance claim, he said.
The strata council has taken steps over the last year to make the building more attractive to insurers. It has tried to limit potential claims by inspecting and cleaning out the plumbing, and it has also done a thorough capital assessment of the building so any problems can be addressed.
These are the types of steps that both government officials and the insurance industry say they’d like to see all condo buildings take.
“We’re hoping that if we provide enough detailed analysis, it’ll lessen the risk so that at least our rates won’t increase. And hopefully, hopefully, the insurer will reduce the rates, realizing that the risk is limited,” McEwen said.
“This is having a significant impact on all our residents.”
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