Property management company and insurance broker FirstService Corp. (TSX:FSV) has announced its intent to file suit against the sa国际传媒 government over legislative changes made in 2020.
Insurance Council Rule 7 is being introduced July 1 to address the potential for conflict of interest where a licensed insurance agency or adjusting firm has shared ownership with a property management company, according to a statement from the Insurance Council of sa国际传媒
FirstService is challenging this on the basis that it will damage the company and increase costs for those living in its stratas. This new rule also comes at a time when there are high insurance costs mixed with unaffordability, and throughout the province.
There are about 100 job vacancies for property administrators in the province, according to Statistics sa国际传媒. Some property management firms suggest the total vacancies could be closer to 200.
Strata insurance premiums rose by approximately 40 per cent in sa国际传媒 in 2019, with deductibles seeing triple digit increases over the year prior. More recently, premiums stabilized last year following a period of decreases in 2021, according to BC Financial Services Authority.
Due to these existing issues and the potential impacts of the rule change, FirstService will launch a suit in the coming days if the sa国际传媒 government does not change course, according to Andrew Lester, president of FirstService Financial, a subsidiary of FirstService.
The changes mean that any property management company or its corporate entity that has shared ownership of an insurance agency will not be able to perform insurance business for clients of a commonly owned strata management company.
FirstService is calling on the sa国际传媒 government to halt this change as it claims it will negatively impact over 100,000 strata owners and eliminate the company’s ability to serve strata buildings.
These impacts will be seen in increased insurance costs, and decreased access to educational and risk management materials, said Lester. He highlighted that strata councils are run on a volunteer basis and that companies like FirstService act as a third-party resource to inform insurance decisions.
“They no longer have this additional support system that's been helping them drive their premiums down,” he said.
“It's a fiduciary responsibility of the [strata] board to hire suppliers, contractors and vendors to maintain the asset. There's going to be more claims, because the preventative measures are not going to be in place. Then those claims may take longer to resolve. These are all the services that my team used to provide up until this day and then on July 1st, we are no longer allowed to do that.”
The changes are in response to 2020 amendments made by the provincial government to the Financial Institutions Act and Financial Products Disclosure Regulation, which prohibits the payment of referral fees to strata property managers from strata insurance transactions, according to the Insurance Council.
FirstService has met with the Premier’s Office, as well as the housing and finance ministers to express their opposition over the last two months, according to Lester.
“Our goal is to try and get them to reverse course over the next few weeks. We seem to have been able to give more clarity to the finance minister about our position and what we've been doing over the past decade,” he said. “But if not, then we'll have no choice at all but to protect our company, and the 100,000 stratas that are living in our buildings. They've come to expect the service, so we are standing up for them as well.”
Lester said one of the points made to the government is that every insurance broker experiences this conflict of interest.
“Brokers are paid a fixed commission and if premiums go up, a broker makes more money,” he said.
“[FirstService Residential] is implementing the risk-management strategies that we've designed. If they implement those risk-management policies, that means the premiums stabilize or lower. That negates this whole idea that a broker is incentivized for higher premiums.”
Lester claimed Finance Minister Katrine Conroy understood this position when it was brought forward in discussions.
The Ministry of Finance did not respond to a request for comment in time for publication.
All sa国际传媒 insurance licensees are expected to comply with the changes by July 1, 2023.
—With files from Peter Mitham, Frank O'Brien, Jane Seyd, Glacier Media.
Story updated June 13 to reflect the latest information on strata insurance premiums.
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