Brokers in Medicine Hat, Alberta are calling for the insurance industry to step up discussions about a new or revamped flood insurance product in the wake of serious floods and storm damage over the past two years.
Storm damage in Alberta has caused more than $xxx million over the past two years, and brokers indicate their clients’ home insurance deductibles have increased as a result.
“Insurance companies are increasing deductibles because of weather-related losses in our area,” said Jackie Doell of A-WIN Insurance. “At one point, a client could get a $500 deductible on a homeowner’s policy, but because the insurance company has experienced so many losses in the past due to hail and water, they increased the deductible across the board [to $1,000].
“The weather-related losses are hurting our industry greatly. As a broker, we want that coverage, including flood, offered to our clients. Potentially, are we going to be looking at having this a separate coverage that you can purchase or decline? I don’t think that’s going to happen soon, but it is on the back-burner and it’s concerning.”
Doell said brokers are currently “trying to negotiate with insurers some form of product” that would answer to increasing water damage claims.(continued)#pb#
Canadian insurers estimate they are spending more than $1.7 billion annually in water damage losses.
The Alberta representative of the Insurance Bureau of Canada (IBC), an association of Canada’s property and casualty insurers, was not available for a specific comment about the deductibles or the state of personal lines flood coverage at press time. A spokesman for IBC did note that flood damage had insurers reviewing their individual portfolios.
“Insurers are being prudent in attempting to manage the effect increasing losses have on homeowners,” said Steve Kee, IBC’s director of media relations. “They are reviewing their cases, assessing, and getting a full understanding of specific risks. Premiums are based on claims histories, and each will set based on their own experiences.”
But brokers feel that discussions need to start around changing the homeowner’s product to account for increased water damage losses. One said that the insurance industry handled the 2011 fire in Slave Lake – which burned down more than 40% of the town, causing more than $700 million in damage – very well. But overland flood damage, which is equally devastating for consumers, is not covered in Canada.
That doesn’t sit well with brokers who have been in the front lines of major flooding events, helping their clients rebuild after devastating losses. Gord Cowan of Cowan Insurance in Medicine Hat, Alberta has been on the front lines of several major flooding events in his area.
“We’ve got our arms tied behind our back with flood, because it’s not a peril that’s normally covered,” Cowan said. “The effects of a flood are felt within the community and across several different industries. From an insurance broker’s perspective, I felt helpless because I couldn’t help these people.”
Cowan said he had a hard time explaining to local politicians why businesses are covered for overland flood, but homeowners are not. One reason is that businesses can afford to pay a $25,000 deductible for the insurance, whereas most homeowners cannot.
Canada’s insurance industry has been kicking the tires on the viability of an overland flood program for a few years. One stumbling block has been ‘adverse selection,’ meaning the group that doesn’t use flood insurance would subsidize the cost for those who use it most.
Cowan said other forms of home insurance innovation should be part of the broader discussion. For the sake of discussion, he suggested that the government assume responsibility for the first $15,000 to $20,000 of a homeowner’s overland flood claim, with the insurance industry designing a product to pay for damages in excess of what the government would pay.
