Why is Vancouver having a strata property insurance crisis?
Great question, and one that we get asked on almost a daily basis these days as Vancouver strata management company.
Unless you’ve been living in a bubble, you likely already know about the current insurance crisis taking place in BC. It started back in late 2019, and still likely hasn’t hit it’s peak. Eerily similar to the Covid-19 health crisis some might say, but I’ll leave that one up to the conspiracy theorists….
Here is a list that we put together of the top 10 reasons that BC is having an insurance crisis;
- 1. Supply and demand. Simple economics. Not even insurance capacity to meet the growing demand of stratas being built on almost every block in Vancouver. When demand outstrips supply, prices must go up!
2. BC, and the entire West Coast for that matter, is on a fault line. Insurers view the earthquake risk in BC as much higher than the risk in Toronto or Calgary. To them, it’s not a matter of if a big one will hit, but when…
3. Increased cost of re-insurance. Insurers buy re-insurance, and when the costs go up, insurers are forced to increase their costs. If you don’t know what re-insurance is, watch THE LAUNDROMAT tonight on Netflix for a better idea.
4. Massive payouts! Insurers are paying out more than ever for global disasters; earthquakes, floods, fires, etc. When they have to pay out billions in damages, guess what, they have to put up their prices!
5. Building replacement costs! Vancouver and the lower mainland have seen massive increases in replacement costs over the past number of years when compared with other markets such as Alberta, and this is reflected in your insurance premiums. This is due to higher real estate prices, permit costs, construction costs, increased costs of labour, material, etc.
6. Increased density = increased risk! The higher the density, the higher the risk to insurers. A tower is higher risk than a 4 storey walk-up due. When the penthouse leaks, you can bet that at least a few units below it are going to be damaged as well. Vancouver is seeing huge increases in density, making it a riskier market in general.
7. Vancouver is full of new buildings. Newer buildings are riskier as systems can often fail early on in the life of the building, and even though they should be covered by new home warranties, sometimes they are not, and this causes extra payouts to the insurance companies.
8. The Strata Property Act! The Act requires that Strata’s insure to full replacement value. If the Act allowed for strata’s to insure to a lesser amount, this could affect premiums dramatically, and allow for new, creative insurance products in our market.
9. Lack of competition! Remember the Insurance companies are global behemoths, and that Lloyd’s of London is essentially an Oligopoly. Lack of competition = less choices for consumers = high prices.
10. Water damage to flooring! Water is the #1 culprit to strata properties. Most newer strata properties now have in-suite laundry, as well as hardwood flooring. 20 years ago, you would simply lift your carpet and dry it out if you had a flood, but these days even a small amount of water requires the entire floor to be pulled and replaced. Lots of labour cost, and lots of material cost.
Looking for some help to navigate the crazy world of Strata Insurance? Reach out to our Vancouver Property Management company today!