We've seen and heard it all recently. Insurance rates going through the roof - 40...50...100...400% rate increases.
What is going on?
Simply put - the return on investment to insure condo buildings isn't there any more and it's creating a deep supply gap. Somewhere along the line, the risk profile changed that even fire resistive buildings weren't attractive anymore. Why?
Imagine a sprinkler pipe break on the 30th floor of a high rise building in the middle of the night. It's 1 am. Who knows how and where to turn the shut off valve? Who do you call? How long until that knowledge holder gets there? Even minute counts and until someone in the know gets there, water is flowing down floors continuously.
Another common cause of loss -back ups. Your sink backs up and you hear this waterfall coming out of your sink. What happens? Who do you call? The damage is already incurred and there's no way to stop it completely. How fast can the plumber or drain cleaning company get there? Each one of these events, while not nearly as significant dollar wise, can cost thousands of dollars to restore.
Multiply the various loss scenarios by the thousands of condo buildings across Canada and you have total dollar value of water damage exceeding fire damage.
With the intense competition for condo business over the 12 years that the soft market lasted, condos haven't had the need in the past to require the development of reactive processes to catch these events as soon as they happen, until the hard market in insurance happened. It's more important than ever to address these issues. Various fire protection systems exist - requirements for mandatory annual fire inspections, sprinklers, a monitoring station that calls a professional team of fire fighters for even the smallest of concerns. In good news, the technology is evolving to help. Sensors for water and temperature fluctuations and automatic water shut offs are easily obtainable that can help immediately react to water events, keeping in mind the effective environmental design of technology placement.
The conversations that need to happen are challenging. It requires boards to understand that insurance is only 1 means of controlling the risks involved with operating a condo building. Risk management practices will become more necessary and that requires expert advice with effective strategies that can lead the condo market to flatten the intensity of the transitions between hard and soft markets. Better to put the money back into the building to protect it for the future than to keep pouring money into premiums each year.
So what can condo boards do?
- Understand how your building operates
- Ensure that you are dealing with the root cause of water issues
- Get the right maintenance help - having just a maintenance contract in place isn't enough anymore. Develop a system of checks at regular intervals to ensure that your maintenance dollars are going to prolong the longevity of your mechanical systems.
- Develop reactive plans when they do happen
Want to chat about it? Email me at firstname.lastname@example.org.
Teresa Nguyen CIP CRM
Teresa Nguyen has extensive knowledge of insurance after spending years in risk management and insurance, understanding and placing hard to place risks in energy, construction and real estate. As a condo owner since 2010, she understands the challenges faced by condominiums, from insurance claims to maintenance to warranty issues and takes the time to understand clients' needs to provide the right insight and advice to her clients.