Climate change a leading factor in climbing home insurance costs

Home insurance rates are on the rise across the country as claims due to severe weather events skyrocketed last year. Some property owners are opening their insurance renewals to find double-digit rate increases.

Brokers say they have been inundated with calls from customers who are seeing double-digit premium increases

A young couple surveys the damage to their home following a tornado in Dunrobin, Ontario west of Ottawa on Friday, Sept. 21, 2018. (Sean Kilpatrick/Canadian Press)

Home insurance rates are on the rise across the country as claims due to severe weather events skyrocketed last year. Some property owners are opening their insurance renewals to find double-digit rate increases.

"They are not happy, understandably," said Traci Boland, a partner at Ontario West Insurance Brokers.

Boland says small annual increases in the range of 2 to 4 per cent are expected as the replacement cost for homes rises with inflation.

"This year, we've seen most of the insurance companies in Ontario take rate hikes and they've ranged from, on top of inflation, 5 to 10 per cent," she said.

And those increases have sparked a surge in calls from clients wanting to know what's happening.

Severe weather claims reach record level

According to a recent report from the Insurance Bureau of Canada (IBC), insured damage for floods, windstorms, ice storms and tornadoes reached $1.9 billion in 2018.

"Up until about a decade ago, on an annual basis, insurance companies across Canada were paying out approximately $400 million a year due to severe weather," said Pete Karageorgos, IBC Director of Consumer and Industry Relations for Ontario.

"In the last 10 years, that figure has jumped on average to about $1 billion a year. Last year actually saw a record payout."

What makes 2018 unique is that there wasn't a single event responsible for the significant losses, such as the floods in Calgary in 2013 or the Fort McMurray wildfires in 2016.

"It's concerning to property owners that more and more properties are being damaged from severe weather versus traditional types of events that people would insure their home for; fires, theft, those types of things," said Karageorgos.

According to the IBC report, some of the largest claims stemmed from windstorms in Eastern Canada, which totaled over $700 million, ice storms and floods in Ontario and Quebec, which cost nearly $400 million, and summer storms across the Prairies, which caused over $240 million in damage.

Boland says that it's important to understand that insurance providers cover the entire province, so weather events that happen in, say, Toronto affect clients in other locations, and rates will increase for everyone.

"I would say that they are preparing themselves because our weather in Canada is becoming extreme. Our century storms are now every year and so they need to be prepared for this and do their due diligence and raise their prices so when these catastrophes happen, they have the funds available and they are able to help their clients," she said.

Changes in flood coverage

In the last five years, claims for water damage from floods, or what the industry calls "overland water," are now being covered.

"There's two types of water damage. There's sewer back-up, and that is what comes into your house up through the existing pipes," said Boland.

"Overland water comes when we have extensive rain storms where the water is on the streets and has nowhere to go and is coming into your homes through window wells, through doorways, or through cracks in your foundation."

Homes in Bolton, Ont. under water because of flooding from the Humber River. (@OPP_COMM_CR/Twitter)

Boland says coverage for sewer back-up has increased from $75 to $100 a year to $300, along with an additional fee of about $100 for overland water. She noted that the majority of claims associated with cracks in a foundation are not covered as they fall under home maintenance.

The cost of home insurance varies based on the value of the property and the extent of coverage. According to a 2018 study by J.D. Power and Associates, the median cost of home insurance in Ontario is about $1,280.

Rates expected to climb

As severe weather becomes more prevalent, the IBC is concerned for at-risk communities.

"There could be areas that are very high risk, that may be difficult or very expensive to get insurance, so the industry is trying to work with government to put steps in place to protect those high risk communities," said Karageorgos.

Until insurance providers process the changes in insurance claims for severe weather, people can expect to see more double-digit increases in the coming years.

How to reduce your premiums

Homeowners can minimize the chance of flooding by installing sub pumps with back-up generators, back-flow valves, insuring proper irrigation to direct water away from their home and ensure downspouts are properly positioned.

And homeowners have a choice when it comes to what they insure.

"If you have a fully finished basement, you want to make sure that you have enough coverage to replace everything," said Boland.

"If you have an unfinished basement, you can choose to only insure the furnace, washer and dryer."