Sept. 21, 2020 — Changes to condo insurance regulations announced recently by the B.C. government “won’t move the needle at all” for the challenges facing the market in the province, the president of the Insurance Brokers Association of B.C. says.
“The problem isn’t brokers,” Aly Kanji, president of InsureLine Brokers, told Thompson’s. “The changes here seem to point the finger at brokers. There’s a requirement for disclosure of commissions and there’s a requirement for no payment of referral fees to property managers — I don’t think either one of those are the cause of what’s happening with the insurance crisis relating to (condos) in B.C.”
He said there are a number of causes, but the biggest one is a lack of capacity.
“So a significant portion of the capacity for insuring strata buildings was provided by Lloyd’s of London and other reinsurers that have removed a significant amount of capacity from B.C. and from Canada, and that capacity has not has not been able to be backfilled by other carriers,” he said.
(In B.C. the term ‘strata’ is frequently used interchangeably with ‘condo.’)
The decrease in capacity is partly due to the international hard market in commercial insurance, Mr. Kanji said. But part of it is due to a rise in claims.
“That has to do with condo corporations not properly maintaining buildings . . . voting to not complete the work recommended by remediation reports, it has to do with developers not putting in simple things like water mitigation devices,” he said.
“There’s a lot of things that can be done to improve loss experience, and those things have not been done.” Condominium owners were similarly unimpressed with the government announcement.
“While recently-announced legislation is welcome, it is doubtful these changes alone will get skyrocketing premiums under control,” Gudrun Howard, president of a large condo building in Burnaby wrote in a letter to the Burnaby Now newspaper.
She said the few companies offering condo insurance hold too much power.
“They define what premiums they require in order to maintain profitability, they choose to whom to offer insurance and at what rates, and they remind their customers that they can withdraw from the market entirely if their expectations of profitability are not met,” Ms. Howard wrote.
“If strata corporations were provided with a viable partial alternative through a semi self-insuring model, both owners and insurance companies would feel pressure to act more responsibly.”
The changes introduced by the B.C. government will come into effect Nov. 1. Insurers or insurance agents will be required to provide 30-day advanced notice directly to condo corporations of their intention to not renew an insurance policy, or of any material changes to the policy.
“This change ensures strata corporations have advanced warning of cost increases and has time to seek other insurance options if desired,” the government said in a release.
As well, insurance agents will be required to disclose their commission amount, or a reasonable estimate, to condo corporations. Insurers who fail to meet these disclosure requirements face penalties of up to $25,000 for an individual or $50,000 for a corporation.
Effective immediately, referral fees to condo property managers from condo insurance transactions are prohibited. These amendments followed an interim report released by the B.C. Financial Services Authority in June, which found that condo premiums have risen by approximately 40% throughout the province on a year-over-year basis, with deductibles experiencing up to triple-digit increases over the same period.
The government faces rising criticism from many condominium owners, who maintain that insurance premiums have far exceeded the government testament of 40% increase — some citing hikes of 250% with deductible increases almost as high.
With an election in the offing, the government hopes to placate the sizable portion of the electorate who live in condos, especially in the Lower Mainland and Greater Victoria regions.
The BCFSA will be releasing its final report and recommendations on the rising costs of condo insurance in B.C. sometime this fall.
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