Insurance companies in B.C. have agreed to end the practices of “best terms pricing,” which has helped push strata insurance premiums to sky-high levels.
“Rising strata insurance premiums is a significant pressure for thousands of British Columbians across the province, and the end of best terms pricing is one positive step towards a healthy insurance market,” B.C. Finance Minister Selina Robinson said in a news release.
The B.C. Financial Services Authority, which is responsible for regulating the private insurance sector in the province, identified best terms pricing as one of many factors in inflating premiums in an interim report it released in June.
Under best terms pricing, insurance brokers gather quotes from multiple insurers who share the risk of insuring strata properties that are often worth millions of dollars and expensive to repair. This is often referred to as a subscription policy.
Each insurer submits a bid, however under best terms pricing instead of the cost of the premium being based on an average of the bids, it is based on the highest bid, even if most quotes were lower.
The result is year-over-year strata insurance increases of, on average, 40 per cent, though “high-risk” buildings could be paying significantly more. The premium increases trickle down to owners, who are forced to pay hundreds of dollars more per month. About half of Metro Vancouverites live in strata properties.
“Our BCFSA team collected sample data from industry on strata insurance properties insured during a period of one month to gain a better insight into this practice,” said Frank Chong, BCFSA’s vice-president of regulation, in a news release. “We found that approximately 94 per cent of sample properties had been negatively impacted by this practice.”
The authority has received assurances that the practice will be phased out by Jan. 1. This will give insurers time to adjust their computer systems so they can accommodate different prices for each insurer.
The B.C. Financial Services Authority is expected to release its final report on the province’s strata insurance market by the end of this year.
MORE TO COME …
— with files from Dan Fumano and Lori Culbert