National Post (National Edition)
As floods get worse, insurance industry fights back against rising costs to homeowners
Over the past decade, Canadian cities have experienced record rainfall events. Recent floods along the Saint John River in New Brunswick have only underlined a stark reality for Canadians: much of the property we own is susceptible to flooding, and the costs associated with flood damage continue to rise.
The Canadian insurance industry is fighting back, not only by offering flood insurance, but also by educating property owners on ways to reduce flood damage and working with stakeholders to make homes more resilient to it.
The Insurance Bureau of Canada notes that insurance payouts for catastrophic property loss totalled around $400 million annually from 1983 to 2008, adjusted for inflation. Those payouts have typically exceeded $1 billion for each year thereafter. Floods in Alberta and Ontario drove costs to $3.5 billion in 2013 alone.
“The largest driving factor for that increase continues to be floods — too much water in the wrong place at the wrong time,” says Natalia Moudrak, director, Infrastructure Adaptation Program, at the Intact Centre on Climate Adaptation at the University of Waterloo.
Increased flood costs are the result of a combination of factors, ranging from more severe storms and aging infrastructure to where we build, how we build, how we use our property and the type of flood coverage available.
“Increased frequency and severity of rain events is a factor,” says Moudrak. “But we are also losing pervious land to new construction, infill and redevelopment — this is land that could have absorbed some rainwater. At the same time, older infrastructure wasn’t designed to handle the volumes and rates of storm water we are seeing today, and its condition is deteriorating over time.”
Basements are also growing larger as home footprints increase, and homeowners are using them as home theatres, for example, and housing expensive electronics below grade.
“The elephant in the room is the fact that we continue to build in flood-prone environments,” says Barbara Turley-mcintyre, CIP MEB, vice-president, sustainability & citizenship, at The Co-operators. “It will take a collaborative approach and some courageous leadership among businesses, developers and government stakeholders to curtail what is essentially an unsustainable practice.”
Part of the problem is lack of awareness. Partners for Action is an applied research network advancing flood resiliency co-founded by The Co-operators Group and Farm Mutual Re. It recently conducted a survey of 2,300 Canadians who live in designated flood-risk areas. The survey found that only six per cent of them were aware that they lived in a designated flood risk area.
“As well, many Canadians believe that federal and provincial government disaster recovery programs will cover them after a flood,” Turley-mcintyre says. “That’s not always true, and these programs are not insurance policies.”
Flood insurance became available in Canada in 2015, in large part spurred by Alberta and Ontario floods.
“That may come as a surprise to people who have always believed that sewer back-up coverage covered flood damage,” says Turleymcintyre. “The Co-operators is making things simpler by now offering comprehensive water damage coverage that covers all those possibilities, even for Canadians at highest risk of flooding”
Property owners can reduce their risk of flood damage — and often reduce insurance premiums — by picking some low-hanging fruit. That includes: disconnecting downspouts from municipal systems and directing them away from the house; installing back-flow prevention valves in homes; installing back-up generators for sump pumps; grading properties away from the house; and choosing flood resistant landscaping.
“Some customers choose to reduce flood insurance premiums by raising their deductible,” says Mike Kosturik FCIP, regional vice-president at Intact Insurance. “Some customers might find it’s manageable to handle the first couple of thousand dollars of damage that might be caused by a flood, and leave insurance to cover a truly catastrophic loss.”
Insurance industry initiatives continue to address flood issues. Floodsmart, developed by the Partners for Action Network, offers consumer education, while the Intact Centre is working closely with the Standards Council of Canada, the National Research Council of Canada and CSA Group to develop a national standard for building new residential communities that are more flood-resilient.
The Intact Centre’s Home Flood Protection Program is training professionals to help homeowners identify top flood risks and act to mitigate that risk. The centre is also working with community colleges to include flood risk assessment skills as part of home inspector training.
Meanwhile, the Insurance Institute of Canada (IIC) continues to train and educate its 40,000 members and 18,000 chartered insurance professionals (CIPS) on flood-related issues.
“Nobody can change the weather,” says Kosturik, who is the current chair of the IIC’S CIP Society. “But by educating our members, we can do a better job of working with stakeholders to promote better water infrastructure, improve building codes and make homes more watertight. There is a higher level of construction available to homeowners if consumers want it, if builders want to build it and government wants to mandate it. Working together, we can help to build homes for the future.”
Many Canadians believe that federal and provincial disaster recovery programs will cover them after a flood. That’s not always true.