Most homeowners are unaware that their home insurance policies are extremely limited when it comes to flood protection. Insurance companies are pointing at a lack of flood risk information across Canada, that reflects inconsistent standards, mapping and knowledge that are costing all Canadians:
Insurance executives say homeowners will never have access to comprehensive flood insurance in Canada unless there are new maps of flood-prone areas that take climate change into account…
Canada is the only G8 country where this so-called overland flood insurance is simply not available in the private sector. “Most insurers agreed that existing flood maps are inaccurate, outdated and inadequate for insurance purposes,” says the study by two experts at the University of Waterloo, Ont. “This data gap poses a clear threat to the viability of flood insurance.”
Having observed the effects of extensive flooding in Toowoomba, QLD, Australia and Calgary, AB, Canada; it is interesting to note that prior to massive flood events, the flooding risk in both cities was considered relatively benign by most members of the public. It is clear that generally, flood risk is not well understood in areas where frequent (say under a five year return period) disruptive flood events are not a part of life.
The fact that the insurance sector in Canada is weighing in on this is interesting. Obviously, the insurance industry’s focus on flooding stems from costs incurred due to flooded basements (due to sewer backups), which in the last 15 years has become their biggest payout area, but they are also pointing out an inefficiency in a government run “insurance program” that they currently do not participate in ((Although coverage for some damage related to flooding, such as sewer back-up, is available, property insurance in Canada does not cover losses from overland flooding, which is by far the most common type of natural disaster in Canada. Those whose homes suffer uninsured damage from floods and other natural disasters may be eligible for some compensation from the federal government’s Disaster Financial Assistance Arrangements (DFAA).)). The report indicates that a major reason for this concern from the industry is because even though they don’t currently provide flood insurance products, almost 70% of Canadian homeowners believe that their insurance policy fully covers them for flooding – it’s about reputation, and finding a solution to insure, mitigate and minimize these flooding risks through proactive government policies ((Research by ICLR and Swiss Re suggests that as much as 70% of Canadians believe they are insured for overland flood damage)).
The study revealed widespread concern among participants about governments’ approach to flooding. Too little is invested in flood risk mitigation and adaptation, while the DFAA ((the Canadian federal government’s Disaster Financial Assistance Arrangements – http://www.publicsafety.gc.ca/cnt/mrgnc-mngmnt/rcvr-dsstrs/dsstr-fnncl-ssstnc-rrngmnts/index-eng.aspx)) helps homeowners recover after a storm without providing incentives for preventive measures beforehand.
Among the other key concerns participants agreed upon were the lack of reliable information, particularly inadequate flood mapping, and the need for additional investments in flood defenses. Those interviewed also “generally shared the same opinion on the major characteristics of flood insurance necessary to make it a viable product.”
The State of Flood Risk Data
I’ve expressed my concerns about inadequate stormwater and flood design standards in Canada previously, and from the report (pdf link), it seems that the insurance industry shares many of the same concerns:
- Most Canadian flood maps are hazard maps, used principally for land-use planning, but not great for risk-management ((More specifically, most hazard maps do not provide information on the risk of actual flood related damage, such as: where damage is likely to occur in the future, frequency of flood events, and the severity or monetary cost of flood related damages.)).
- Design return periods vary across the country ((Alberta applies a 1 in 100 year return period, British Columbia applies a 1 in 250 year period, and Ontario applies multiple return periods in different parts of the province. Most of these return periods are informed by the most extreme example of local historical flooding, such as Hurricane Hazel in the case of Ontario.)). The report states that without a consistent application of return periods across Canadian flood maps, insurers would have to develop premiums that apply to different risk areas.
- Access to and quality of flood mapping data is highly variable ((Flood maps have been developed by a fractured group of Canadian agencies including local conservation authorities, provincial ministries, flood management agencies and municipal bodies. While some of these groups make the data available, others do not, or require an application process. Furthermore, many of these maps are not up-to-date and fail to reflect changes in land-use, such as urbanization and climate change impacts on the frequency and intensity of flooding.)).
Considering that over 100 days has passed since the flooding and High River, AB is still in recovery mode, with homeowners waiting for repairs and funding from the DFAA program and other sources, it is clear that the problem is one that needs addressing. On the financial front, the Alberta government is estimating the total cost of these floods at over $6 billion dollars – the most expensive natural disaster in Canadian history – How much of that could have been avoided through suitable adaptation and mitigation strategies?
As with British Columbia’s ICBC and other insurance programs, which fund risk mitigating activities ((http://www.icbc.com/road-safety/safer-roads/invest-roads)), a program of funding flood risk mitigation and adaptation activities should be a priority for communities that have significant flood damage risk (i.e. financial risk) in storms/floods under the 1 in 100 year return period. Determining the payback for these activities should be a relatively simple exercise for an insurance company.
As with other climate change issues, adaptation and mitigation strategies fr flooding will become important for our cities to weather the changing risks to our communities and daily lives. In Calgary and surrounding communities, the reality of this risk has been an expensive lesson and complacency toward the likelihood of a future event would be ignoring the fact that we can hardly afford to maintain what we have built without having to replace it unnecessarily, if there is a solution to minimize flood damage in the future.