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Langley condo owners reeling after strata insurance deductible jumps from $5K to $250K

Apartment and condo owners face staggering insurance increases
Many strata owners are facing massive increases to their insurance premiums. Jill Bennett has the shocking numbers, and the reasons for the increases.

Residents of a condo complex in Langley are reeling over what they say is an inexplicable massive hike in the cost of their strata insurance.

Kevin Froese and Jacklynn Loewy bought their unit brand new in 2015 but had to stretch their budget to make it work.

“We did our homework,” Froese told Global News. “We were shocked.”

“We felt very assured that we had purchased in a brand new building and would not encounter any massive disasters or huge unforeseen expenditures in the foreseeable future.”

READ MORE: B.C. condo owners brace for sticker shock as insurance rates surge ’50 to 300%’

Fast forward to December 2019 when the 181-unit strata got word that their strata insurance deductible would climb from $5,000 to $250,000 for water damage, with owners required to carry their own personal policies up to that amount to cover the gap.

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Froese said the couple struggled to even find an insurer that would sell that policy.

The strata’s insurance premium also skyrocketed from $97,000 to $371,000.

Strata insurance rates about to jump
Strata insurance rates about to jump

“Keep in mind this is a now three-year-old building with zero claims,” Froese said.

Strata council president Adrian Kroll said residents are also getting reduced coverage under their new policy.

“A lot of insurance companies have left the condo market, we don’t know why, our broker doesn’t really know why,” he said.

“Nobody’s willing to tender offers to insure, a lot of companies are reducing the amount they have exposed to in the insurance field, so it becomes a battle for the broker to try and find an insurance company that’s willing to take on a project this big.”

Froese and Loewy aren’t alone in facing sticker shock.

In November, the Condominium Home Owners Association (CHOA) warned owners that they could see rates climb anywhere between 50 and 300 per cent in the new year.

READ MORE: New rules mean Alberta condo owners could be on the hook for $50,000 in deductible costs

CHOA executive director Tony Gioventu said one-factor insurers are dealing with is a massive spike in the value of appraisal for construction replacement.

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“We’re seeing buildings that were constructed five years ago that had an appraised value for construction and renewal at about $60 million,” said Gioventu.

“Today we’re seeing that those same construction-insured appraised values for full replacement value are somewhere around $120 million to $150 million.”

Under B.C. law, insurers are required to cover the full replacement value for a building, Gioventu said, meaning insurance companies are on the hook for tens of millions in the case of a catastrophic fire, flood or earthquake.

He said with the limited number of insurers active in the market, companies are looking for ways to limit their higher risk.

Light at end of tunnel following Oliver condo fiasco
Light at end of tunnel following Oliver condo fiasco

“It’s going to be about supply, demand. It’s going to be about capacity to insure in the event of some sort of major catastrophic event, is it possible for the industry to actually sustain that?”

Rob de Pruis, director of consumer and industry relations with the Insurance Bureau of Canada said there are tens of thousands of strata unit owners in B.C., most of whom are not seeing hikes like Froese and Loewy’s building.

He said in other cases, insurance hikes for some owners could be linked to underlying risks, such as claims history or the repair and maintenance history of the building.

Even location could play a factor, for example, in the case of earthquake or flood risk, he said.

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“The biggest piece of advice that we can offer is to make sure that they’re having a conversation with their insurance representative, to understand what some of the reasons are behind some of these increases, and to let them know that they do have options,” he said.

De Pruis said it’s also incumbent for owners to shop around, noting that not all insurance brokers have access to the same products and insurance markets.

Gioventu said growing insurance costs could leave owners struggling to renew their mortgage if they can’t find coverage they can afford in time.

READ MORE: Alberta government has ‘not talked about a cap’ on soaring condo insurance rates

He also said it could suck up money a strata would normally put aside to cover contingencies or for proactive maintenance — a situation he said could actually contribute to larger insurance woes in the future, if building upkeep and upgrades aren’t attended to.

Gioventu said owners looking to keep insurance costs down should look at bylaw changes (such as those banning gas barbeques) and dedicated maintenance programs to keep their risk down.

But those kinds of tips are cold comfort to Froese and Loewey.

“Everybody knew there was going to be some insurance stuff, some change, but everything I read said a 300 per cent increase was going to be the worst-case scenario,” said Froese.

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“But we’re a brand new building. We’re three years old and we’ve never had a claim. So how did we become the worst-case scenario? And what happens to people who’ve had claims? Or next year?”