An unhealthy strata insurance market is hopefully coming to an end in 2021 with BC insurers agreeing to put an end to ‘best terms pricing’. 

With ‘best terms pricing’, strata corporations had to pay the highest rate quoted for insurance premiums, even if there were lower rates quoted from different insurers. The reason for this is because the majority of strata insurance policies have multiple different insurers on the policy that cover the different types of coverages or that share the risk on a certain type of coverage. For example two different insurance companies may share the water damage coverage or risk on an insurance policy. 

Many strata corporations were seeing an annual increase to their insurance premiums anywhere from 30 to 300 percent, with an average increase of at least 50 percent for most complexes. This put a lot of pressure on strata owners and led to high, unprecedented increases to monthly strata fees or owners had to pay a special levy just to cover the strata insurance.  This caused further tension during the global pandemic and added to the problem of housing affordably in Greater Vancouver.  

So how does an unhealthy strata insurance market become healthy? The end of ‘best terms pricing’ will help, however, there are a variety of long-term factors playing a role in increasing premiums. Two of the biggest factors are catastrophic exposure, such as earthquakes, flooding, and other natural disasters that certain parts of BC are susceptible to, and loss reduction. A few other factors include a rise in construction costs, lack of gradual premium increases, risk model changes, privatization of insurers, increased insured value, and the lack of insurers willing to provide coverage in this space. 

The BCFSA (BC Financial Service Authority) has agreed to not just put an end to ‘best terms pricing’, but also look more closely at strata insurance data to prevent data gaps and assess home warranty claim issues. 

Insurance premiums aren’t going to change over night; it will take time to see the changes, and will require a combined effort of continuous reduction of risks, scaling of claim costs, and preventing issues from happening that lead to claims is a hopeful start.

For more information on this topic visit the BCFSA’s website: https://www.bcfsa.ca/?p=about_us/StrataReport