Impact of Canada’s wildfires: Home insurance hikes a given

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Wildfires expected to exacerbate the current housing crisis, making affordable housing even more scarce

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The devastating wildfires this year that wiped out more than 200 homes in Nova Scotia alone could very well impact more than those individual homeowners for the residual effect could be far more widespread, says Walter Melanson, co-founder and lead market analyst for PropertyGuys.com.

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“With increased risks from climate change, the insurance landscape is bound to change, affecting home affordability,” he says. “Insurance prices are forecasted to increase by five-15 per cent, adding another layer of complexity to the market.”

The bigger tragedy, he says, as a result of wildfires that have virtually destroyed properties across the country, is what will happen to all those people who lost their homes?

Melanson, whose firm is headquartered in Moncton, N.B. and has franchise operations across Canada, began looking at the short and long-term effects on the housing market in areas that had been devastated, soon after the Nova Scotia fires erupted in the spring.

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There are, he says, a litany of issues that have been created by this tragedy and others and they include:

While the “real estate market remains a free arena, homeowners should be cautious to ensure they are not exploited,” he says. “In short, these wildfires could influence property values, buyer behavior, and the overall housing market dynamics.”

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As for home insurance, aside from the pending increases on policies, there is the fact “there are still reports of people having difficulty getting to the insurance companies, difficulty getting the adjusters on the ground, difficulty settling those claims.”

When asked if all of this damage from the fires will cause a steep increase in home insurance rates, he says, there is no doubt, particularly for homeowners directly impacted.

“The recent wave of wildfires has brought environment concerns to the forefront and unveiled intricate challenges that extend to housing, prices, government involves, insurance costs and investor interests,” says Melanson.

“The figures five-15 per cent came out when people were panicking. And so, when you are quick to come out with a number like five-to-15 percent, often it ends up being higher than that. I do not want to underplay a five per cent increase for people who are living paycheque-to-paycheque and who are paying so much already for their property. It is a lot, and so is 15 per cent. But I am thinking, what does 20 per cent do to someone, what does 25 per cent do to someone?”

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The fact is, says Melanson, is that “when costs related to claims increase, insurers need to adjust their premiums to stay in business. With the increased frequency of disasters like wildfires combined with other factors like higher inflation, increased interest rates, and higher labour and related costs related to claims, (they) need to increase their premiums. This affects everyone, ” he says.

“While everyone shares the rising cost of insurance premiums – insurance rates will increase most in regions where the likelihood of future claims is most prevalent – like in wildfire-prone areas. In these areas, we estimate that homeowners will see the cost of their property insurance increase between five and 15 per cent.”

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