Many B.C. condo stratas are in a panic over the skyrocketing insurance costs for their buildings, but irresponsible strata councils bear some of the blame for these price spikes, says one Abbotsford developer.
While the insurance industry’s losses from environmental-disaster payouts are partly responsible, at a local level, frequent claims, low contingency reserves and poor maintenance by stratas also share some burden, says Diane Delves, president and CEO of Quantum Properties.
“Stratas are getting a bit of a bad reputation for too many claims under insurance,” she said. “There needs to be a fundamental change in strata insurance, how stratas maintain their buildings and how they handle their own insurance.”
Maya Sinclaire, who owns an older Abbotsford condo on Bourquin Place, said, after owning multiple units over the years, she has seen how poorly stratas use insurance claims.
She said her building’s insurance deductible jumped 500 per cent in a year – from $5,000 to $25,000.
“The problem, the way I see it, is that there are too many people in between the damage and people who pay for it,” Sinclaire said. “I am not at all surprised by the rates going up.”
Sinclaire, who describes herself as “handy,” said her unit once had a renovation for damage that she could have fixed for $700. She told her strata that she wanted to fix it herself. Instead, they made an insurance claim that ended up costing thousands in “artificially inflated costs.”
“Many [trades] people came to measure and photograph – they all happen to come at the same time, thus literally fighting over who will get to do it first, then they all left,” Sinclaire said. “They usually appeared out of blue and then disappeared forever.”
Sinclair said she only discovered what these contractors charged the strata after seeing a bill by accident. She said she saw a $250 disposal charge, even though there was nothing to dispose of; a fire alarm was checked and re-installed at the price of a brand new one; and they charged hundreds for the removal and installation of a dishwasher, “even though the unit had no dishwasher.”
“At least insurance companies let owners see the bill,” Sinclair said. “I was not allowed, even though I asked.”
Delves said strata councils shouldn’t be making insurance claims unless there is a catastrophic event.
“You should never be claiming for small amounts. [If] you hit up your insurance for $10,000 to $20,000 too often, they’re just not going to want to do business with you,” she said. “Somebody’s dishwasher floods and wrecks the flooring of three units [and the repairs cost] $15,000. Your insurance agent shouldn’t even hear about that.
“The strata should just take care of it.”
But the huge insurance increases have also been seen in brand-new buildings in Abbotsford with no claim history.
In January, the owners of brand-new Mahogany Tower were shocked to see their strata’s insurance broker had quoted them a deductible of $588,000, an increase of 780 per cent from the previous year.
Delves said, because Mahogany Tower is such an expensive building, there were fewer insurers and the risk had to be spread across eight to 10 groups.
“It was a bit shocking with [Mahogany, of course, because it is a brand-new building, built to the highest seismic requirements. It’s a brand-new quality building with a warranty,” Delves said. “Because you’re bringing in the players that don’t really want to be in the business, they are going to charge a risk premium for being on the insurance certificate.”
While Mahogany Tower’s strata was able to get the quote decreased to $241,000, other councils around the city are facing similar spikes.
Another Abbotsford condo owner, Peter Bryant, said the increases are frightening owners on a fixed income.
“We’re older, we’ve worked 50, 60 years, we’ve put all our money together and finally got a little hole in the ground that you can hopefully sell and put yourself into an extended care unit someday,” Bryant said. “There are a number of folks that I know… that are very close to losing their properties.”
Bryant said if stratas are mandated by the provincial government to have insurance, and insurance companies won’t insure them, the government needs to step in.
“What are those folks going to do?… How can you even sell the property?”
There is an expectation in the development industry that the insurance market will correct itself, Delves said.
“At what point that happens, I don’t know. We’re watching the situation pretty closely,” she said. “When you jack up the costs like that, you’re going to find more people entering the market to compete, because if they are offsetting past losses, there’s a pretty darn good profit in what they are charging now.
“We’re hoping it’s not an ongoing issue … It is a bit of an unusual market, though, because there aren’t that many players.”
[CORRECTION: The story previously stated that Hub International was the insurance broker for the strata at Mahogany Tower. BFL is the insurer for the building.]