The B.C. Government is amending its Financial Institutions Act to address the rising cost of strata insurance and bring more transparency to the industry.
Changes to strata insurance regulations taking effect November 1, 2020 will require insurers or insurance agents to provide 30-day advanced notice directly to strata corporations of their intention to not renew an insurance policy or of any material changes to the policy.
This change ensures strata corporations have advanced warning of cost increases and has time to seek other insurance options if desired. As well, insurance agents will be required to disclose their commission amount, or a reasonable estimate, to strata corporations. Insurers who fail to meet these disclosure requirements face penalties of up to $25,000 for an individual or $50,000 for a corporation.
Effective immediately, referral fees to strata property managers from strata insurance transactions are prohibited.
These amendments follow an interim report released by the B.C. Financial Services Authority (BCFSA) in June 2020. The report found that strata premiums have risen by about 40 per cent throughout the province on a year-over-year basis, with deductibles experiencing up to triple-digit increases over the same period.
Evidence also showed the industry has been incurring losses over the past three years from mostly minor claims (particularly those resulting from water damage) due to poor building maintenance practices and initial construction quality issues.
The data suggests that insurance has also been used to fill in the gaps left by other forms of protection such as home warranties for new buildings and maintenance programs for older buildings. Further, the exposure insurers have to earthquake risk in B.C. compared to other places has prompted many of them to reduce the amount of insurance that they offer.
The BCFSA will be releasing their final report and recommendations on the rising costs in fall 2020