B.C. tables 'first steps' legislation to try to tackle rising strata insurance costs

The B.C. government has tabled legislation amending strata laws in an effort to address the rising costs of strata insurance.

A strata title allows individual ownership of part of a property or lot. It is generally either an apartment or townhouse with shared ownership in the remainder of the building, referred to as the common property.

Speaking Tuesday, Finance Minister Carole James and Housing Minister Selina Robinson repeatedly said the situation of rising insurance costs is a complex one and that Tuesday's legislation was focused on transparency.

"The current situation is unacceptable and there is no quick fix to this problem," James said.

In a statement, the government said it would amend the Strata Property and Financial Institutions acts and make regulatory changes to:

• Stop referral fees between insurers or insurance brokers and property managers or "other third parties."
• Set out "clear guidelines" for what stratas need to insure.
• Require strata corporations to inform owners about their insurance coverage, any policy changes — including increasing deductibles — and allow the strata to dip into its contingency fund to pay for "unexpected" premium increases.
• Protect unit owners within the strata from "large" lawsuits from the strata "if the owner was legally responsible for a loss or damage, but through no fault of their own."

The province said the legislation could lead to further regulatory changes after consultation with "strata community stakeholders."

Those include requiring brokers to disclose their commissions and closing what Robinson called a "loophole" that allows stratas to put off depreciation reports about a strata building's condition.

End of referral fees

James said the end of referral fees means insurers and insurance brokers can no longer offer fees to strata property managers as an incentive.

Forbidding that will improve strata councils' and owners' confidence that the choice of insurer was not unduly influenced by a fee, James said.

James was asked how much she believed referral fees contributed to the rising cost of insurance but did not provide a direct answer.

She said commissions can be up to 20 per cent of the cost of insurance and she believes forcing brokers to disclose commissions will improve competition.

"It is going to take some time," she said. "These are the first steps."

Depreciation reports

Robinson said another further regulatory change could close what she called a "loophole" in the way depreciation reports are handled.

Depreciation reports detail the condition of the building and maintenance it will need over the next three decades. A strata must obtain one every three years

A depreciation report can be postponed, however, if 75 per cent of the owners vote to put it off. 

"This created risk for owners and increased the risk of claims from unaddressed repair needs, which drives up the cost of insurance."

"Unfortunately, many strata owners today are paying the price for this mistake."

Robinson said this also increases the risk for insurers which is contributing to a lack of competition in the market.

Premiums rising

A report released last week by the B.C. Financial Services Authority said the insurance market isn't healthy for about 1.5 million people living in condos, townhouses and other tenant-in-common properties in B.C.

The report says premiums are rising 40 per cent annually across the province and those costs are up 50 per cent in Metro Vancouver.

Chuck Byrne, executive director of the Insurance Brokers of B.C., said the report's findings detail what he called a crisis in the province's strata insurance market.

James said the authority will release a report in the fall about the structure of the insurance industry in B.C. and what further changes could occur.