New Statistics Canada data shows cost of residential construction materials has vastly outpaced overall inflation as severe weather losses at all time high
The historical tempest of rising insurance premiums in Canada’s property insurance market is far from an anomaly. Pressures linked to inflation, coupled with the rising frequency and severity of catastrophic weather events, stretch back to the beginning of this decade. Unfortunately, consumers are now seeing challenges with affordability of coverage.
The trend of severe weather losses in Canada tells a discouraging story. Last year was the worst in Canada’s history for insured losses from severe weather events across the country. These losses totalled over $8.5 billion and resulted in roughly 273,000 claims. This is 188% above the historic average for total claims in any given year.
The record losses in 2024 are nearly triple the total insured losses recorded in 2023 and 12 times the annual average of $701 million between 2001 and 2010.
Of course, these numbers do not tell the stories of the many individuals, families and communities that have been effected. While insurance plays an integral role in providing financial resilience and helping people recover as quickly as possible, more and more people are facing uncertainty and frustration after a severe weather event.
Consumers are not responsible for the shortage of supplies or labour or for the inflationary pressures driving up the cost of building materials. But these external factors are all conspiring to complicate the insurance industry’s timely resolution of claims resulting from the increase in catastrophic loss events, which is causing difficulties for customers.
A look at the data underlying claims
Even as inflation eases in Canada, data from Statistics Canada shows that the key factors influencing the cost of home insurance remain elevated. Most notably, recent Statistics Canada’s Building Construction Price Index found that residential building construction costs have soared by 67% over the last five years, vastly outpacing the 18% general inflation rate over that same period.
To add perspective on building construction costs, let’s look at some of the actual products necessary to respond to a claim for a home repair or rebuild.
Over the last five years, the cost of lumber and other wood products has increased 35%, the cost of fabricated metal products and construction materials has increased 40%, the cost of machinery and equipment has increased 23%, the cost of furniture and fixtures has increased 18%, and the cost of cement, glass, and other non-metallic mineral products has increased 38%.
Looking specifically at two major urban centres – Toronto and Calgary, which were both impacted by severe weather events in 2024 – the trends affecting the cost of claims are even more stark. Toronto saw two major floods in 2024, together causing over $1 billion in damage. According to Statistics Canada, residential building construction costs have increased 114% since 2017 in Toronto, Canada’s largest city. Calgary, which experienced the most costly hailstorm in Canadian history in 2024 with $3 billion in insured losses, has seen residential building construction costs increase 100% over the same period.
As severe weather-related losses continue to escalate exponentially across our country, governments and consumers must understand the disproportionate impact these catastrophic events have on home insurance costs. In addition, uncertainty around a potential trade dispute between Canada and the United States could impact the cost of critical materials needed to repair or replace damaged properties.
Insurers are facing higher claim payouts and prolonged claim resolution times while increases in homeowner’s insurance costs have outpaced overall inflation. Against this backdrop, it will be extremely challenging for insurers to recover their own costs while still delivering affordable home insurance to their customers. The insurance industry can’t solve this home insurance affordability crisis alone.
Government action can ease the pressure
The number of people without access to home insurance, specifically for overland flood, is growing, and for others, costs are increasing. Canadians need governments and the private sector to collaborate on solutions to protect them from the severe weather of today and tomorrow. If that doesn’t happen, we should all get ready to live in an uninsurable country.
Governments and policymakers must be more proactive to properly manage and mitigate risk. That includes:
Making targeted investments in infrastructure that defends against floods
Implementing land-use planning rules that ensure homes are not built on flood plains
Adopting the principles of the FireSmart wildfire prevention program in communities in high-risk wildfire zones
Implementing long-delayed updates to building codes that will better protect homes and livelihoods.
Investments in risk reduction will help ensure Canadians can always find and afford the insurance they need to protect their financial futures – even as the risk of severe weather continues to rise.
