DEALING WITH THE DELUGE
Massive losses help spark a push for better water damage insurance
The Aug. 29, 2017, flooding was a personal disaster for thousands of Windsor area residents. It was also the largest catastrophic loss for the Canadian insurance industry that year.
The industry paid out claims worth $165 million to area residents. To date, the province of Ontario has paid out another $1,436,181 through the province’s Disaster Recovery Fund. “Water has become the new fire,” said Pete Karageorgos, the Insurance Bureau of Canada’s director of consumer and industry relations for Ontario. “There’s now more payouts for water than fire, which used to be the top source of claims. We’ve seen this across the province and the nation.”
The insurance industry defines a catastrophic event as one that causes $25 million or more in losses.
Between the 2017 and 2016 floods in the Windsor area, the insurance industry paid out claims totalling $300 million.
In addition there have been 838 claims paid out by the Ontario Disaster Recovery Fund to residents in Windsor, Tecumseh, Lakeshore, LaSalle, Essex and Amherstburg. There were 583 claims in 2016 and 255 claims in 2017.
Over the past decade, the Canadian insurance industry has been averaging $1 billion in payouts for catastrophic weather events compared to $400 million 30 years ago. Karageorgos said the rising numbers are the result of a combination of factors. Climate change is producing more frequent and heavier rainfalls leading to higher lake and river levels. Wetlands are disappearing, infrastructure is aging and homeowners are finishing their basements.
“In the Windsor-Tecumseh area the damage was primarily in the basements of homes,” Karageorgos said.
Some of the watery misery is the result of poor development decisions.
“We want to be close to the water or municipalities have allowed development in floodplains,” Karageorgos said. “They’re called floodplains for a reason.” Though flooding is becoming more common, Karageorgos admits seeing two such similar flooding events in the same area within a year is “extremely uncommon.” However, the insurance industry and municipalities can no longer play the odds that they’ll get a reprieve from such bad luck.
“As a homeowner, you have to look out for yourself as well,” Karageorgos said. “The industry is receptive to individuals who understand that and make changes.” For its part, the insurance bureau is working with local municipalities and residents on flood mapping, sewer master plans and flood education. Karageorgos said municipalities and residents investing in flood
There’s now more payouts for water than fire, which used tobethetop source of claims.
mitigating measures will see their efforts recognized by the insurance industry.
“We’re trying to act as a bridge to help outline what steps need to be taken to create a more accurate picture for the underwriters of insurance companies,” Karageorgos said. “Some of these infrastructure investments result in fewer claims and companies see that and it makes it a more desirable area to offer insurance or better rates because stuff has been done.” In addition, the insurance bureau has put together a program called Flood Factor to help educate homeowners about the steps they can take to protect themselves. The Flood Factor interactive booths were part of the Tecumseh Cornfest this month.
One positive development is more insurance companies are offering overland flooding coverage. Traditionally, companies offered flood coverage for burst pumps and sewer backups. “Overland flood insurance and comprehensive water damage coverage wasn’t much available before 2015,” said Karageorgos. That changed after the 2013 Calgary flood. “Consumer demand wasn’t there. Now, it is being offered and homeowners should ask about it.” Still, some local residents, especially those with homes near the water or who have experienced repeated flooding, find it impossible to get flood insurance.
The Ontario Disaster Relief Fund offers limited compensation and many residents were frustrated with the application process “It wasn’t meeting the needs of the people,” said Lakeshore Mayor Tom Bain. “When you get to the bottom line, after the deductions, it was hardly worth it for some to fill all the papers out. There has to be something to be more straightforward to meet people’s needs.”
Tecumseh residents have similar stories about the recovery program, Mayor Gary McNamara said. Karageorgos agrees the Disaster Relief Fund is not the answer for those who can’t get insurance or have limited coverage.
The federal government has asked the insurance bureau to help it design a national flood program similar to the United Kingdom’s Flood Re program. Flood Re is a joint venture between the insurance industry and the government.
“Canada is the only country in the G-7 that doesn’t have a national flood program,” Karageorgos said. “There is disaster relief, but this is strictly focusing on flooding.”