Data from Statistics Canada’s October Consumer Price Index (CPI) report has revealed that residential building construction costs have surged by 66% since 2019, significantly outpacing the national inflation rate, which stood at 19% over the same period.
This sharp rise in construction costs has contributed to a 24% increase in home replacement costs, encompassing expenses in rebuilding a home from the ground up.
The Insurance Bureau of Canada (IBC) has emphasized that these increases are a key factor behind escalating home insurance premiums. Canada’s insurance providers face growing challenges, with rising construction input costs, a shortage of skilled labour, and an escalating number of natural disasters.
“The cost to rebuild a home in Canada is steadily increasing, and this cost increase has been exerting upward pressure on home insurance premiums,” Liam McGuinty, IBC’s vice president of strategy, said. “This comes at a time when acute skilled-labour shortages and skyrocketing losses from natural disasters are already having a significant impact on the home insurance landscape.”
In provinces like Alberta, which faced historic weather events this year, including a record-breaking hailstorm in Calgary, the impact has been particularly severe. Alberta’s residential building construction costs have risen by 73%, while home replacement costs have grown by 29%, further adding to the financial burden for homeowners.
Since 2019, the number of personal property damage claims in Canada has risen by 115%, with the cost to repair and replace damaged property jumping by 485%. These trends have placed significant financial strain on the home insurance sector, the IBC said.
Craig Stewart, IBC’s vice president of climate change and federal issues, stressed the need for government action to reduce the financial strain on homeowners.
“Canada’s insurers are playing a leading role in helping Canadians adapt to the impacts of severe weather and have been calling on all orders of government to take immediate action to mitigate the impacts of natural catastrophes and better protect communities moving forward,” Stewart said. “If Canadian governments fail to take decisive action to create more resilient communities, it is expected that pressures on home insurance premiums will continue.”
The IBC has called for measures to improve the country’s resilience to natural disasters, including investing in resilient infrastructure, adopting stricter land-use planning rules to prevent construction in high-risk areas, and enforcing updated building codes that offer greater protection for homes and residents.
The current economic pressures on home insurance are compounded by a looming shortage of skilled construction workers. A report from BuildForce Canada in March 2024 predicted that between 25,000 and 28,000 workers in the industry will retire annually until 2033, while the demand for construction workers will increase by 88,400 during the same period.
Without a rapid expansion of the workforce, the labour shortage will likely delay repairs and drive up costs further, the IBC said.
Canada’s increasing vulnerability to natural disasters has led to unprecedented insured losses. In 2023, the country experienced over $3.5 billion in insured damage due to severe weather, marking one of the costliest years in recent history. This year, insured losses have already exceeded $7.8 billion, setting a new record for the highest insured losses in Canadian history.
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