IBC says Quebec’s condo insurance deductible definition should wait for the market to adjust

Published: November 13, 2018

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The government of Quebec should be cautious when trying to decide what is an acceptable deductible for condominium insurance, says the Insurance Bureau of Canada (IBC).

Speaking to Canadian Underwriter, the IBC says the government should “wait and see” as the market will need to adjust. Proposed regulations aim to change aspects of condo insurance in Quebec. Bill 141 makes wider changes to the financial services sector, which will come into effect on June 13, 2019.

IBC says because of the complexities of the market, “we suggest that we wait and see how the market adjusts to all these changes to see where the issues are,” said Pierre Babinsky, director of communications with IBC. “Then, if there is a need, then go ahead with specific rules that would define what is unreasonable or unreasonable.”

One complexity in the market regards how a condo prepares against risk. For example, if a condominium installs all necessary preventative measures and maintains those measures, it may choose a high deductible, argues Babinsky. Those condominium associations would be willing to take the risk of a higher deductible because they have good measures in place.

“Insurers should still have the capability to assess the risk discussed with their clients in terms of what is the best package for them regarding the deductible, but also the premium,” Babinsky says.

When the Quebec does define a deductible, IBC believes it should be split between the number of condo units in a building.

“If they go ahead with that, condominiums would be the only home insurance product that would have such a definition as opposed to commercial, home, any other type of home insurance coverage. We don’t see an urgent need to define that at this point.”

Other suggestions offered by IBC include:

  • The industry standard of $1 million in liability insurance is sufficient. “If we go to $2 million, you may find yourself to be overinsured, so you’re paying for coverage you may not need.”
  • Anything that is currently covered through an endorsement should remain covered through an endorsement. “We should not take something that right now is covered through an endorsement and include it in the usual risks,” Babinsky said. For example, perils like fire, theft, explosion and lightning should be covered, but anything that is covered through separate endorsement like sewer back-up and surface water should remain insurable through an endorsement. In some cases, a particular building may not have access to special coverage due to the high risk.
  • If condo corporations have a claim where need to use a self-insurance fund (to cover minor damages below the deductible), they should have six months to collect the fund. If they have a claim where they have to use the fund, they should have another six months to rebuild the fund.
  • For the yet-to-be reviewed more general condo legislation, condo corporations should commission a reserve fund study to see what is needed in short-, medium- and long-term maintenance to keep the building in a good state of repair. “What we’re seeing now is most reserve funds don’t have enough funds to do proper preventive maintenance and that’s where, we feel, a lot of the claims come from because of these damages.”

Last week, the Chambre de l’assurance de dommages (ChAD) says the deductibles will also need to be easy to understand and consider how many units are in a condominium.

“The government is saying, ‘Well, you shouldn’t be able to increase the deductible too much because otherwise if you do have a claim, you may not have enough money to pay it,’” said Ingi Khouzam, compliance lawyer with the ChAD. “The idea is: does the condominium [corporation] have enough money to pay that deductible once a claim arrives?”

ChAD believes the deductibles should be clear enough to present limited scenarios. For example, the condo corporation’s liquidities should be sufficient to cover a claim, or the owners of the condos should know how much they must pay into the fund.