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The skyrocketing cost of residential construction in Alberta has sent home insurance premiums in the province soaring, the biggest such increase seen in Canada in more than two decades.
Builders in Calgary, and to a lesser degree Edmonton, have been complaining for more than a year about the rising cost of building materials and labour. Inflation in the industry has spiralled to such a degree that many firms have simply stopped building residences for fixed prices.
That phenomenon is now biting even those homeowners who have no plans to move. Premiums in the province jumped by more than 40 per cent between July, 2005, and July, 2006, roughly pacing the rise in the replacement cost for private residences over the same time.
It is the biggest jump in premiums seen since a 47-per-cent hike in premiums in New Brunswick in the early 1980s. Alberta's increase far outpaces the rest of the country. Saskatchewan, with an 8-per-cent increase, was a distant second, while fees actually fell 5 per cent in Newfoundland.
The Insurance Bureau of Canada says the increase in Alberta is the inevitable outcome of price inflation in the housing sector, and the near-ubiquitous feature of policies that specify an insurer will replace a dwelling rather than simply pay out a fixed amount of cash. Jim Rivait, vice-president of the Prairies, Northwest Territories and Nunavut for the IBC, said homeowners are actually getting a respite from inflation, since year-long terms mean that price hikes could be delayed for months.
Insurers, on the other hand, must pay today's prices for reconstruction while receiving, at least in part, revenue based on the past's lower prices. However, he could not say whether profits from home insurance are falling because of inflation in residential construction.
www.homegenies.com
The skyrocketing cost of residential construction in Alberta has sent home insurance premiums in the province soaring, the biggest such increase seen in Canada in more than two decades.
Builders in Calgary, and to a lesser degree Edmonton, have been complaining for more than a year about the rising cost of building materials and labour. Inflation in the industry has spiralled to such a degree that many firms have simply stopped building residences for fixed prices.
That phenomenon is now biting even those homeowners who have no plans to move. Premiums in the province jumped by more than 40 per cent between July, 2005, and July, 2006, roughly pacing the rise in the replacement cost for private residences over the same time.
It is the biggest jump in premiums seen since a 47-per-cent hike in premiums in New Brunswick in the early 1980s. Alberta's increase far outpaces the rest of the country. Saskatchewan, with an 8-per-cent increase, was a distant second, while fees actually fell 5 per cent in Newfoundland.
The Insurance Bureau of Canada says the increase in Alberta is the inevitable outcome of price inflation in the housing sector, and the near-ubiquitous feature of policies that specify an insurer will replace a dwelling rather than simply pay out a fixed amount of cash. Jim Rivait, vice-president of the Prairies, Northwest Territories and Nunavut for the IBC, said homeowners are actually getting a respite from inflation, since year-long terms mean that price hikes could be delayed for months.
Insurers, on the other hand, must pay today's prices for reconstruction while receiving, at least in part, revenue based on the past's lower prices. However, he could not say whether profits from home insurance are falling because of inflation in residential construction.
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