From natural disasters and the costs of renovations to increased rent prices, claim costs are rapidly increasing, with no current end in sight.
Below we have listed three primary reasons why the cost of home insurance claims has increased and what you can do to keep your policyholder within their claim limits.
Why Claim Costs are Rising
There are various factors that contribute to the increase in home insurance claims, but climate change, rising construction costs, and high rental prices are the primary culprits.
1. Rising Construction Costs
When a policyholder is displaced and requires home renovations, their claim costs can go through the roof. Here are some baselines for how much it can cost to rebuild a home after disaster strikes:
- Fire damage: For a small fire, policyholders and adjusters can expect total damages to cost, on average, $2,500-$5,000. For a larger house fire, the cost can reach $50,000+.
- Flood damage: Flood restoration, on average, costs between $1,304-$5,546, depending on the damages.
Numerous factors have caused home damage restoration costs to rise, including the increased cost of building materials, labour prices, supply chain issues, and inflation.
For example, according to Macro Trends, in October 2015, lumber prices were around $260 per thousand board feet. In October 2022, they averaged $470 per thousand board feet.
2. Climate Change
According to the Insurance Bureau of Canada (IBC), Canadian insurance companies spend an average of $2 billion annually on losses related to natural disasters.
Below are some of the most significant recent Canadian natural disasters and the amount they cost in insured losses:
- 2021 British Columbia floods: $675 million
- 2021 Barrie, ON, tornado: $100 million
- 2020 Calgary hailstorm: over $1.3 billion
- Fort McMurray wildfire: $3.8 billion
These stats mean Canada has spent $5,875,000,00 in insured losses in just four natural disaster events.
According to a Senior Official with Natural Resources Canada, the annual costs of natural disasters are up $400 million from just ten years ago. With climate change-related events occurring more frequently than ever, and costing more than ever, policyholders and adjusters can expect claims costs to reach $139 billion over the next 30 years.
3. Rising Rent Costs
Due to the 6.8% inflation that hit Canadians in 2022, the cost of rent has increased exponentially.
In 2022, the average cost of rent across Canada for a one-bed, unfurnished residence was $2,043 per month, representing a yearly increase of 15.4%. The following are the average rent prices for a one-bedroom, unfurnished home in each Canadian province according to Rentals.ca:
Nova Scotia: $2,453
New Brunswick: $1,627
British Columbia: $2,682
Northwest Territories: $1,786
Due to this significant rent increase, adjusters may struggle to find temporary housing for displaced policyholders that fits within claim limits.
Reduce Insurance Claim Costs With Accomsure
If your policyholder becomes displaced and you’re worried about claim costs, don’t fret; Accomsure is here to help.
At Accomsure, we can help your policyholder find temporary accommodations that meet their unique needs and fit within their claim limits.
For example, when a multi-unit low-income facility burnt down, Accomsure helped their insurance company save nearly $120,000. We also helped a senior couple with health issues save 28% on accommodations and a rural Alberta family find the perfect temporary housing while saving 30% on accommodation costs.
With dozens of connections country-wide, we can help your policyholder find a temporary home they love that fits within their claim limits while you focus on what matters most: their claim.
If you’re looking for a way to reduce home insurance claim costs, submit a claim with Accomsure.