Canadian home insurance costs surge by 7.66% this year — will strapped homeowners be forced to move?

As 2024 unfolds, Canada’s home insurance landscape braces for significant changes, echoing the challenges and trends seen in the auto insurance sector. The marked inflation experienced last year sets the stage for anticipated developments.

Despite expectations of inflation returning to the 2 per cent target by 2025, factors such as high claims costs, escalating repair and replacement expenses and a surge in climate-related disasters signal an inevitable price adjustment.

7.66% year-over-year increase in home insurance premiums since January

Data from MyChoice, an insurance comparison website, reveals a 7.66 per cent year-over-year increase in Canadian home insurance prices since the year’s onset. The impact of rising home insurance rates will be unevenly distributed across Canada, with certain provinces facing more pronounced effects.

Replacement cost and insurance inflation: A complex relationship

The company’s analysis shows the relationship between replacement cost inflation and home and mortgage insurance inflation isn’t straightforward. While replacement costs are typically seen as a primary driver, they alone don’t dictate premium trajectories across provinces.

For instance, Manitoba anticipates an 11.31 per cent home insurance inflation rate despite a -1.52 per cent change in replacement costs. Saskatchewan sees a 12.16 per cent insurance rate hike alongside a modest 1.35 per cent rise in replacement costs.

Source: Statistics Canada, 2024

Climate change’s impact on natural disasters: Key to projected rate increases

The influence of climate change on the frequency and severity of natural disasters nationwide is key to projected increases in home insurance rates. Each year, the industry contends with the mounting challenge of covering losses from wildfires, floods and other climate-related events, prompting a reassessment of rates to match the escalating risk. According to the Insurance Bureau of Canada, severe weather conditions in 2023 led to over $3.1 billion in insured damage across the country.

Areas with higher insured damages, like British Columbia with $720 million and Ontario and Quebec with $710 million combined, likely contribute to the broader trend of rising insurance rates due to the elevated risk and cost of claims associated with these events.

Cities most at risk for mortgage delinquencies

To address the escalating premium calls, the federal government allocated $31.7 million toward the national flood insurance program in its 2023 budget. The program aims to mitigate the socioeconomic impact of floods, which have historically plagued Atlantic Canada.

The ongoing surge in home insurance costs is poised to exacerbate financial pressures for homeowners, particularly in cities identified in a recent Equifax/CMHC study as experiencing the highest mortgage delinquency increases.

Cities like Toronto and Victoria, witnessing alarming mortgage delinquency increases of 66.67 per cent, underscore the financial strain on homeowners. A 7.66 per cent average increase in home insurance rates could further exacerbate the situation and potentially drive homeowners out of cities most at risk for mortgage delinquencies: