2024 is Canada’s most expensive year for extreme weather – here’s what it means for your insurance

2024 is the highest year for weather disaster costs that’s ever been recorded in Canada, with four major weather events occurring in the short span of one month. A record-breaking 228,000 claims resulted from these events. Compare this to last year, where there were 160,000 claims for the entire year.

The tropical storm Debby recently passed by areas of Quebec, including Montreal, and cost over $2.5 billion in insured damages. This is miraculously even less than Calgary’s recent summer hailstorm, tallying over $2.8 billion in damages. Weather is becoming more extreme in Canada with each year that passes. What does it mean for your insurance? 

Before we sink our teeth into the impact of weather on insurance, let’s look at the rising costs of extreme weather. Although there is an upward trend in the severity of weather, there’s more to it than simply worsening conditions. There are several factors at play. 

First and foremost is the rising cost of construction materials and labour, which makes properties more expensive to repair when there’s damage. Inflation also plays a role, with houses from decades ago that once had a market value of $200,000 now being worth well over $800,000. The same damages that might have occurred when the house was first purchased would be much more expensive in present day, even if the incident wasn’t necessarily more severe. Aging infrastructure is also a major contributor. Cities with older sewer systems and buildings may be more prone to damage than newer construction, leading to higher costs. And finally, there’s the weather itself, which is becoming more extreme. From extreme heat to an increase in burned areas in Canada due to wildfire, our weather’s only getting worse. 

“The trend is going to continue,” says Mitch Insurance CEO, Adam Mitchell. “What was once described as a 100-year storm is clearly not the case anymore. Toronto, for example, has had three 100-year storms in just the last 11 years.”  

As weather events become both more frequent and severe, the more damage output there will be. Coupled with these other factors, we could be looking at a potentially sharp increase in costs in the coming 20, 10, or even 5 years.  

Extreme weather affects everyone—not just the people whose homes and cars were actually damaged.

The premiums everyone pays their insurance provider goes into a pool of funds. While some of these funds are used for operational expenses and profit, most are reserved for paying future claims. It’s part of the deal. You pay your premiums and your insurance company pays for any covered claims. Providers need to ensure that their pool of funds is big enough to be able to pay claims for all their clients. When the cost of claims rises, the pool must get larger as well. To manage this, insurers spread the risk around by increasing rates across the board. In fact, there’s a common saying in the insurance world which really summarizes the whole situation: “The premiums of the many are meant to pay the losses of the few.”

If your insurance company or geographical area is getting particularly hit hard by severe weather, then that impact on premiums will likely be greater.

Not all insurance companies are impacted the same way by severe weather, and so rate increases among different insurers could vary. Someone you know could see a 15% increase, where you might only see an increase of 5%. It really depends. 

In 2023, Mitch saw an average rate for home insurance prices for its new clients between June-August sit at $1,660. For existing clients renewing policies, that average was less at $1,581.

The same month range (June-August) in 2024 has proven much different. For new clients, the average rate was $2,159, and for existing clients renewing policies that average sat at around $1,711. That’s a pretty tremendous increase from the previous year!

If you’re someone whose seen significant rates increases in recent years, or even in the last couple of months, it might be worth looking for a better deal. Finding the best home or the best car insurance company in Ontario for your needs can be tough without the help of a broker, though, so we do recommend working with a member of our team to help you find the lowest possible price.

You can be impacted by Canada’s extreme weather in several ways, but we’re going to focus on two for sake of brevity: if your property has been damaged in a weather event and if your rates have increased because of damages felt country wide.   

If your home or vehicle has been damaged by hail, wildfire, high winds, flooding, etc., odds are that your insurance policies will cover you. Auto insurance can be a tad trickier as most weather damages to vehicles will fall under optional comprehensive coverage. So it’ll only be covered if you’ve elected to purchase that coverage. 

It can be difficult to file a claim following a mass weather event because thousands of other homeowners and drivers will be doing the same. We advise trying to get your claims submitted as soon as possible to expedite the process. Document everything: take photos, videos, and make sure you send this to your insurance provider as evidence when filing your claim. This is a requirement of your insurer to do so, and failing to do so may complicate or even invalidate your claim.

Even if you haven’t needed to make a claim throughout all this extreme weather we’ve been having, your rates still may have increased. It can feel frustrating to see your rates rise, especially when you’ve done nothing wrong.  

The best way to manage increasing premiums? Make sure you’re shopping the entire marketplace and looking at all available options to find the best coverage and price. “With no change coming to these storms in the near future, it’s important to regularly review your policies with a professional broker,” says Mitchell.  

“Some coverages like overland water have changed in the past several years and you may not have the right coverage in place to make sure you’re properly protected.”  

Mitch Insurance understands this is a difficult time for many, but we’re here to help. Give us a call if you need assistance finding the coverage suited to your needs, review your policy regularly, and help you shop the market for a better deal if your rates have already risen.