B.C. won’t cap skyrocketing insurance increases for strata condo corporations, but NDP ministers say they are introducing new measures intended to reduce risk and hidden costs they say should bring the price down eventually.
The government introduced legislation on Tuesday that would immediately ban the practice of insurance brokers paying referral fees to strata property managers who complete an insurance deal with them. It also says it will bring in new legislation in the fall to require agents to publicly disclose how much of payments the strata companies make for insurance is commissions.
Tuesday’s legislation will provide “more confidence that a manager has not been swayed by a referral fee,” Finance Minister Carole James said.
The changes that will be introduced immediately also include a plan to allow stratas to use their contingency reserves for sudden increases in insurance premiums.
Among the changes that will come through legislation in the fall are new requirements for disclosing commissions, which some have said can go as high as 30 per cent on top of the premium, and a requirement that insurance companies give corporations more notice of any increase or plans to deny coverage.
The fall legislation is also intended to fix what Ms. Robinson called a loophole introduced by the B.C. Liberals that allowed strata councils to avoid doing the annual report on their building’s condition and maintenance issues.
Finally, it will tackle the thorny issue of defining the boundary between a private condo unit and common property – vagueness in B.C.‘s legislation has made it unclear what exactly a strata corporation’s insurance is supposed to cover and what unit owners should pay.
All of those measures, Ms. James said, would help make the B.C. condo-insurance market attractive to more insurance brokers and improve pricing in the long run.
“There’s a challenge here of a lack of competition.”
The province’s actions come after six months of rising public concern about huge insurance increases for many of the province’s 32,000 strata corporations. Some have seen their costs triple, while individual homeowners who buy insurance sometimes have to get a policy with a deductible of $100,000 or more. A few strata corporations haven’t been able to get any insurance.
Tony Gioventu, the executive director of the Condo Home Owners Association of B.C., welcomed the new measures.
“All of these initiatives are certainly going to make a difference,” he said.
The Insurance Bureau of Canada has said part of the reason for the sudden increase is a combination of national and global issues that include massive natural disasters. But the bureau has also pointed to the rising cost of property in B.C. – a known earthquake-prone zone – and lack of adequate maintenance for some buildings. Water leaks are a major cause of insurance claims.
A report by the B.C. Financial Services Authority last week called B.C.‘s condo-insurance market “unhealthy,” after documenting that premiums had gone up 40 per cent overall for recent renewals.
That report also noted that another contributor to the problem was owners not getting personal insurance for their units, and corporations in new buildings making an insurance claim rather than using their new-home warranty. Those issues were not addressed in Tuesday’s announcement.
But, he said, it would also be good to have some kind of requirement for homeowner insurance.
“There’s work to be done on that. It would be very beneficial for strata owners.”
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