Some Final Thoughts
Some Final Thoughts
I can’t help but wonder what got us into this mess. I still think part of it, clearly, are claims caused by water, and I know that PEX and CPVC piping are less expensive materials that just don’t last as long as copper, and just seem more likely to fail. The fact that there are a myriad recalls and class-action suits doesn’t help.
Maybe the global market with stress from catastrophic claims has contributed, but again – the global price of hardwood has little to do with the price of a Slurpee in 7-11, so I don’t buy that one. Maybe the piece that I mentioned about training and mentoring adjusters is right, in that we are telling them to seek out subrogation opportunities, but not teaching them the difference between viable subrogation, and subrogation that is just going to be abandoned. The insurer has every right to recover, where it’s warranted – but there has to be a limitation on how long they can pursue a builder. As builder’s policies increase in price, the cost of building increases, meaning the costs of strata building policies increases, and the cost of the strata owner’s policy increases, and so on ad infinitum.
I still think it’s time for government to step in, or threaten to. If Alberta, the most pro-business laissez-faire province in the land, can cap deductible subrogation at $50,000, then surely BC could do the same. As a start, it would nearly guarantee that every strata building deductible moved up to $50,000, allowing a relief valve for the building insurers – and perhaps letting them settle the building deductibles back down to $50,000 where they’ve exceeded that amount. It would give both homeowners and their insurers the peace of mind that there is no gap in coverage (hopefully, for the homeowner) and that exposure is limited (for the insurer). And the threat of intervention would certainly rattle the cages of some insurers and bring them back in line.
The thing the government can’t do is back-stop the strata building insurers. I have seen that suggestion bandied about, and I think it’s probably a non-starter. No matter what, the government won’t backstop something that benefits individuals that can afford home ownership in BC. It’s too narrow a band, it would be discriminating against those that couldn’t purchase a strata unit, and it would mean that it would unjustly enrich a designated class.
It’s interesting that, as I’ve been writing this post over the last week, this subject has again popped up. The BC Government through the BC Financial Services Authority has released a statement – hooray – and says that a full report might be taken by the fall. There has been no indication as to when any action would be taken. To quote from the Canadian Underwriter Article:
“despite large increases in the cost of insurance, the situation has yet to stabilize, likely meaning further increases for condo councils, known as strata councils in B.C.
The report says some councils are at risk of not being able to obtain full insurance coverage for the buildings they oversee. Authority vice-president Frank Chong says B.C.’s earthquake risk and insurance losses over the past three years from numerous minor claims due to poor building maintenance are among the reasons for the higher costs.
Chong says a final report will be completed by this fall after consultations with the government, the industry and condo owners.”
Canadian Underwriter, June 16, 2020
For the record, the BCFSA is the regulator that oversees insurance companies in BC that aren’t federally regulated. Essentially, that means that what the BCFSA says has little weight – they don’t regulate the federally regulated insurers, who are the ones that have the appetite for these large properties. Most of the provincially-run insurers have limited large commercial and large residential exposure, and then are often not taking lead positions on those policies. Big national – and international – insurers are the ones doing most of the underwriting, and they are controlled by federal Offices of the Superintendent of Financial Institutions (OFSI).
It also seems that this has gained a lot of public interest. I was contacted by CBC news this week who was running a piece on the strata insurance problem. They wanted to interview me for the piece, but of course I’m in a conflict with that, so I had to pass. It’s too bad, as (clearly) I had a lot to say.
I admit I don’t have a solution to the problem, although I like the idea of a “tower”. I have thoughts, especially considering I’m struggling through this with my own strata building (which has not been resolved yet, as of the time of writing). I just want what anyone wants: adequate coverage, affordable coverage, and the security that when I renew my policy in August, my policy won’t leave me on the hook for part of a deductible. Right now the coverage is both inadequate and not affordable, and gives me no security. I don’t think I’m asking much as a voter, taxpayer, and homeowner.
It is important for me to reiterate: these thoughts are my own, and are not a reflection of the policies or practices of my employer.
One thought on “The BC Strata Insurance Crisis”