Extreme weather conditions are forcing the Canadian insurance industry to look at raising premiums and changes to its approach, which means consumers may soon have the ability to see how their coverage is broken down and select the parts they want to keep in order to save money, says a local insurance broker.
Consumers will also have to become more educated about insurance practices, and choose coverage based on where they live and what kind of weather exists in the area, says Valerie Stephens with Aqua Insurance Brokers in St. Albert.
“The consumer needs to spend the time to understand what their home insurance policy covers and the option that they have to change some of their coverage and or deductibles,” she said.
Claims on the industry reached $3.2 billion last year, after flood, hail and ice storms caused devastating damage across the country, reported the Insurance Bureau of Canada (IBC).
The storms across southern Alberta alone cost the industry more than $1.7 billion. Similar storms in southern Ontario reached $940-million in claims since 2013.
In recent years, hail and flood damage has started to exceed fire and break-ins as a source of insurance claims in Canada, said Stephens. This forces companies to raise their premiums to keep up with an increased number of claims, but also to educate consumers on future options for insuring their homes, said Stephen.
That includes showing consumers how premiums are broken up into different coverage, and how much each costs – rather than lumping them all together.
“So if you are in northern Alberta where you don’t really get hail, that can be a special limit to your coverage that says I am only going to buy $20,000 of hail coverage,” she said. “Versus if you are in Pigeon Lake where they get hail every second day you might say I need $120,000 worth of coverage.”
But as some premiums have already risen anywhere from five to 30 per cent, Stephens is not alone in saying that companies struggle with how to properly price properties so that everyone can afford a sufficient level of insurance.
Kim Sword, owner of Sword Insurance Agency in St. Albert, said it may take another five to 10 years until the industry finds a way of dealing with the increased cost of severe weather conditions. By then, he suspects that instead of raising premiums, insurance companies may opt to take away some coverage entirely.
That could mean paying $1,000 on house insurance but not being covered against hail damage any longer, rather than paying rates of $3,000 to $4,000 to cover your house against everything as was done in the past, he said.
“Insurance can’t continue to pay for home building qualities or workmanship, and it can’t be a maintenance policy,” he said. “Homeowners will have to take more responsibility and be aware of what a house is and not just buy it and think it’s all good.”
While some areas are more likely to experience severe weather – such as Red Deer’s tornado alley or High River’s flood zone – St. Albert has a history of being one of the best places for property insurance, he said.
The city has fewer issues with weather and property damage-related claims, he said, which means it will shoulder less of the brunt of rising costs for insurance than other communities.
He added that it remains worthwhile to shop around as rates will continue to differ among companies, based on how many clients they have in disaster-prone areas.
“Instead of just typically renewing your insurance, now is a good time to shop around,” he said. “Yes, there are disasters. Yes, rates are going up. However there are still some great deals to be had.”