A homeowner on Oxford Street received a letter from his insurer stating that his home insurance was up for review pending an electrician’s report. Two electricians actually supplied reports stating that the home contained knob and tube wiring, but that it was safe.
Despite the favourable reports, the insurance company refused to insure the home. Since then, the homeowner has had $25,000 worth of work done to change all the wiring in his home in order to have his insurance provider renew his policy.
“Why are insurance companies being so aggressive with good, honest, premium-paying citizens who have done nothing wrong?” wondered the frustrated Oxford Street resident.
“Where is the proof that insurance companies in general are dealing with losses from houses burning to the ground in knob and tube induced fires?”
Actually, there is no verifiable proof, according to a recently-released report by a Manitoba Real Estate Association (MREA) task force on knob and tube wiring. The report contains statistics from the city of Winnipeg 2006 census and the office of the fire commissioner that show electrical fires in homes made up less than six per cent of all losses to fire.
“The majority of issues arise with improper installation of new components or lack of maintenance on the existing system (regardless of what electrical system is in place),” said Deputy Fire Chief Justin Panagapko.
The concerns expressed by the Oxford Street resident are far from unique, which is why the MREA in May formed a 10-member task force chaired by Brad Walker, a past-president of MREA, a REALTOR® and a Neepawa-based insurance broker, to investigate the growing number of concerns the association was receiving from the public about the difficulty of obtaining insurance for homes with knob and tube wiring.
MREA president Lorne Weiss said insurance companies haven’t provided a clear explanation about their demands for higher premiums or the refusal to grant insurance due to the presence of knob and tube wiring in homes.
“What are the insurance companies using as their benchmark?” he asked.
Weiss said Winnipeg has a great number of homes with such wiring — which is approved by Manitoba Electrical Code — as a result of the city’s large percentage of older pre-war and post-war housing stock.
According to the report, between 30,000 to 35,000 of the city’s 160,000 homes have knob and tube wiring, while 50 per cent of the homes in areas, such as Brooklands, Weston, Point Douglas, Fort Rouge and other older neighbourhoods with modest housing, were built prior to 1940. These are the neighbourhoods with “affordable” housing affected by the uncertainty of obtaining insurance coverage due to the presence of knob and tube wiring.
“People in these homes haven’t upgraded their wiring because it hasn’t been necessary,” said Weiss, a member of the knob and tube wiring task force.
But when it comes to insuring a home, it may become quickly necessary, as insurance companies have been refusing to provide insurance unless costly upgrades of up to $35,000 are undertaken.
After buying a knob-and-tube wired home on Henderson Highway, a couple was told the house required $15,700 worth of electrical upgrades within two months before they could take possession and be granted insurance.
A Cobourg Avenue couple had insurance coverage on their 100-year-old home, but when they decided to sell it, no insurance company would insure the new owners. The couple ended up paying $6,000 to have the wiring changed as a condition of the sale.
“Our industry is not in favour of people buying homes that are unsafe,” said Weiss. “We would support safety inspections by qualified electrical contractors, looking at the electrical service being adequate for the needs of the home, but what we want to hear from insurance underwriters is a clear statement of what they’re looking for and why they zeroed in on knob and tube wiring.”
Even Canada Mortgage and Housing Corporation, “does not restrict insurability on homes with knob and tube wiring,” the task force was told in a letter from Cam Dupuis, the regional advisor for research and information transfer from Calgary for CMHC, the federal agency that provides mortgage insurance to home buyers.
Another letter was received from A. Marantz of Trained Eye Home Inspection confirming that knob and tube wiring “poses no danger as long as the wiring has not been tampered with or that the insulation has not burned away.”
When modifications to such an electrical system are performed, it is invariably a lack of familiarity with old-style knob and tube wiring that leads to problems.
The research undertaken by the task force found that policy holders in homes with knob and tube wiring “are being notified that their insurance will not be renewed unless the knob and tube is replaced in short order (30 to 60 days).
“Failure by the owner to do so within the time frame has resulted in non-insurance or cancellation; a serious breach of their mortgage agreement.
“In some cases,” according to the report, “the insurance company’s notice to the homeowner is triggered by the sale of the home. In other cases, it is the annual re-insurance of the home.
“In either case, the homeowner has been given very short notice to address an issue that certified electricians have (previously) verified is approved.”
Since the cost of removing the wiring is extremely high, the report recommends that Manitoba Hydro’s Energy Finance loan program be extended to electrical upgrades, capped at $25,000 per home with a 15-year amortization period and a borrowing rate of one per cent above prime (the prime rate for Canadian charter banks is three per cent).
Currently, the plan allows for a maximum of $5,000, a five-year term and an interest rate of 8.75 per cent.
“If the long-term goal is to replace all the knob and tube wiring,” said Weiss, “then better solutions and assistance have to be presented.”
The report compiled by the task force, which also included Claude Davis, Steve Hunt-Lesage and Kim Thompson from WinnipegREALTORS®, Al Morin, the CEO of Assiniboine Credit Union, Michael Barrett, the president-elect of the Brandon Real Estate Board, Tim Sale, a former provincial cabinet minister, and MREA CEO Brian Collie, made five recommendations and a promise “to raise the public profile about this issue.”
The MREA report recommends that the insurance industry clearly define and provide evidence on the issue of knob and tube wiring and their reluctance to underwrite homes containing such wiring, and if unable to provide verification of its position, abandon its “zero-tolerance policy.”
Other recommendations include at least six months notice by insurance companies to homeowners for electrical upgrades, better trained and licensed home inspectors (many professionals, including electricians, are unfamiliar with old-style knob and tube wiring) to report on wiring conditions specific to a home, and insurance companies providing potential policy holders with clearly defensible requirements for obtaining home insurance — “not the nature of it.”
Weiss said members of the task force will be meeting with Gord Mackintosh, the provincial minister of family services and consumer affairs, to discuss the findings contained in the report within the next week or two.
Weiss said the provincial government has a role to play o determine if knob and tube wiring is really a problem.
Meanwhile, the report has been forwarded to Jim Scalena, the provincial superintendent of insurance.
In June, Mackintosh asked the province’s director of consumer protection, the superintendent of insurance and the fire commissioner produce a report by November 1 on knob and tube wiring.
The consumer affairs minister said it was time to undertake a formal review on the extent of the demand for electrical upgrades by the insurance industry and the airness of such demands on consumers.