The condo insurance market is undergoing dramatic changes.
Approximately 48% of insurance claims in the high-rise market are due to water damage, compared to 18% of claims due to fire and 4% due to theft. COVID is changing how our buildings are being used. Weather-related claims are increasing. Underwriters are changing their approach. As a response to all of these changes, rates are increasing.
As the vast majority of insurance claims shift to floods, we are seeing the condo insurance market shift in response. Read more to learn about what some of these changes are.
Why is this shift occurring?
According to Canadian Underwriter, experts are blaming deteriorating infrastructure as a major factor in the increased insurance claims, pointing at aging and deteriorating pipes as a problem as water damage claims have almost tripled since 2013.
On top of increased claims, repairing the water damage is becoming more complex, driving up claims costs. Repairs need to be done with the correct new products, and tasks such as protecting against mold are more labour-intensive than they used to be due to the amount of infrastructure that needs to be replaced during the process.
How has COVID affected flood insurance claims?
With the pandemic keeping many businesses stay-at-home for well over a year now, high-rise buildings need to consider the effects of having large buildings empty in the long term. Pipes require winterization to prevent floods, and monitoring in case floods do occur. Water ingress – when outside water gets into a building – needs to be prevented, and the HVAC systems need to continue operating.
How are insurance companies changing?
Technological innovation is affecting how insurance underwriters work. Underwriters are on a path to becoming technological trailblazers, utilizing automation and leveraging technological tools to focus on higher-level challenges. Technology isn’t squeezing out underwriters, but rather a future tool that will be used to increase efficiency.
How are condos and tenants affected?
All of the changes above are affecting condo insurance, and the effects are directly affecting the condo owners. From 2019 to 2020, Ontario condo owners’ insurance rose by 8%. In Alberta and BC, the increases are even higher, at 20% and 18% respectively.
Ontario’s increase is attributed to a condo development boom, which corresponds to more insurance claims. Furthermore, aging infrastructure is affecting rates as well, as construction flaws become more apparent and claims in one condo can affect neighboring condos.
Lastly, severe weather events are occurring more frequently due to climate change, which can also affect condo insurance claims. Claims related to severe weather events reached $422 million nationwide in 2008, and $2 billion nationwide currently.
Claims made by the condo can increase insurance premiums, and the condos may pass these increased costs onto tenants through maintenance fees.