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Due to the pandemic, inflation and supply chain issues, many things have increased in price over the past year. A new report cites that home insurance rates in Ontario will be increasing in 2022, as well. It is projected that a variety of factors will drive premiums up by at least 5%. Let’s deconstruct why your home insurance premiums will see this increase, and how to save money on your premiums.

Like many homeowners across the country, you may be renewing your policy and discovering that the rates keep going up. Rising material costs in construction, supply chain disruptions and climate change have all played a role in driving premiums up. According to RATESDOTCA, an insurance comparison website, the average cost for home insurance in Ontario in 2021 was $1,342. A 5% increase would translate into a rise of $67 per year, making the average cost $1,409 annually.

While the recent pandemic can be partially accountable for the surge in inflation and supply demands, residents in Ontario have seen their home insurance rates increase by an average of 63% between 2011 and 2021. In the same study, data confirmed that the average cost of homeowners insurance increased more than three times the rate of inflation over the last decade!

THREE MAIN REASONS FOR INCREASES

According to IBC data, personal property claims have more than tripled since 1996. This mean it is up 213%, from $2.3 billion to almost $7.2 billion. Even if you’ve had no claims, you could still see higher premiums than you expect. But why? These homeowner rate increases are likely being driven by three significant factors:

  1. Higher prices for building materials
  2. Extra costs due to supply-chain disruptions
  3. The escalation of extreme weather and natural disasters.

Let’s take a closer look at how each of these factors play a part in your rising premiums:

CLIMATE CHANGE

Extreme weather events and catastrophes are becoming more commonplace. As forest fires, storms, floods and other weather events increase in frequency, they will continue to cause extensive damage. As a result, homeowners will experience more costly claims in the long run. Extreme weather caused by climate change has resulted in millions worth of insured damages, and steady increases in insurance premiums. According to an Insurance Bureau of Canada study, severe weather across the country last year translated to over $2 billion dollars in insured losses.

Some of the severe weather conditions contributing to losses were:

  • Tornadoes in Barrie, Ontario led to insurance losses of $100 million
  • Flooding and wildfires in BC in November, lead to losses of more than $450 million
  • Alberta holds several of the most expensive events in history due to flooding, wildfire, and recent hailstorms
  • Hurricane events on the East Coast, as well as many others across the country

The IBC report recognizes that rising costs for goods and services, bigger, fancier homes and aging infrastructure all play their part as well. However, the main culprit for increased claim rates and rising insurance costs is extreme weather. Ice storms, severe cold snaps and heavy rainfall took their toll on our homes, and both climate change and severe weather is leading to large insurance losses.

The foundation of insurance is based on the philosophy of spreading losses of the few among the many. When there are huge losses, they will push up premiums for all customers.

“Climate change is already having a direct financial impact on individual Canadian homeowners,” said RATESDOTCA managing editor, Jameson Berkow. “Everyone should be motivated to take action on climate change, but this data should add even more incentive by putting a clear dollar value on the costs of inaction.”

Speak with one of our isure representatives to discuss ways to implement greener solutions to help lower premiums. We can explain how eco-friendly features, like solar panels, energy-efficient windows/doors, and high-efficiency appliances, are a great choice for savings on home costs while helping the environment.

RENOVATIONS

With Canadians locked down during the pandemic, insurers noted that more people were staying home and using vacation funds to update and improve ‘staycation’ dwellings. Renovations to primary residences and secondary residences, like cottages, were on the rise as Canadians focused their lockdown energy on home improvement projects.

Investing in your homes will make them worth more. Home renovations increase the cost of rebuilding, which in turn, drives premiums. According to Statistics Canada, Canadians across the country applied for 212,523 residential alteration and improvements permits from January to November 2021.

Any type of upgrades, from finishing your basement or adding on an addition, will affect the overall value of your home. So, as renovations have increased home values, the cost of home replacement has also gone up with it. Year over year, if your replacement cost increases, your premiums will fall in line with it.

It is also important to note that inflation costs of building materials, the age of your home, your postal code, and fluctuations in crime rates are other factors that affect home insurance rates in Ontario.

REBUILDS

Pandemic-induced supply chain disruptions and changes in consumer purchasing behaviour have led to surges in building material costs. Shortages in lumber, among other materials, is also driving up insurance costs. Insurance rebuilds due to fire, weather or water damage are costlier than construction costs from privately arranged contractors. If you’ve suffered a loss, insurers must rebuild your home quickly in order to move you back into your home.  Insurers must also account for the accommodation costs they must pay for you while your home is being rebuilt.

OTHER FACTORS CONTRIBUTING TO INCREASES IN HOME INSURANCE RATES IN ONTARIO

Here are some other important factors that contribute to rising premiums, as reported on the Economical Insurance website:

  • Municipal infrastructure is getting older: Outdated infrastructure and a higher demand for water makes sewer backups more frequent, resulting in more damage-related claims.
  • Intense population growth: In Toronto, for example, the surge in population has caused a serious strain on electricity generating and distribution resources. This increase in demand—up 58% since 2009— has resulted in an increasing number of brownouts and blackouts.
  • Neighbourhood trends: As neighbourhoods grow, demographics and risks will change. New commercial developments being built in primarily residential areas and new subdivisions being built might alter municipal infrastructure and risk.
  • Increased costs: Emergency services, skilled trades and our personal belongings are more expensive. Inflation means higher prices for emergency services and labour costs for repairs when we need them, making paying for claims more expensive, as well.
  • Eco (but not budget)-friendly: While we all are trying to do more to help the environment, it should be noted that it will likely result in higher costs to you, the homeowner. Items like solar panels and energy-efficient appliances will cost more to repair and/or replace should they break. This is factored into your home replacement cost when renewing your homeowners’ policy.

WHAT CAN YOU DO? 

As a policyholder, you may not be able to control these rising rates, but you do have options to potentially lessen the effects of a rise in home insurance premiums:

  • Discounts: Some insurers offer discounts that can help bring down premium prices, including discounts for properly-installed and monitored security systems, fire alarms and claims-free discounts. If your insurer doesn’t offer any, ask our isure brokers to help shop around for better rates.
  • Soft credit checks: Insurers can run a soft credit check that may lead to lower premium prices if a homeowner has good credit.
  • Increase deductibles: The higher your deductible, the lower your insurance premium will be. Policyholders should choose a deductible that they are able to pay in case of an insurance emergency.
  • Membership/employment discounts: Some companies and professional organizations offer group rates for insurance.
  • Bundling: Consumers can save by bundling home and auto insurance together with the same provider.
  • Proper coverage: One of the most common insurance claims is flooding. When it comes to water damage, there can be big differences between policies offered, so let’s find the best one for your needs.
  • Compare: You should be careful not to shop by price alone and to compare policies carefully.

In the wake of record catastrophic weather events, bigger or more expensive homes, and aging infrastructure, insurance companies will be looking to raise premiums in 2022. Speak with one of our isure representatives to discuss any questions or concerns you have regarding these increases and ways to potentially help offset these costs.

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