The Real Estate Board of Greater Vancouver REBGV brings us an update on the dramatic increase in strata insurance, and the changes made by the BC Legislature.
BC Strata insurers to end ‘best terms pricing’
When news of skyrocketing insurance premiums for strata developments emerged at the beginning of the year the province tasked the BC Financial Services Authority (BCFSA) to investigate in search of solutions. The BCFSA is the agency responsible for regulating the private insurance sector in the province.
In June, BCFSA issued an interim report, which found that a practice known as ‘best terms pricing’ had contributed to premiums increasing an average of 50 per cent in Metro Vancouver. A subsequent report found that 94 per cent of sample properties had been negatively affected by best terms pricing.
This practice refers to a process where insurance brokers collect quotes from multiple insurers. When each insurer quotes on a strata property, it sets out the amount of risk it’s prepared to accept and a rate charge.
The quotes are conditional quotes, based on all the insurers receiving the same terms. Instead of the premium being set by the quote of each insurer, or by an average of all quotes, under best terms pricing the final price is set by the highest rate quoted by any of the insurers on the policy.
Changes as of November 1, 2020
As a result of the investigation, , the BC legislature passed Bill 14 – 2020: Municipal Affairs and Housing Statutes Amendment Act (No. 2), 2020, which received royal assent in August 2020.
The bill amends insurance-related provisions of the Strata Property Act (SPA) and the Financial Institutions Act introducing regulatory changes, effective November 1, 2020 that address rising strata insurance costs and best terms pricing.
Best terms pricing
- This practice will end in January 2021, according to Tony Gioventu, executive director of the Condominium Home Owners Association.
Renew or not renew
- Insurers or insurance agents are now required to provide a 30-day advance 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 that strata corporations will be warned in advance of any cost increases and have time to select other insurance options.
- Insurance agents are now required to disclose their commission amount, or a reasonable estimate, to strata corporations. Penalties for non-disclosure include a fine up to $25,000 for an individual, or $50,000 for a corporation.
- Referral fees to strata property managers from strata insurance transactions are prohibited.
These changes are intended to give strata corporations the information needed to make informed decisions about their insurance needs.
Read the government press release.
(Prepared by Harriet Permut, Manager of Government Relations at the REBGV)Posted by Denise Brown PREC on