What the P&C industry can do to keep home insurance affordable

Canada’s P&C industry needs to lobby more for public investments in resilience, provide more incentives for Canadians who invest in protection for their homes, and stop re-building damaged homes to their pre-loss condition, according to a new emerging issues paper published by the Insurance Institute of Canada.

Home insurance is currently affordable, adequate, and available for most Canadians, says the report, Home Insurance Affordability: Implications for the Insurance Industry in Canada. But higher residential claims for flooding, wildfire, hail, and severe wind has driven up the price of home insurance significantly over the past 30 years.

“Strain is evident in some Canadian insurance markets,” says the report’s author, Paul Kovacs, the founder and executive director of the Institute for Catastrophic Loss Reduction. “Experience in the United States shows that home insurance affordability will inevitably become an issue if Canadians fail to break the trend of rising severe weather-related home damage and continue to experience rising residential claims.”

Statistics Canada figures cited in the report show the median after-tax income in Canada was “stagnant” between 1996 and 2025, growing by an average of 0.8% per year after inflation. Over the same period, the cost of living in Canada increased by 2.3% a year, driven by increasing costs in housing, food, and energy.

Meanwhile, the price of home insurance in Canada increased by an average of 5.3% per year over this period. “This was more than twice the increase in the cost of living, sustained over three decades,” the report states. “Indeed, Statistics Canada found that home insurance prices increased by more than inflation in 28 of the last 29 years. In this same time period, natural catastrophe–related claims have increased 8.1%.”

Claims costs for insurers ballooned to a record $9.1 billion in 2024 and returned to the more familiar (but high) range of $2.4 billion in 2025. Escalating natural catastrophe claims expenses are the main culprit in the rise of home insurance costs.

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The report states every dollar invested in building resilience in homes reduces claims costs down the road by between $5 and $10.

To prevent a home insurance affordability crisis in 10 years’ time, four opportunities exist for building more damage-resistant homes, the report states:

• Homes must be built in the right locations and in the right way during initial construction
• Millions of existing homes lack essential protection that should be added through retrofits supported by government incentives
• Governments and the insurance industry can partner to build back better after a loss, adding essential resilience measures that will reduce the future risk of damage
• Communities must invest to protect homes and public infrastructure.   

To this end, the “insurance industry must press with increased urgency for action by governments,” the report states. “Building codes need to include protection from flooding, wildfire, hail, and high wind. Governments should provide financial incentives to homeowners who invest in protection. Governments should invest in resilient community infrastructure.”

Second, the insurance industry “needs to become more effective in communicating present practices in a way that incentivizes homeowners to invest in seismic and climate resilience,” the report recommends. “The insurance industry must improve communications with homeowners about how resilience investments can have a favourable impact on home insurance pricing, terms, and availability.”

And finally, the industry and governments need to invest in “building back better,” meaning they rebuild in a way to prevent damage from happening in the future.

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“Governments and the insurance industry need to stop restoring damaged homes to their pre-loss condition,” the report states. “This puts structures and their contents back at risk. Inevitably, homeowners will experience future loss and damage.

“Insurers and governments should commit to build back better by incorporating resilience protection into recovery efforts.”

David Gambrill

David has twice served as Canadian Underwriter’s senior editor, both from 2005 to 2012, and again from 2017 to the present.