B.C. tables legislation to help reduce strata costs

VICTORIA (NEWS 1130) — New legislation proposed by the B.C. government could save condo owners money on insurances rates by ending referral fees and creating more transparency.

But Finance Minister Carole James is warning there are no quick fixes.

Strata insurance premiums rose approximately 40 per cent across the province on a year-over-year basis, with deductibles experiencing up to triple-digit increases over the same period, a three-month investigation by the BC Financial Services Authority found.

The province tabled legislation Tuesday to amend the Strata Property Act and the Financial Institutions Act, said James.

The changes would close loopholes related to depreciation reports, end referral fees paid to property managers, and giving strata owners and corporations more tools.

“While the report confirms the reasons behind the increase in prices are complicated, it’s in fact very clear that the results are not. The current situation is unacceptable. And there is no quick fix for this problem,” she added.

Q how soon are people going to see more $ in their pockets?@carolejames says this is not a quick fix… immed change will be when legislation passes an end to referral fees.
The rest around insurance competition will take some time.#bcpoli @NEWS1130 #covid19

— LizaYuzda (@LizaYuzda) June 23, 2020

“This legislation will bring more transparency to the strata insurance market, and help strata councils and owners cope with the current situation.”

Prohibiting referral fees would affect an insurer’s commission.

“This means that insurers and insurance brokers will no longer be able to offer referral fees as an incentive to a strata property manager,” James said.

She added she’s heard commissions could have been up to 20 per cent of the cost.

“That’s a very large amount that is going into commission fees.”

Q how much do/have referral fees been cost stratas?@carolejames says commissions could've been up to 20% of the cost (!!!WHAT?)
She says adding transparency and turfing these will also increase – she's expecting – some competition ergo affecting rates.#bcpoli @NEWS1130 #covid19

— LizaYuzda (@LizaYuzda) June 23, 2020

James said, while the industry is a private marketplace, the province hopes disclosing those fees will create competition and encourage brokers to pass on savings on when it comes to condo insurance.

“This will give strata councils more confidence that the choice of their insurer or their broker has not been swayed by referral fees.”

The legislation has yet to pass.

The province is also strengthening notification requirements about changes to insurance costs and insurance coverage.

“This, again, is going to help strata corporations, get the notice they deserve and need to plan ahead,” James said.

She said the BC Financial Services Authority is going to provide a further report in the fall.

Housing Minister Selena Robinson said the proposed changes to the Strata Property Act will provide clarity for strata corporations.

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“The amendments also make it clear that stratas are authorized to use their contingency reserve fund to pay for any unexpected unbudgeted and imminent premium increase to limit the need to rely on assessments or risk gaps in insurance coverage,” she said.

“And these changes will protect strata unit owners against large lawsuits from strata corporations if the owner was legally responsible for a loss or damage, but through no fault of their own.”

She added some regulatory changes will be made under the proposed changes.

Robinson also said the province is looking at changes to allow for partial insurance for those buildings that have been unable to get insurance coverage.

“The disclosure of fees and commissions and the end of undisclosed commissions to third party brokerages will certainly affect the outcome.”

Tony Gioventu, executive director of the Condominium Homeowners Association, said the changes will enhance competition and benefit the public.

“The transparency of fees and commissions that are collected or earned by insurance brokerages will also provide a high level of transparency on the industry,” he added.

The BC Financial Services Authority report showed the industry has been incurring losses over the past three years from mostly minor claims — particularly those resulting from water damage — due to poor building maintenance and initial construction quality issues.

Data also suggests that strata insurance has also been used to fill in the gaps left by other forms of protection, such as home warranties for new buildings and maintenance programs for older buildings.

As well, the report found the exposure insurers have to earthquake risk in B.C. compared to other markets prompted many to reduce the amount of insurance they offer, creating pricing pressures.