What’s behind the rising cost of Home insurance?

Insurance premiums are based on what insurance companies calculate they’ll need to pay out in claims. Different companies have their own way of trying to predict future claims, but ultimately, more claims lead to higher rates, and that applies across the industry.

To continue providing security for clients, insurance companies have to adjust rates in response to increasing claims costs. It‘s unwelcome news for clients, but here’s an explanation of why it’s happening and what you can do to manage costs.

Extreme weather is on the rise

Every year, the Insurance Bureau of Canada (IBC) publishes a “Facts” book about issues and trends in the Canadian insurance industry. It’s available online for anyone to read.

In 2017, the IBC stated "Our changing climate is creating more weather extremes - more rain, more heat, more drought, more wind... In Canada and around the world, climate change is not a future threat but a present danger.”

With this trend, we’ve seen significant increases in catastrophic losses across Canada, which have reached an average of over $1 billion per year, according to the IBC. Unfortunately, this costly trend is expected to continue, and the resulting rate increases will likely be industry-wide.

MKT647 Chart-p Catastrophic losses in Canada in $000,000,000, 1983 to 2017 1983 1985 1990 1995 2000 2005 2010 2015 6.0 5.0 4.0 3.0 2.0 1.0 0 Loss + Loss Adjustment Expenses in 2017 dollars Source IBC, PCS, CatIQ, Swiss re, Munich Re, Deloitte Estimated Trend Line IBC Facts 2018
Insured losses for a given disaster are deemed catastrophic when they total $25 million or more.

Working toward change

In the past decade, insured losses from natural disasters have more than doubled. As an insurer, we believe we share the responsibility to educate, prepare and equip Canadians to adapt to climate change.

Until 2015, Canada was the only G7 country without residential insurance protection for overland flooding. With our Comprehensive Water product, we’re making this coverage available for all homeowners*, even those most at risk of flooding.

Managing your premium costs

We continue to ensure the rates we charge are based on the actual risks we insure. To continue to protect you from life’s uncertainties, we’ve changed how we calculate rates to more precisely reflect a specific property and the risks it faces. But there are some things you can do to help manage your insurance costs, depending on the specific risks affecting your property.

  1. Update your information – tell us if you’ve updated your home’s plumbing, wiring or roofing. It could help lower your premium.
  2. Review your coverage – schedule a complimentary Client Review. Together, you and your Financial Advisor can go over your coverage.
  3. Adjust your deductible(s) – in some cases, increasing your deductible may help lower your premiums. Contact us to see if making a change will help you.
  4. Bundle your coverage – consider us for all your insurance needs to maximize discounts.
  5. Talk to us about your specific risks – we can tell you the biggest risks facing your property and suggest additional actions to protect your home and reduce your premium.

Wind or hail risk

  • Replace older roof or siding with weather-resistant products
  • Increase your deductible

Fire risk

  • If practical, replace wood heating (other than a fireplace) with another heat source like propane
  • Install a fire sprinkler and/or central monitored fire alarm or heat detector system

Plumbing risk

  • Replace older plumbing
  • Install an automatic water shut-off system and/or central monitored water sensor system
  • Increase your deductible

Crime risk

  • Install a central monitored alarm system

*Not available in Manitoba or Quebec.