Extreme Weather Cause For Insurance Increase

Residents across Canada, including Alberta and in particular Calgary, saw a whirlwind of major weather events throughout 2013.

With many extreme weather catastrophes comes damage to homes, vehicles and businesses. And with Canadian insurance companies seeing record claims in 2013, Albertans could see their insurance costs on the rise.

“The floods in June 2013 were the most recent of a whole series of events that have caused significant increases in claims in Alberta,” said Bill Adams, vice-president, Western & Pacific region with the Insurance Bureau of Canada.

“What we’ve seen in Alberta in the last number of years is a significant increase in claims as a result of weather events,” said Adams.

High River resident, Doug Gage, was one of the many who suffered damage to his house as a result of the June 2013 floods. His entire basement had to be gutted, and is currently still under construction, this resulted in a rather large claim to his insurance company.

“For the basement and the claims for all the contents I would say we put through roughly $35,000 – $40,000,” said Gage.

For Gage there is a concern that his insurance rates will increase. He deals with two insurance companies one through his condo board for the building, and one for his personal contents.

“The contents might change, they may change how much you’re allowed to claim, I had a premium package of up to $71,000 in replacement value,” said Gage. “So who knows that may go up, they may say that you cannot claim that much another time, they may change how much you are allowed to claim.”

While Gage is predicting his insurance will go up, he thinks he won’t see it this year, but rather next year. Adams explained that insurance premiums won’t go up based on one event, but rather increases are triggered by long-term claims trends.

Some of the weather issues that Alberta has seen going back a number of years, are hail and wind storms causing an increase of insurance claims.

Adams said, “Federal government regulation prohibits us from saying premiums are going up or premiums are going down, but there is no doubt there is significant cost pressures being faced by insurance companies as a result of all of the bad weather we’ve seen.”

The largest expense insurance companies have is insurance claims, so often they have to adapt by adjusting their prices or premiums, changing the type of coverage they provide or by adding a deductible.

Adams explained that not all insurance companies are affected in the same way, companies with a large market share in areas that are affected by hail storms or flooding will see their costs increasing more than companies who don’t have a large market share in those particular areas.

“It’s up to the consumer to make certain they understand that dynamic, and that when renewal time comes up that they talk to their insurance representative to make sure that first of all they have the insurance coverage that is going to protect them, and secondly that they are shopping the market and that they use the competition to their advantage,” said Adams.

Insurance companies categorize natural catastrophes as single events resulting in claims of over $25 million.

“In Canada in 2013 we topped $3 billion in claims costs as a result of natural catastrophic weather, that was before the ice storm [in Toronto], so we don’t have an estimate yet of what the ice storm was,” said Adams. “Each of the last five years we have topped $1 billion in claims in Canada, and of course 2013 will re-set the record for a single year, it will by-far be the most costly year in Canadian history.”

Adams explained that climatologists are predicting the weather is going to continue along the same trend we are currently seeing, with these natural catastrophes.

“That doesn’t bode well for insurance costs, but there are many things that they can do to prepare for extreme weather events so that rather than cleaning up after the bad weather hits they are actually building more resilience into their home so that they are able to minimize the damages that are the result of extreme weather,” said Adams.

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