Why home insurers are more exposed to NatCats after the pandemic

When the pandemic, remote work and a hot housing market combined to cause more Canadians to buy homes in suburban and rural areas, home insurers may have become more exposed to NatCat losses, data from a recent Aviva study found suggests.

COVID-19 influenced a change in location for 60% of Canadians, said the Aviva study, How We Live. And one in 10 Canadians who moved into rural or suburban areas said the pandemic factored into their decision.

Remote work became commonplace during the pandemic, when government-ordered public health quarantines required social distancing to prevent the spread of COVID-19.

“Those who work from home (26%) are significantly more likely to say COVID-19 influenced their decision to move to the suburbs or small towns,” Aviva’s report observed. “This is especially true for younger homeowners in Alberta and British Columbia, who are moving towards rural regions, likely due to less affordable housing in urban or suburban regions.”

Youth are leading the charge into the suburbs and the hinterlands, Aviva found. Seven per cent of Canadians reported purchasing a new home during the pandemic in 2021. Among them, 21% were under the age of 44.

But young Canadians wishing to buy their first homes faced hot housing markets in urban areas such as Vancouver and Toronto, which helped drive the price of an average Canadian home up 19.6% in 2021 (to $720,854), as noted in the Chartered Professional Accountants’ Pivot Magazine. And so, affordability factored into their exodus from the city.

But for insurers, all that home-buying in the ‘burbs and remote areas changed the urban-wilderness interface. This, in turn, introduced more ways for insured home losses to occur.

In short, pandemic home-buying patterns may have increased Canadian home insurers’ exposure to natural catastrophes.

“Whatever the reason Canadians are choosing to move to more remote areas, special attention should be paid to areas known for windstorms and/or hail,” cautioned Phil Gibson, executive vice president and managing director of personal insurance at Aviva.

“Often, areas that are flatter or less insulated by the wind protection large buildings provide, or the heat cities generate and give off, can be impacted to a greater degree by these risks,” he added. “Large, open, and flat land is often subject to intense wind events, while the very same storms hitting a city could have little to no effect as they dissipate much faster.”

Wildfire is also a known risk in suburban and rural areas, given how close people are living to trees. In fact, living closer to nature is not unlike living with the same risks to which cottagers are exposed.

The more remote the location, the more people will need to work with insurance providers to ensure more rural-based risks are included in the home insurance package. Working from home closer to nature is a great idea until nature meets you under the doorstep or camps under your roof.

“Care should be paid to the presence of wildlife if moving deeper into rural areas,” Gibson noted in the report. “The presence of wild animals attempting to nest in and around the home may be higher. Homeowners should inspect the interior and exterior of such homes regularly for birds, rodents or insect colonies.

“When moving to more remote areas, Canadians should always contact their insurance representative to ensure they have the right coverage for the additional protection required.”

Feature photo courtesy of iStock.com/Bulgac