Explaining water risk
Suchinder Singh , Vice President, Personal Lines, Intact Insurance?
Even before the floods Ontario experienced this summer, brokers have been telling us that you see property as “an increasingly nuanced product,” and you want help explaining changes in property rates and restrictions – especially around water – to customers.?
We hear you. While all insurance is important, home insurance is the one that hits most directly at the heart. Home is not just a place – it’s where we build our lives. As customers and homeowners, we all need to feel that our home is protected, and that if something happens to it, our insurance policy has the coverage we need to get us back on track.?
Given the increased severity and frequency of extreme weather events, it’s critical to ensure that customers understand what their home policy covers – and what it doesn’t cover – and why, especially when it comes to water risk.?
Here’s what you need to know to have those important conversations.?
More analysis and customized coverage?
Insurers are not just considering square footage, value of contents or postal codes nor are we offering one-size fits all coverage. We are using flood mapping and geocoding to drill down into the risk profiles of individual properties.??
At Intact, for example, we offer water coverage through our Enhanced Water Damage Package, which has several endorsements and distinct levels of coverage based on geographic locations.?
Water most expensive peril?
Why are insurers doing this? Climate change. Extreme weather events are more frequent, more severe and the claims they bring more expensive. Their impact on how insurers price property risks has been considerable.??
In this environment, water is the largest peril any insurer needs to cover, accounting for 60% of the premium on most property policies.??
Water enters homes in various ways?
Most insurers, including Intact, differentiate water damage coverage depending on how water enters a home:?
Sewer back-up and water and sewer line coverage, as well as the routine water damage caused by overflowing bathtubs, leaking pipes and cracked toilets, is well-understood across the industry, and by customers – although it’s always a good idea to go over the exclusions and limitations with customers, as well as potential loss mitigation actions and incentives. At Intact, we are big fans of mitigation so, for example, if a customer installs a loss mitigation device such as a sump pump at the time of an insured sewer back-up loss, we will contribute an additional $1000 towards its installation.?
Overland water and groundwater are trickier to understand – and underwrite!?
Groundwater should perhaps be called underground water. It’s found in the cracks and spaces in soil, sand and rock and it enters homes through basements and cracks in foundation when the water table rises.?
Overland water is above ground, fresh water that comes from rivers and lakes as the result of rain, snow melt and spring run-off and includes flooding caused by dam breaks or overflow of rivers, lakes and reservoirs.?
It’s with groundwater and overland water where the availability of coverage varies most, by insurer and by geography.?
Flood mapping and geocoding?
To price water damage sustainably for most customers over the long term, an insurer like Intact relies on sophisticated mapping and geocoding.?
Flood mapping consists of many layers of data, such as the types of flooding prevalent in the area, causes of the flooding, flood return periods and sophisticated LiDaR and bare earth data, which lets us see the surface of an area stripped of all structures on it.?
Geocoding is how we match the address of a property risk with precise geographical coordinates. In tandem with flood mapping, geocoding considers elevation, topography, proximity of bodies of water and structures such as dams and reservoirs, historical rainfall statistics and river flow data, soil permeability, snow melt accumulation and, of course, the severity and frequency of extreme weather events.?
Territories and coverage?
Based on flood mapping and geocoding, insurers identify territories with similar risk profiles, and base price and coverage on that. At Intact, we use seven territories, with territory 1 designated as minimal risk, territories, 2, 3 and 4 as medium risk, and territories 5, 6 and 7 as considerable risk.?
We do not offer overland water coverage in territories 5, 6 and 7, as these territories have an extremely high probability of flooding.?
Why did you make it so complicated??
As we have accumulated increased data, we have gotten a better understanding of how water enters buildings, and the frequency and cost of each type of occurrence. This has influenced how we design our coverage and how we price our risks.?
The goal is to deliver coverage to your customers at a fair and sustainable price, considering their property's risk profile.?
What happens when a home in a high-risk territory floods??
People like to live near water. According to Public Safety Canada, 80 per cent of Canadian cities are built in part on flood plains and 10 per cent of Canadian homes are at high risk of flooding. For those homes, private insurance for overland flooding can be unaffordable – or unavailable.?
That’s why Canada's?first national flood insurance program for households at high-risk of flooding, currently scheduled to launch in 2025, is so important. Intact, alongside the Insurance Bureau of Canada and many key players in our industry, has been collaborating closely with the federal government to deliver this solution to Canadians for many years. It’s essential that the insurance industry help close the insurance gap for floods and other perils, including earthquakes, for Canadians.???
We’re committed to continuing to advocate for a solution that is sustainable and affordable for everyone.??
And, as flood mapping and geocoding give us more and more sophisticated insight into where flooding happens, brokers and insurers need to work together to educate customers about their risk, changes in coverage, and public or private options for insurance, as these occur.?
The good news: The risks are tailored and understood?
As a country and as an industry, we are close to a collaborative, affordable national flood insurance program. At Intact, through our investment in climate action projects, such as the Intact Centre on Climate Adaptation at the University of Waterloo , we are able to connect Canadians with practical ways to help protect their homes from flooding and other weather-related risks. These free resources are available on the Intact Centre website, and we encourage all brokers to use them to help customers adapt to the consequences of climate change.?
And, because we have a deep, and ever improving, understanding of how, and where, water damage is most likely to occur, our pricing on property is unique – and accurate – for each customer’s home. Homes at lower risk from flooding pay a different price than homes built on flood plains. With the government stepping in to provide flood insurance for high-risk properties – and, hopefully, with municipalities getting smarter about where they allow development – property insurance will be a sustainable, stable product.?
How to get the best price, and the best coverage, for your customers??
As property risk analysis continues to evolve across the industry – and it will – getting all the right information from the customer and putting it into the insurer’s hands is key to getting the right rate.?
For Intact brokers, our 30-minute Pricing It Right eLearning, part of the Personal Lines Fundamentals Pathway, is an effective way to ground yourself in what data you need from customers to get them the best price on property premiums from us.?
The one-hour Enhanced Water Damage Package eLearning, part of the Personal Lines Intermediate Pathway, takes brokers deep into Intact’s water coverage, including eligibility considerations and real claims scenarios.?
What else do you want to know??
Questions? Please ask your Intact Insurance representative! We want you, and your customers, to understand the “why” behind any rate changes and restrictions – and to find the best coverage, at the best price, for your customer’s unique property risk.?
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Additional resources for customers?
Share these climate adaptation resources, developed by the scientists at the Intact Centre on Climate Adaptation, with your customers.?
Flood?
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Extreme Heat?
Nature?