By Shannon Moneo | Photo by Cox Development
Tony Gioventu happily lives in a 250-unit, Vancouver-area strata condo. He’s also executive director of the Condominium Home Owners Association of BC and so has inside knowledge of climbing strata insurance and deductibles that have blindsided many strata owners.
Gioventu is blunt in his diagnosis of skyrocketing rates.
“People weren’t acknowledging their claims history,” he says. Over the last five years, very expensive claims have occurred in B.C., often due to the behaviour of condo owners and managers: older pipes weren’t replaced, gas barbecues on balconies of wood structures or smoking caused fires or maintenance and repairs were neglected.
Early intervention is crucial. “Stratas need to work on long-term planning and figure out what needs to be fixed. If you wait for things to fail, it can cost 30 to 60 per cent more,” he says.
Information Up Front
Sarah West, a Royal LePage Coast Capital realtor, has been selling properties in the Victoria area for seven years, and she’s seen how anxiety over strata insurance has altered her business.
“Buyers are being more cautious for the first time in a while,” she says.
In response, most realtors are now putting insurance information out front in their listings for fellow realtors, so that buyers’ inevitable insurance questions can be readily answered. In the past, that information was buried in strata documents, which had the potential of being overlooked.
When strata corporations purchase insurance, it covers the building and common areas, such as the lobby, elevator, parking lot or fitness facility. Strata insurance also pertains to anything built or fixed inside a unit by the developer during original construction. When owners purchase insurance, it is for their personal belongings and anything added beyond what the developer installed.
Stratas that have had the biggest premium and deductible hikes and have had numerous water claims, such as tubs overflowing, malfunctioning hot water heaters or leaks in common pipes within a unit, West notes. Poor maintenance and apathetic owners are critical factors, while larger and/or older structures carry more risk.
Some of the problem relates to how stratas are marketed.
“Developers sell stratas as carefree living,” Gioventu says. For some, that translates into low-cost living, but that has serious implications.
“Look at new developments. They keep fees low at the start,” Gioventu says. In reality, they should be two to three times more to cover future costs, including insurance.
As well, the rise in high-rise stratas, with high-end finishings, has been a notable contributor to costly insurance claims, Gioventu says. Marble or hardwood floors, spa-like bathrooms and granite countertops are driving the insurance upsurge. If a tenant on the 20th floor lets their bathtub overflow, imagine the cost to replace hardwood floors five or more floors below.
The Global Effect
The president of the Vancouver Island Strata Owners Association Wendy Wall lays some of the blame on recent worldwide disasters — floods, typhoons, hurricanes and wildfires — and their effects on the insurance industry.
“It comes down to a business getting hit by massive global losses,” she says.
A shrinking pool of insurers, a growing number of strata properties and B.C. being an earthquake risk, has led to the spike in costs/ deductibles, she says. Last April, her 100-unit strata almost couldn’t get insurance. After a three-month extension, insurance was secured, but at a 200 per cent increase.
Wall is also aware of stratas where one insurer cannot cover all of a strata’s requirements.
“Some policies have 32 different insurers,” she says, “Some can’t find 100 per cent coverage. It’s unprecedented.”
As well, rising deductibles are causing much angst for individual owners when the strata lays blame on owners. If a deductible has jumped to $100,000, any claims under $100,000 are not covered by insurance. If found responsible, say for a failed in-unit washing machine hose, the owner is on the hook for the $100,000 deductible.
West advises owners to find insurance riders, often expensive, that protect them from deductible distress.
Stay Connected
But finding a satisfying remedy isn’t simple, given the competing players — strata boards, individual owners, insurers, property managers. The big message is to be as proactive and educated as possible. No one wants a policy with exclusions, such as no coverage for the roof or pipes, Gioventu warns.
“Strata corporations need to closely look at a five-year renewal plan,” he also recommends. Owners need to be involved and pay attention. And several months before the insurance renewal, cultivate good relationships with the insurance broker and property manager.
