Addressing the strata insurance crisis in British Columbia

Jul 14, 2020 | 41-5, Bills, Blog, Governance, Video | 0 comments

Over the past year there has been a growing crisis in skyrocketing insurance premiums for stratas.

This has created a desperate situation for the more than 1.5 million British Columbians (30%) living in a strata building. People are fearful that the security of their homes is threatened and many are concerned if they are even able to afford their homes.

This issue is complex and I have done my best to illustrate the complexity in my response to Bill 14. Unfortunately, this legislation is only the “first steps” with many of the long-term problems still needing to be addressed, and the short-term affordability issues are yet to be resolved.


A. Olsen:

Thank you for the opportunity to speak to Bill 14, the Municipal Affairs and Housing Statutes Amendment Act. I actually appreciate the opportunity to speak following the member from Abbotsford West. I don’t believe that I will be coming with as much bluster, but I do appreciate both the words that he shared about the challenges with this bill and, as well, always appreciate when members provide ideas that can be debated for us to discuss.

I think that it’s important to acknowledge that we also, in the B.C. Green caucus, have been hearing from British Columbians over the past year about the substantive challenges that people are facing, British Columbians are facing, as they’re hit with some of the largest insurance rate increases that we’ve ever seen in the province. We’ve been hearing these stories from strata councils who are unable to secure insurance for their buildings, dramatic rate increases, ranging from 50 percent to 300 percent. You hear from owners that they were blindsided by these increases. The costs for some are upwards of hundreds of dollars, over $1,000 in some cases, on top of housing expenses that were already unaffordable.

I think it’s important for us all in this chamber to come to grips with the scale of the problem. Over 1.5 million British Columbians live in a home that’s part of a strata. That’s one in three, 30 percent of the people in our province, and they come from all walks of life.

In response to this crisis, the government directed the B.C. Financial Services Authority earlier this year to inquire into the causes of the increase. The issue was the focus of a number of questions from the official opposition earlier in this spring. We’ve done a lot of work on this issue. The member from Kamloops–South Thompson, as we heard earlier, brought in a private member’s bill to really put this issue in front of government as one that needs to be dealt with and addressed with haste.

Now we have this bill, Bill 14, before us to take what the government is calling “the first steps to address a rising insurance cost for strata owners.” I expect, for the most part, Bill 14 won’t be met with significant criticism for what it proposes to do. The changes appear largely focused on ensuring more transparency for strata owners; providing more clarity, support, and direction for strata corporations; and better data collection and reporting for the sector. None of those can be complained about. There are questions that I’ll want to ask about the regulatory power to allow certain stratas to not be required to get full insurance coverage and the potential consequences of such a change. But for the most part, the criticisms on this legislation will be for what it fails to do.

We’ve heard from our colleagues. We’ve heard some of those criticisms already in the second reading stage of the debate. I’m sure that we’re going to be hearing a lot more and raising some more of those concerns in the committee stage of this debate as well. I think it’s fair to say that this is a very complicated issue with few, if any, easy solutions and that there’s plenty of room to make the situation facing one-third of our province even worse.

The B.C. Financial Services Authority, in their interim report issued on June 16, included in their list of causes minor claims due to water damage, poor building maintenance, initial construction quality issues, challenges with strata policies, high cost of replacement, earthquakes and a market lacking adequate insurer liquidity. Add this to the increasing costs associated with more severe weather events due to climate change, and which is only just starting to be grappled with by insurers, and the unique challenges we see due to B.C.’s overpriced housing market, and you can see the enormity of the task ahead of all of us legislators.

So while Bill 14 appears completely supportable, it is essential that we are clear that this is not a strata owner’s or strata corporation’s problem alone. For instance, Bill 14 will, in the government’s own words: “Set out clear guidelines for what strata corporation are required to insure, to help strata councils make informed decisions on their insurance policies.” Do we have any data that suggests that the lack of guidelines has been a significant contributing factor? Do we know how much impact we expect this will have on the rates currently facing strata owners?

Or how about this change? “Change the minimum required contributions made by strata unit owners and developers to a strata corporation’s contingency reserve fund.” Will this have a measurable impact on the rates facing British Columbians today? How about for the next year’s expected increase? My point is that we must not let this issue be so easily defined as an issue with strata owners and strata management without the clear data to reinforce that.

We have seen just how devastating the lack of action by the previous government was when it came to the housing market. The deregulation and total free-market approach has led to cascading challenges across our province. As it turns out the so-called free market approach of the B.C. Liberals is not so free at all, is it? In fact, the cost of their policy for British Columbians has been more than most can handle.

I think it’s essential that we ask tough questions about all of these potential challenges and that the government equip itself with the data to inform further policy intervention, if so called for. These questions include: has there been any deregulation in the construction sector that has contributed to the construction quality issues that we now face? Have governments been so keen to create housing supply in the market that we failed to ensure that we have the regulatory regimes to support the increasing number of stratas that we see? Has the lack of updates to the Strata Act contributed to the problem?

In one publication I read, Troy Wotherspoon, the president of the Insurance Brokers Association of B.C., points to “more than 30,000 strata corporations of almost infinite variety.” Has the Strata Act been modernized to reflect this complexity? Or are British Columbians seeing insurance rates out of line with other jurisdictions because this is an attractive jurisdiction for multinational insurance companies to make a profit? A profit on the backs of British Columbians. Bill 14 will provide the answers to these questions. But if we don’t start asking them now, we won’t fix the underlying problem.

The other significant challenge in front of the government is what Bill 14 is silent on: what support is coming for people who are facing unaffordable increases to their insurance rates?

Actually, should be pointed out…. This is something that has been pointed out, and I’ll reiterate the point that was made by the member who spoke before me. This is not something that is coming. This is something that is here. It is already impacting British Columbians today and for the past year.

While direct financial support may help pay the bills in front of people today, that will simply amount to a cash subsidy to insurance companies and risks building the higher rates going forward. We have to be careful. It’s essential that government is developing policy that will help address not just the long-term challenges with strata insurance but the immediate affordability challenge facing people today.

It is important to contextualize the challenge that we face. So I’ll repeat a quote from Frank Chong, vice-president and deputy superintendent of the B.C. Financial Services Authority. It was a quote coming from the press release announcing the completion of their interim report in the middle of last month. He said: “The underlying factors contributing to B.C.’s unhealthy strata insurance market are complex and do not present any easy solutions. Everyone involved in the market has a role to play to balance the availability and affordability of insurance going forward.”

I certainly do look forward to their final report. I hope you get some answers to the questions that I have posed in this second reading debate and get a better sense of how Bill 14 fits into the broader approach that this government is going to take on this legislation at the committee stage. Thank you for this opportunity to speak to Bill 14.

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