REPORT: Home insurance premiums take a dip while condo rates continue to climb

Homeowners received some good news in the first quarter as prices to insure their homes have dropped in Ontario, Alberta and B.C. However, the same isn’t true for condo owners. Prices for condo insurance saw double digit increases in B.C. and Alberta, and a 9% rise in Ontario. 

These are the main conclusions of the latest Home Insurance Price Index, which LowestRates.ca publishes so consumers can see how property insurance prices are changing and understand the market.

Key highlights from the report: 

• Home insurance premiums are down: Better deals are to be had for consumers as insurance companies look to grow their business.

• Condo insurance continues to rise: There’s no reprieve for condo owners, who face rising rates due to aging infrastructure, increasing deductibles and a lack of competition in the marketplace.

• Property insurance outlook: After a hard year, the majority of Canadian insurance companies were profitable in Q1 2021 — but still have to balance profitability with future uncertainty. 

How to use this index: The index is created from the hundreds of thousands of insurance quotes we get every year and shows whether prices in Ontario, Alberta and B.C. are rising or falling. Here’s how it works: Our baseline is set at 100. This means that if our index increases from 100 to 101, prices have increased by roughly 1%. This index doesn’t factor in inflation.

Part 1: Provincial breakdown of home and condo insurance rates (Q4 2019 - Q1 2021)

Ontario 

Alberta

British Columbia

Part 2: Home insurance rates are down 

On an annual basis, home insurance premiums were down 1% in Ontario, 6% in Alberta and 12% in B.C. 

A larger number of Canadians working from home due to the COVID-19 pandemic has had an interesting side effect on home insurance: there are fewer opportunities for damage to occur from fire, flooding or theft. 

"A lot of losses happen when people aren’t home," says Justin Thouin, co-founder of LowestRates.ca. "Fire or water damage happens when people aren’t home, or the damage is more extensive when they aren’t there. There’s fewer of those losses."

In general, insurance claims generated from isolated damage to individual homes are on a smaller scale compared to significant and widespread insured damage caused by wildfires, flooding, hail and tornadoes. Even though losses continue to increase for insurance companies as extreme weather becomes more frequent and severe, the last year hasn’t been as eventful (or expensive) in terms of catastrophes. 

The biggest factor behind insurance rates is replacement costs, and those costs are factored into your insurance policy

For example, Intact Financial, the largest property and casualty insurance provider in Canada, said in its 2020 annual report that weather-related catastrophe losses fell 45% between 2019 and 2020, from $326 million to $205 million.

"A large part of property insurance is catastrophic events," says Thouin. "When we see fewer of those, you should see a downward pressure on rates. However, climate experts are predicting that climate change will increasingly make weather even more extreme or unpredictable in parts of the country. In the coming decades you might see areas that may have been relatively safe from disasters such as flooding, now are prone to flooding."

The insurance industry cycles between hard and soft markets, where carriers either tighten or ease their capacity to take on new business based on how much money they’re bringing in and how much they pay out. When more capacity becomes available and companies are looking to grow, a wider amount of coverage offerings drives prices down. In short, more competition is good for consumers.

Currently, Canada's property & casualty insurance industry is in a hard market. The P&C umbrella includes home and condo insurance, auto insurance, commercial insurance and professional liability. Different sectors were hit harder than others, but overall, 2020 saw the industry’s “lowest level of profitability since 2001,” according to a recent report by the Property and Casualty Insurance Compensation Corporation (PACICC).

But after a tough year, there are signs of recovery: claims are lower across the P&C industry, investments are up, and 87.5% of Canadian insurers reported profits in Q1 2021, according to PACICC’s report. And even in a hard market, Alberta and B.C. residents are finding lower home insurance premiums on LowestRates.ca thanks to a broader offering of home insurance carriers on our site. 

Because hard market conditions affect consumers who are shopping for insurance or renewing their policy, it’s beneficial for consumers to compare quotes and work with an insurance broker, who can help find discounts and other opportunities to save money while advising on the appropriate amount of coverage.  

Part 3: Condo insurance premiums continue to climb

Year-over-year, condo insurance increased 9% in Ontario, 16% in Alberta and 27% in B.C. It’s a growing issue in condo-centric Toronto and a longtime issue in B.C., where around one-third to half of the province’s population lives in strata housing. B.C. is the only province to use the term “strata,” which refers to a building or property that contains both individually owned units and shared common areas, such as condos, townhomes, duplexes or a strata subdivision with detached homes. Just like condo corporations, strata corporations are responsible for “managing and maintaining the common property and assets of the strata development for the benefit of all of its owners,” according to the B.C. government. 

We could continue to see downward pressure on rates. The question is, how aggressive do [insurance companies] get with it?

Both unit owners and the condo or corporation need to have their own policies that cover individual units (unit owners) and common areas, the structure itself and the exterior (condo corporation). When the condo corporation’s insurance policy is faced with rising deductibles, those costs are passed on to unit owners.

The B.C. government announced a number of regulatory changes last year aimed at bringing more insurance providers and (and therefore more competition) back into the province’s market. But the insurance industry doesn’t move quickly, and tends to work in cycles of 12-18 months. At the end of 2020, the BC Financial Services Authority predicted in a report that “it will take time to bring the market back to a healthy state, possibly years.” 

Unfortunately for condo owners, there hasn’t been much movement on this front — but it’s a trend that LowestRates.ca will continue to track. 

Part 4: Looking to the future 

How predictive are current trends of the future? Like home insurance, the auto insurance industry has seen fewer drivers on the road and as a result, fewer collisions and claims. While the COVID-19 pandemic shifted people’s habits, it’s difficult for insurers to build that into their future pricing. The addition of flood insurance to some Canadian insurance companies’ offerings starting in 2015 is also affecting their business, as water damage is the number one culprit behind home insurance claims. 

Insurance companies depend on both premiums and investment returns to have enough money to pay out customers’ claims, and have faced several years of low returns on their investments. When the COVID-19 pandemic hit in early 2020, it aggravated existing financial strains and heightened economic uncertainty as oil prices dropped and the stock market experienced volatility. But after riding out a challenging year, the PACICC reported that 87.5% of insurers reporting profits in Q1 2021 was “the most widespread profitability” the Canadian property & casualty industry has seen since 2007.

"We could continue to see downward pressure on rates," says Thouin. "The question is, how aggressive do they get with it? As these factors come in, every insurance company assesses it a bit differently from their perspective."

Even though some insurers are benefitting in the immediate term, it’s still an uncertain time. There are a few things that could offset potential savings, such as inflationary pressure and fluctuations in the cost of lumber. Insurance companies also have to factor in the availability and cost of labour. 

"The biggest factor behind insurance rates is replacement costs, and those costs are factored into your insurance policy," Thouin says. "If the cost of lumber or labour goes up, theoretically, the cost of repairing or replacing your house will go up in some proportion."

Conclusion 

The Home Insurance Price Index is a snapshot of the market, but home and condo insurance rates are constantly changing. There are a number of factors that may raise or lower premiums as an individual, such as the deductible, where you live, the amount of coverage you choose and your personal claims history.

Even when average premiums go up or down as a whole, not all insurance companies raise their rates every year, or by the same amount. That’s why it pays off to compare quotes from multiple companies using LowestRates.ca.

Note to readers: Since publishing our last report, we changed the way we calculate the Home Insurance Price Index. Our new method calculates different outlier bounds per quarter, which ensures the index isn’t skewed by very large or very small premiums that aren’t reflective of LowestRates.ca’s typical consumer. This means there are small discrepancies with numbers published in our previous indexes, but the overall patterns remain the same.