High value: Rising premiums also weigh on privileged clientele

Premiums have been rising significantly since the pandemic for the entire home insurance market. The building value limit is indexed at approximately 7% per year by high-value insurers, estimates Vanessa Lajeunesse, a broker at Covalen. Premiums are increasing by 10% to 15% depending on the case, and it is largely water damage coverage that is becoming increasingly expensive, she says.

Brokers are having to explain in more detail the various factors behind the successive increases imposed in recent years. Lajeunesse gives the example of earthquake coverage, the cost of which has also risen significantly. This protection also covers damage related to landslides, which often occur after heavy rainfall.

Regarding earthquake protection, Marie-Pier Renaud, a broker at BFL Canada, notes that she is being asked more and more questions about this coverage. “I hear about it more often than cybersecurity,” she says.

The premium amount covering seismic risk has also increased, notes Dominique Duquette, a broker with Hub International. This coverage is uncommon in Quebec, but her colleagues in British Columbia report that insurers are more fearful in this regard.

Increase in values  

For home insurance, the coverage limit also includes a percentage for damage to the insured's property. This allows brokers to negotiate with insurers based on their clients' specific needs, according to Renaud. The percentage allocated to property can be adjusted downward to reduce the premium.

The broker's job is to explain the impact of these claims on premium increases, limit reductions, and higher deductibles. “Three years ago, we were starting to see increases in deductibles for water damage,” says Duquette. “The $25,000 deductible is now really established,” and this is the case with all high-value insurers.

Brokers have to work harder at renewal, if the insurer tightens underwriting conditions, and look at what other insurers have to offer. Depending on the location, “each insurer has its own standards, risk mapping, and claims history,” notes Duquette. A risk may be refused by one insurer but tolerated by another. “This makes our job much more difficult.”

An endorsement imposed by Intact in 2024 regarding the condition of roofs also applies to high-value homes, says Duquette. The same thing happened for homes with swimming pools. “When equipment gets old, coverage limits are lower if there is damage,” she says.

Regarding premium increases, Rhonda Griffin, who heads Fort Insurance and Group Benefits' Signature team serving preferred clients, says that the magnitude of increases varies considerably among the major insurers in this niche. "We've seen the same insurer announce 20% increases two years in a row. Another insurer's increases are closer to 10%. In another case, since increases have been lower in recent years, the insurer is already warning us that next year's increases will be closer to 20%," she explains.

According to her colleague Thomas Scharen, home insurance rates in general will continue to rise. “When you announce a 15% increase several years in a row, you start to run out of arguments to explain it,” notes the broker.

Normal inflation in construction costs, natural disasters, and rising values are all factors that can explain the extent of premium indexation. “But we don't have any new arguments,” underlines Griffin.

The broker’s role  

According to Dominique Duquette, customers should consult their broker before taking up offers from direct insurers who dangle the prospect of reduced premiums to cover their property. “It's not uncommon to see customers who don't want to renew their policy with prestige products,” she says. 

“The total premium is important, but don't forget to compare what kind of coverage you have, because I can also offer you a premium at half price. But the coverage won't be the same,” adds Duquette. “You have to compare apples with apples. Unfortunately, it's when you make a claim that you realize you may not be as well covered as you thought."

At the underwriting stage, the file provided by the broker includes a minimal description of the property. If the value of the items to be insured exceeds the amounts specified in the contract, for example for a painting, a professional appraisal may be requested before adjusting the coverage.

For new business with a high-value insurer, a professional appraisal is done by the insurer to determine the amount of coverage. “When I put together the file, I have a lot of questions to ask in order to fully understand the client's needs. People cooperate because they feel that we are there to protect their property,” notes Marie-Pier Renaud.