Ashley Ford
Province
Home construction liability rates throughout Greater Vancouver and across Canada are soaring, adding hundreds of dollars to the cost of a new home for consumers.
A complex combination of factors, 9/11, poor global economy, rising theft and vandalism and increased claims are responsible for the premium hikes.
But the Canadian Home Builders Association heavily suspects the cash grab by insurance companies is to recover and replenish lower earnings and investment returns which are often due to their own poor investment decisions.
“There is no doubt it is a huge problem,” said Peter Simpson, CEO of the Greater Vancouver Home Builders Association and “we are watching it very closely. The worst part about it — the increased cost — is it gets handed right on to the home buyer.”
He said there have been a number of cases where builders cannot even get “liability and course- of-construction insurance.”
They have to arrange their own security, he says.
He quoted the situation of a West Vancouver home project worth $890,000 where the initial premium demanded was $16,000 and required the builder to mount full-time on-site security during the building period.
That was eventually lowered to $6,200, but would have only cost $2,000 two years ago.
While Simpson agrees theft and vandalism is on the rise, he doesn’t believe it has reached such an extent to warrant a tripling or more for premiums.
Sandy Beveridge of Beveridge Insurance agrees builders are in a tight spot. But so are the insurance companies, he says.
“The insurance industry is bleeding red these days and their investment income, traditionally around 15 per cent, has virtually shrunk to nothing.”
Which in turn means capital is fleeing the industry and raising premiums is one of the only alternatives they have, he said.
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