The cost of climate change is something Canadian homeowners cannot ignore. Weather is the primary factor in increasing home insurance rates. It’s hardly a new problem, but it needs to be addressed.
For 2021 and beyond, the outlook for homeowners is less than encouraging as significant weather events become more frequent and damaging. Flooding remains the most costly and common natural disaster, but Canadian homeowners also face risks from wildfire, storms, cold fronts, and tornados.
As severe weather continues to influence home insurance premiums, homeowners are left with trying to find adequate coverage at an affordable price. RATESDOTCA points to the importance of comparing home insurance quotes to offset some of the mounting costs of premiums.
Each year, many Canadians face the risk of their homes being destroyed or their families being displaced because of severe weather events. As more homes become exposed to climate risk, government action may come too late to solve the problem.
2020: COVID, Weather, and Home Insurance
Many vehicle owners across Canada saw their auto insurance rates decline during the COVID-19 pandemic, bringing some much-needed respite from increasing premiums. However, home insurance customers have not enjoyed similar reductions.
As millions of people obeyed the lockdown enforced to reduce the spread of COVID-19, the impact on the auto insurance market was profound. Canadians were driving their vehicles less, there were fewer cars on the roads, and collision rates fell. Thanks to discount programs and rebates offered by insurers during the pandemic, auto insurance premiums became more affordable.
Unfortunately, the same conditions do not apply to home insurance. While being at home more may make it easier to report accidents, it is also possible there is more risk. If people spend more time at home, there is a greater chance of accidents. However, that pales in comparison to the ongoing impact climate change has on home insurance.
Whether it’s Ontario home insurance or any other province in Canada, climate change is reshaping the industry. 2020 proved to be another historic year of weather events and related insurance losses. Insured damage totalled $2.4 billion during the year, becoming the fourth-highest annual loss since records began in 1983.
The three costliest natural disasters of the year were:
| April 26 to May 3 | Fort McMurray flooding | $562 million |
| June 13 | Calgary hailstorm | $1.3 billion |
| July and August | Central and Southern Alberta storms | $221 million |
Insurance losses are bad news for homeowners. Insurers pass on those losses to customers in the form of high premiums. Moreover, as insurance companies become warier of risk, homeowners located in at-risk locations face increasingly inaccessible home insurance rates.
Changes to the climate mean more people fall into the at-risk bracket each year. Canada is now in an insurance cycle where insurers raise premiums to mitigate losses from weather events, but more people cannot afford coverage. This risk could potentially be reduced if homeowners start investing in weather stations for their properties. With so many different types of stations on the market right now (click here to learn about them), homeowners should be able to pick the right one, so that they can hope to bring down the premiums on their houses. However, that is only one solution that may not be enough to address the more widespread and systemic issues with the housing insurance crisis.
Government Task Force May Not Be Enough
One of the problems governments and organizations in Canada face is the uneasy fact climate change is here to stay. If 2020 was a year in isolation, the impact of such high losses would be manageable, but that is not the case.
The reality is eight of the top 10 worst years for climate-related insurance losses were in the last decade. The average annual bill for covering insurance losses following natural disasters was over $1.5 billion during that time.
Despite the warning signs, Canada has still not implemented strong national programs to find a solution. Flooding is the no. 1 cause of home damage in Canada, and a growing number of homeowners cannot get insurance because they live in a flood risk location.
Insurance companies have created flood insurance solutions over the last five years, but some of Canada’s most at-risk flood areas are uninsurable for a private company. There have been calls for a national flood insurance program, but the government has been dragging its feet on such a solution for years.
In the meantime, more homes continue to fall into danger as flood plains expand due to climate change.
There’s no doubt education is also important to help Canadians understand the risks climate change poses to their homes. Still, Canada does not have a climate adaptation strategy at a national level.
Public Safety Canada’s creation of the Task Force on Flood Insurance and Strategic Relocation was an important step. Set up by the federal government, the task force commenced its work in January 2021, combining the efforts of federal, provincial, and territorial agencies and representatives of the insurance industry to develop a national, low-cost flood insurance program. The task force will submit a report to the federal government in early 2022.
Homeowners in at-risk flood locations without insurance will have access to low-cost coverage or have options for relocation. It’s a tentative step in the right direction, but such a program is still being held back by bureaucracy. All the while, volatile weather will continue to contribute to Canada’s escalating home insurance costs.
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