This petition calls upon the federal and provincial governments to immediately enact legislation to regulate rental housing property insurance. Tenants and housing providers are at the mercy of Canada’s amoral, profit-centric insurance industry.

Housing is the foundation of sustainable living without which any society cannot survive or develop, and a shortage of housing is a catalyst to myriad social ills. Housing unaffordability and unavailability is of no concern or consequence to insurance companies but it is arguably today’s top-of-mind issue for most consumers, especially tenants.

MYRIAD ISSUES

Unjustified Premium Increases

Canadian rental housing insurance premiums for most rental housing providers has increased 25% to 100% per year for the last two years, substantially contributing to the rapid increase in rental housing costs, which are ultimately paid by tenants. Unlike many other costs, there are no means for cost reduction or recovery. Many insurers have declined to quote at all, forcing some housing providers to resort to either having no insurance coverage or using so-called “high-risk specialist” insurers that, again, eventually result in large tenant rent increases. 

Potential Unrecoverable Tenant Losses

There is no legislation requiring a rental property to have building insurance. Only mortgage companies require property insurance. Tenants would not know that they are at enormous risk if the rental property has no mortgage and the owner elected not to have insurance coverage. A catastrophic event might not only bankrupt the property owner but it could also bankrupt tenants or destroy a tenant’s irreplaceable items (family heirlooms, photos, movies, mementoes, etc.). Tenants would have little-to-no financial recourse.

Insurers Contribute to “Renovictions” 

Many insurers make unwarranted and often exorbitant demands for financially-untenable “upgrades” such as replacing a 10-year-old roof that has a provable 30-year warranty or converting a 60 amp service to 100 amps. These types of upgrades often require a financial investment that is beyond the property’s financial means to provide them. Such unwarranted upgrade demands exacerbate the already highly-controversial “renovictions” process that has led to many tenant evictions and turned private sector affordable rental housing units into “upgraded” unaffordable rental units. 

Insurers Contribute to Above Guideline Increases (AGI)

Unwarranted, forced upgrades also result in property owners left with no choice but to apply for a lawful Increase Above the annual rent Increase Guideline (AGI). This results in tenants in rent-controlled properties paying up to 3% more rent per year for up to three years on top of the published annual guideline amount plus any qualifying increase in property taxes.

Canadian insurers must accept some responsibility for forcing some tenants out of their homes while unreasonable insurer-demanded upgrades are undertaken.

No Insurance for Older Buildings

In Ontario, which may be similar for other provinces, four out of five (82%) purpose-built rental properties were built before 1979. The vast majority were built in the 1960s and 1970s, before most provincial building codes were implemented. Older properties are almost always more affordable for renters than new properties for many reasons. New buildings are not subject to rent control. However, many Insurers refuse to offer coverage for older properties even though no claims have ever been made, and the operator is a proven professional operator.

Insurers Inhibit First-time Home Buyers

According to the Bank of Canada website, Canada’s currency lost 50.6% of its value between 2002 and 2022 alone. That means that any money “put under a mattress” lost half of its value in just 20 years. Unless you make a return on investment greater than 2.1% each year for the past 20 years, the average Canadian’s purchasing power has been steadily decreasing. It's no wonder then why many aspiring first-time home buyers today don't feel they'll ever be able to own a home, and why almost half (44%) of all tenants are paying substantially more than CMHC's estimation that 30% of income should go towards housing costs.

Grossly-inflated and out-of-control, rapid increases in building insurance contributes to overall inflation and specifically negatively impacts first-time home buyer plans and aspirations.

Insurer Investment Losses Paid by Tenants

Insurance companies generate revenue primarily from the premiums they charge, called underwriting, and from reinvesting that money in investment like stocks and bonds. Unlike most other types of businesses though, insurance companies pass on those reinvestment losses (in addition to their claims losses) through higher policy premiums, regardless of a policy holder’s exemplary record and whether any claims have been made. The insurance industry’s poor reinvestment decisions and errors are ultimately paid by tenants.

Insurance company shareholders should be absorbing these losses. Senior management who fail their shareholders should be replaced—just like any other business.

Coinsurance

Arguably, all tenants and most small-to-medium housing providers know nothing about the insurance industry’s coinsurance loophole that can significantly impact tenants and policy holders. 

Coinsurance forces policy holders to agree, often without the policy holder’s understanding, to share the cost of a claim, in addition to the well-understood deductible. This requires policy holders to obtain insurance to cover a property’s total replacement value. If the coverage is less, then the policy holder will not receive the full compensation in the event of a claim, even if the claim is only a partial loss. 

Property owners are forced to take out maximum coverage even if the owner doesn’t want or require it. For example, a property’s “market” value might be $1,200,000 but it might cost $2,000,000 to rebuild it (“replacement value”). The owner may be a renovation expert or have significant financial resources. Or the owner may decide to assume the risk of a total loss and instead insure for only a partial loss. They decide to insure the property for $1,000,000 to reduce their insurance premium. They intuitively believe that a $500,000 claim will be fully covered but it’s not correct. The universal coinsurance clause states that the percentage of “under-coverage” will be applied to the claim. In this case, the property was “under-insured” by 50% of the total replacement value so the partial claim will be reduced by 50%. The insurer pays out $250,000 instead of the $500,000 the policy holder was expecting, leaving the owner to come up with the balance or possibly lose the property. 90% coinsurance means that the coverage limit purchased by the policy holder must be at least 90% of the replacement value. 80% used to be the norm but many insurers have increased this to 90% or even 100%.

It’s a cost-saving trick of insurance companies to minimize the amount of money they have to pay out while maximizing the amount of premiums they collect. And who pays? No surprise … tenants … through rent increases.

Rent Control and Vacancy Decontrol

Most tenant advocate groups and some uninformed (or dismissive) politicians seek to use rent control and vacancy control legislation to prevent any housing costs being transferred to tenants who created the actual costs as part of their living expenses. Limiting income without limiting costs—such as property insurance—makes no sense. 

Most rental housing tenants are employees with a steady pay cheque. No employee would accept a legislated maximum increase on their pay cheque while their housing and other living costs increased far beyond their ability to meet those obligations. Even without legislation, this is still happening in urban centres everywhere, even those geographies without rent control.

Non-profit, not-for-profit and government entities must also generate enough revenue to cover all costs of every kind so, when costs increase, they either have to increase the rent, or divert tax revenue from other government programs, or raise taxes. 

Like every business, without some profit there’s no reason for private sector investors to build or operate housing. 98.5% of all housing in Canada was built by the private sector. Government built only 1.5% of Canada’s housing.

There are also many other types of investments, including non-housing real estate, that offer a return on investment without the brutal legislative, financial and social challenges of residential rental housing. Rampant increases in costs like building insurance drives away private sector investors, causing an ever-increasing shortage of rental housing inventory. High demand and no supply of rental housing drives up rent rates. Now add on housing insurance.

HUGE INDUSTRY PROFITS

According to Canadian Underwriter magazine’s coverage of a Q4-2020 Outlook Report published by MSA Research, “Canada’s P&C insurance industry survived the pandemic year of 2020 in good financial health … The Canadian P&C industry emerged from 2020, an extraordinary year in all respects, with strong results and strengthened balance sheets,” said Joel Baker, MSA’s CEO, “… generally speaking all boats were lifted. The industry’s return on equity (ROE) in 2020 reached 11.03 per cent, which is a significant jump up from the industry ROE of 7.1 per cent … in 2019. The industry’s net income grew by 54.73 per cent last year, expanding from about $3.9 billion in 2019 to $6 billion in 2020. Even though the number of claims was up 17% … the industry’s net loss ratio dropped 2.42 percentage points over last year …”

RENTAL MARKET

• There are about 2,000,000 rental triplexes or larger in Canada. 710,000 (35%) are in Ontario. This amount does not include single family homes, duplexes and “second suites” (attics, basements, coach house, etc.). This number is almost certainly substantially larger than the purpose-built inventory    
• There are about 4.5 million renters in Ontario. Ontario’s population is about 35% of Canada’s. Therefore, there are arguably almost 13 million (12,850,000) renters in Canada
• 98.5% of all housing in Canada was built by the private sector. 1.5% was built by government.
• 49% of Canada’s total rental housing is in the hands of “unincorporated individuals” (not “big” companies)
• Ontario’s debt is larger than 168 countries, including Russia. Government at any and all levels can NEVER build the desperately-needed housing
• Canada has the lowest housing-per-capita of all G7 nations. Ontario has the lowest in Canada … and therefore the lowest of all G7 nations

EFFORTS TAKEN BEFORE THIS PETITION

Competition Bureau

A formal complaint was filed with Competition Bureau Canada (CB). A senior CB case officer replied that they can only prosecute offenders if they can prove collusion, which almost always requires an insider whistleblower. The CB officer further said that politicians are the only recourse to make changes to insurance industry practices. 

Housing Industry Pool

In early 2022, a coalition of housing providers representing about 2,500 rental units comprising about $1.7 million in premiums made overtures to six insurance companies (not brokerages). Four never replied. Two said to contact a brokerage. After several months of discussions with at least seven larger brick-and-mortar and online brokerages, none of the brokerages would contact their respective insurers to make a proposal. All the brokerages wanted to “first” quote on the individual policy holders.

Specific Property Quote

Additionally, in early 2022, 19 insurance companies (not brokerages) which insure rental properties were asked to quote on the property insurance renewal of a 21-unit property in a city about 30 km from Toronto. The property never had an insurance claim, was well maintained, had several upgrades and no vacancies, located in a quiet downtown area of a major city on a cul-de-sac next to a park, with a fire hydrant on the property, and a one-minute drive from a fire station. 15 insurers (not brokerages) declined to quote. One company quoted about $21,000 and a second about $19,000. That’s about $1,000 per year per tenant or almost $83 per month per tenant … just for property insurance.

Customized Insurance Package 

A Managing General Agency (MGA) is an intermediary, usually an insurance brokerage, which is given the right under contract by one or more insurance companies to create custom insurance packages for targeted submarkets that are either too small or too specialized for the mainstream insurance companies to consider. Only one brokerage proposed using its uncommon MGA status to create a unique nationwide insurance product for the Canadian rental housing market, which would be mutually beneficial to their insurer(s), to tenants and to competent-proven housing providers. It seemed potentially a perfect fit. Nothing further to date has come of this opportunity.

Brokerages Don’t Represent Policyholders

Brokerages present themselves as working on behalf of policyholders to obtain the “best price.” However, insurance brokerages are compensated with a percentage commission of the total premium. The higher the premium, the more money the brokerage and agent make. 

Some insurers also offer “no claim” rewards to brokerages which have clients that make no claims. 

Brokerages are not incentivized to act in the best interests of their housing provider clients or tenants because there’s no business case for brokerages to lobby insurers to reduce premiums. It’s an inherent conflict of interest within the whole industry that fuels housing unaffordability and high rental rates.

HOW TO FIX IT

Signors of this petition call upon the Canadian Federal Government to regulate rental housing insurance nationally: 

• Assume jurisdiction over the rental housing insurance market’s conduct as well as consumer issues such as rate-setting, sales practices and the conduct of brokers
• Compel all insurance companies that offer rental housing insurance to provide best-of-practice coverages at prices affordable to tenants and their housing providers
• Eliminate denial of coverage of any rental housing applicant, and compel insurance companies to  apply policy costs that are commensurate with just and honest, independently-corroborated risk assessments
• Prevent insurance companies from passing on their non-claims-related losses, especially reinvestment losses, to their policy holders
• Ensure insurance companies and their intermediaries are able to meet their financial obligations to policyholders.
• Alternately, reference British Columbia’s and Manitoba’s government-owned auto insurance coverage program as a template for a “nationalized” rental home insurance program owned and operated by the government
• Alternately, establish a not-for-profit version of CMHC’s mortgage insurance program that guarantees low-cost insurance policy premiums that are backed by government

This mandate could possibly be assigned to the federal Office of the Superintendent of Financial Institutions. OSFI already regulates Canada’s automobile insurance and the financial soundness and solvency of most property and casualty (P&C) insurance companies. It would be a logical extension of their legislated purview to determine the regulatory factors to guarantee best-in-practice coverages that could include in their considerations perils assessments and risk analyses by such independent, non-partisan agencies as the Canada Safety Council, the Canadian Federation of Construction Safety Associations, provincial agencies such as the Electrical Safety Association (ESA) and Technical Standards and Safety Authority (TSSA), various provincial Fire Codes, etc.

CALL TO ACTION 

Truth is often a threat to power, and to self-interests that are contrary to the best interests of society or even an entity’s fiduciary responsibilities to its own clients and charges. This is the case with the Canadian insurance industry. The industry’s pursuit of excesses has distorted and corrupted the otherwise democratic and socially-acceptable pursuit of “reasonable” profit in exchange for a valued product or service.

Sadly, justice is not automatic and virtue in the real world is rarely its own reward. Individuals create justice, whether they are a Supreme Court judge or a well-informed layperson. In both cases the pursuit of justice and the correction of injustice is a daunting undertaking. 

One person can make a difference and raise the awareness among the many about an injustice but it takes tens of thousands, if not millions, of voices to compel meaningful change, especially when it impacts an incredibly powerful, elite and largely amoral industry.

Society overall is generally better off when it has entities that willingly assume insurance risk so that citizens can live in relative peace, knowing they have a safety net. However, when that industry abuses its responsibilities and uses its enormous influence to charge exorbitant fees for an essential service while showing no regard for the industry's own social conduct, it is government that must step in to correct the injustice.

Every tenant and housing provider is negatively impacted by the alleged profiteering of property insurance providers. If a million tenants and housing providers signed this petition, it would be a deafening call that government would be foolish to ignore.

Therefore, sign this petition. Then send the link to every tenant and housing provider you know and encourage them to sign it too. 

The petition and signatures will be sent to every Canadian federal Member of Parliament (MP). It will also be sent to all the Ontario MPPs. If you are in another province and you’d like this petition and signature list sent to your legislature please contact the petitioner.