The British Columbia Financial Services Authority (BCFSA) and the Alberta Superintendent of Insurance have both issued new guidance in their respective provinces to end the use of best terms pricing (BTP) when setting premiums for subscription condominium corporation insurance policies.

The BCFSA says the practice of using BTP was clearly identified by the regulator as one of several factors currently inflating strata property insurance premiums.

“Insuring strata properties often requires brokers to bring together multiple insurers with each insurer taking a portion of the total risk. The resulting insurance policy is often referred to as a subscription policy,” the BCFSA explains in its statement announcing the new prohibition. “In putting together such a policy, each insurer would submit its own bid. Under best terms pricing, the final premium paid by strata owners was typically based on the highest of those bids, even if the majority of quotes were lower.”

The BCFSA adds that data collected found approximately 94 per cent of sample properties had been negatively impacted by the practice. The regulator’s interim report on the rising cost of strata insurance in British Columbia, published in June 2020, found that premiums have risen approximately 40 per cent throughout the province on a year-over-year basis. Deductibles saw triple digit increases over the same period. A final report on the market is expected from the BCFSA before the end of 2020.

Insurers in British Columbia have until the end of 2020 to stop the practice of using BTP, while insurers in Alberta must discontinue the practice no later than March 1, 2020.

The Canadian Council of Insurance Regulators (CCIR) followed up on the announcements, issuing its own statement about the actions taken to address the use of BTP in the Alberta and British Columbia strata corporation property insurance markets. It says the “CCIR recognizes that best terms pricing may also be in practice in the broader commercial insurance market and provincial regulators are looking to gather more information from the property and casualty industry to better understand the situation,” they write. “The CCIR intends to look at the practice of best terms pricing within the broader commercial insurance market, to ensure the practice aligns with the fair treatment of customer principles.”

Related:

- Condo insurance rates skyrocket in Alberta and British Columbia