Brokers say they would love to be able to sell an overland flood insurance product in Canada, but they worry about the viability of the product.
If only those people who lived in flood-prone areas bought flood insurance, the premiums charged would be too high for people to afford it, brokers say.
But without such a product, governments must pick up the tab of flood claims.
Most recently, Manitoba’s provincial government raised taxes in its 2013 budget to 8%, citing a need for money to build flood-fighting projects.
The question then becomes whether it’s better to have government provide flood assistance to residents through flood relief, or whether it’s better for the insurance industry to pitch in by creating an overland flood insurance product, which currently does not exist in Canada in homeowner lines.
The Insurance Brokers Association of Manitoba is advocating for the insurance industry to start discussing the possibility of offering a flood insurance program to homeowners. Manitoba suffered flood damage costs totalling more than $1.2-billion in 2011. A significant part of that will be recovered from the federal government through cost-shared disaster programs.
But is it better for the insurance industry to pick up the tab, by offering overland flood insurance to residents? Or is it better for the government to pick up the tab, raising taxes for everyone if the need arises?
Many brokers had mixed feelings about whether flood insurance would actually work better than government assistance when it comes to covering residents for flood damage to their homes. (continued.)
#pb#
“The issue from an insurance perspective is that the market for actual flood insurance is too small,” said Murray Cameron of Cameron Agencies. “So the premiums insurance companies would be charging – consumers wouldn’t be buying it because the cost would be too high.”
Theoretically at least, that’s why the government has taken the lead role in disaster relief for flooding.
Doug Rempel of Crystal Insurance Brokers said he would like to see private enterprise take more of a role in claims relief. But at the same time, the idea of flood insurance makes him nervous. (continued.)
He said insurance companies would likely start dropping clients if they had to contend with claims payouts of the scale seen in 1997, when Red River flooding caused $500 million in losses.
“I’d love to sell it,” he said. “I don’t know what the price point would be. I think it would be like buying tornado insurance in Kansas.”
Ultimately insureds need to take some responsibility for building in flood-prone areas, so the onus doesn’t always fall on insurers or the public purse, said Cameron.
“Obviously if somebody goes out and builds their property out in a flood zone, maybe someone should be saying: ‘Hey, are you aware of the situation? You will have to cover this liability yourself if you are willing to take that chance,’” he said. “Somebody has to take some onus if he or she is building in a flood plain. Some onus has to be placed on them so that the general public doesn’t have to pay damages every time a flood comes on.”
