Home insurance prices are expected to rise after a historic wildfire season, with one analyst placing the rise between five to 15%.
“With increased risks from climate change, the insurance landscape is bound to change, affecting home affordability,” Walter Melanson, lead market analyst for PropertyGuys.com, told the Toronto Sun.
“The recent wave of wildfires has brought environmental concerns to the forefront and unveiled intricate challenges that extend to housing, prices, government involvement, insurance costs, and investor interests. These wildfires could influence property values, buyer behaviour, and the overall housing market dynamics,” he added.
The wildfires in Nova Scotia alone had destroyed more than 200 homes. Experts warn that its impact could be more widespread.
As the cost of claims increases following the frequency of disasters, higher inflation, increased interest rates, and higher labour costs, insurers need to adjust their premiums to continue their business, Melanson explained.
“The figures 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,” he said.
Apart from the price increase, Melanson also flagged other issues brought by the wildfires:
· The challenges of rebuilding homes as there existed supply chain issues and unprecedented costs, causing it to take more time and be more expensive, further worsened by rising interest rates and inflation.
· Opportunistic buying, wherein some investors may capitalize on the tragedy by making dubious offers to distressed homeowners.
· The scarcity of affordable housing due to the worsening housing crisis
“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,” he said.
