Whether it was at Swiss Re’s annual insurance outlook breakfast, a roundtable discussion with ministers or an Economic Club of Canada panel, Don Forgeron, Insurance Bureau of Canada’s (IBC) president and CEO, was talking about floods.
“Within the insurance industry, we are taking steps to better educate consumers about the realities of flood, and how to reduce their individual risk,” remarked Forgeron during the panel on April 09. Speaking to Insurance Business afterwards, he said that the industry is uniquely prepared to do this work.
“There’s a long, long list of what the industry has done and continues to do in terms of helping consumers adapt and better prepare, and we’re probably much further ahead than other sectors because we’ve been dealing with it for so much longer than other sectors,” said Forgeron, later adding that he’s optimistic about the progress on flood insurance availability.
“The industry feels fairly confident that, over time, we’ll be able to write flood cover at an affordable rate in say 90% of the country, but there will be somewhere between 5 and 10% of those risks that are simply too high.”
On whether effects from climate change are hitting society faster than private and public sectors can keep up with, Forgeron said that waiting to take action, only to find out the answer is ‘yes’ is not an option.
“There is a focus on mitigation, on reducing our carbon footprint, on moving to a greener economy and that’s important, but even if we turned off all the greenhouse gases today, the damage that we’ve already created is giving rise to the severe weather that we’re having today, that we all know is going to continue to get worse,” said Forgeron. “We do have a federal government and provincial governments that are committed on the mitigation side and we continue to impress upon them the need to focus on dealing with today’s reality.”
Insurers and governments are making strides that have already had an impact. Just a few years ago, the insurance industry didn’t even sell residential flood insurance.
“It was a risk that was largely uninsurable because the view was that those places that flooded were the same places that flooded every year, and so you couldn’t devise an affordable flood insurance program, but the world has changed and now we’re seeing flooding events happen almost randomly across the country,” explained Forgeron, though there’s more work to be done.
“The current system of compensating people for flood damage simply is not sustainable – where a flood event happens, governments step in with assistance, people are rebuilt in exactly the same places with exactly the same homes, exactly the same drainage systems, and yet we were surprised that they would flood again. It was clear that there was a need for a new way forward.”
Canada’s Minister of Public Safety, the Honourable Ralph Goodale, convened a roundtable in November 2017, bringing together all the different stakeholders that had a role to play in addressing the protection gap. A national advisory group was created to provide advice and recommendations to various levels of government on how to deal with the issue, proving how crucial it is to form partnerships across sectors.
“This is not a government problem, it’s not an insurance industry problem and it’s not a consumer problem,” said Forgeron. “It’s a shared problem by the whole of society and it’s going to take the whole of society to solve it.”
Brokers have a role to play, too. Consumers are not going to mitigate against a risk they’re not aware of, and many find out they don’t have the right coverage only when their homes are already flooded.
“One of the biggest problems we have in moving consumers to act, whether it’s on flood, on earthquake or on any other issue usually is awareness,” said Forgeron. “Brokers are ideally situated to have that conversation with consumers around what the risks are and then obviously to be able to provide them with solutions.”