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Home insurance costs on the rise for some residents

Nanaimo residents may experience a bump in their home insurance premiums this year.

A number of factors have motivated the insurance companies Coastal Community Credit Union deals with to raise premiums, said Lesley Maddison, vice-president of insurance.

First of all, natural disasters such as Hurricane Sandy and the earthquake in Japan have raised the price of the re-insurance that insurance companies buy as a means of risk management, she said.

Re-insurance, typically bought from large, global companies, is to ensure companies have the means to pay out to customers in the event of a natural disaster or other catastrophic event.

Maddison said five of the last nine years have been the most expensive on record for natural catastrophes and these re-insurance companies paid out a lot of money and raised premiums to compensate.

Some insurance companies are not passing all of the increase on to consumers because some premiums have gone up substantially, she added.

Serge Corbeil, government relations manager with the Insurance Bureau of Canada, the national industry association representing private home, car and business insurers, said 2012 marked the third year of the last four where claims due to severe weather incidents, such as hail storms in Alberta and wind storms in B.C., totalled at least $1 billion across the country.

Another factor affecting rates is that federal regulators have increased the amount of re-insurance that insurance companies have to buy, said Maddison.

On top of this, new catastrophe risk models indicate the probable maximum loss is greater than anticipated in the past, she added.

“They now realize the exposure in B.C. is greater,” she said. “What they thought would be their maximum loss is greater than the old model showed.”

Damage estimates and estimated costs to rebuild have been too low in some cases and every year companies reassess, said Corbeil.

“Every time there is an earthquake somewhere, there are lessons learned,” he said.

As a result of these factors, people will start to see increases not only to earthquake insurance premiums and deductibles, but also to their basic house insurance premiums, said Maddison.

She said the companies that Coastal deals with indicated the rates will rise between five and 25 per cent.

Ted Lewis with Nanaimo Insurance Brokers said some of the companies he deals with indicated that rates and deductibles are going up, but he hasn’t heard from others and the increases haven’t been so huge that people are outraged.

While Maddison, Lewis and Corbeil all say earthquake insurance is still widely available in Nanaimo – two companies that Maddison is aware of have stopped offering it for certain postal codes in Victoria for several reasons including cost and availability of re-insurance – they stressed that this type of insurance is an add-on and not part of basic home insurance.

“If you didn’t ask for it, you probably don’t have it,” said Corbeil.

With earthquake premiums going up, the job of the insurance broker is to go through the options with clients to help them save money – for example, people can choose to insure their home but not the contents in event of an earthquake, said Maddison.

“We have access to many different insurance companies,” she said.

“It’s important to have a good relationship with your broker. Your broker is your advocate for helping you understand the coverage and your options.”

For those who opt out of earthquake insurance altogether, Lewis cautions that the government will not step in to help.

“The government is not going to step in if you could have bought insurance and didn’t buy it,” he said. “Most people can’t afford to replace their own home.”

Insurance does not cover damage from tsunamis or landslides, he added.

According to a seismic hazard map produced by Natural Resources Canada, Nanaimo rates relatively high for chances of an earthquake.

The area has an orange rating – second highest from red.

The Victoria, Duncan and west coast regions of the Island are all red.

“For this region, you’re looking at about a one in three chance of experiencing a strong, damaging earthquake in the next 50 years,” said Alison Bird, earthquake seismologist with Natural Resources Canada.

“You’re close to some fairly major sources of earthquakes.”

Bird said there are things homeowners can do to try to minimize the damage an earthquake causes.

For more information on earthquake preparedness, please visit www.earthquakescanada.nrcan.gc.ca/info-gen/prepare-preparer/eqresist-eng.php.

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