As extreme weather events like wildfires and floods become more severe and common due to the effects of climate change, experts say that could result in more expensive home insurance in the long run.
Morgan Roberts, director of insurance sales at Ratehub.ca, says the increasing frequency of claims means insurance companies will likely try to petition provincial financial regulators to approve further premium increases.
“As insurance companies pay these claims that are going on, they could ask for rate increases to try and get some of the money back,” he told CTVNews.ca on Wednesday. “They can’t just automatically double your insurance. But the more claims that get paid out of these disasters, the more it could increase everyone’s insurance overall.”
After Hurricane Fiona hit Atlantic Canada, the cost of damage is estimated at between $300 million and $700 millionaccording to the credit rating agency DBRS morning star.
But while a single event isn’t going to have an effect on premiums, Craig Stewart, vice president for federal affairs at the Insurance Bureau of Canada, says premiums have been trending higher.
“Insurers, 15 years ago, were paying an average of $400 million a year in claims,” he told CTVNews.ca in a telephone interview on Wednesday. “The average is about $2.2 billion now… We’re now five times where we were 15 years ago.”
Insurance companies also rely on global reinsurance firms to spread their risk and increase their coverage, but reinsurance rates have also been trending higher.
“It’s like insurance for insurers,” Stewart said. “And because of all these events that we’ve been experiencing in Canada, reinsurance rates are going up. So it’s more expensive for insurers to transfer that risk.”
THE NEED FOR NATIONAL FLOOD INSURANCE
For some Canadians, particularly those who live near floodplains or the coast, adequate home insurance may become too expensive or simply not available, says Stewart.
“Insurance is designed to deal with accidents. You know, that’s the idea behind it. But when the risk is predictable and it’s no longer accidental, I mean, you’re living in a high-risk area that we know is going to flood. …makes insurance either very expensive, or not available at all,” he explained.
“Canadians love to live on the water. So we can’t move everyone who lives in the floodplains or on the coast. That’s just not going to happen. So we need another solution.”
Insurance Canada has been calling on the federal government to implement a national flood insurance program, and Stewart believes Hurricane Fiona “likely provided added urgency” for such a program.
The commitment to introduce such a program was also part of the The platform of the Liberal Party of Canada during the last federal elections, as well as Mandate Letter from Minister for Emergency Preparedness Bill Blair.
In August, the federal task force on flood insurance and relocation published its report and outlined four options about how the feds could implement a national flood insurance program.
The first two options involve the federal government creating a high-risk insurance pool through partnerships with private insurance companies, designed for those living in highly flood-prone areas.
In the third option, the federal government would create a public insurer to cover floods (similar to what the US does), while the fourth option would involve the government providing reinsurance to private insurers.
While the report did not directly recommend one insurance model over the others, its analysis suggested a preference for a public insurer model or a public reinsurer model.
Asked about plans for a national flood insurance program during a Wednesday news conference, Intergovernmental Affairs Minister Dominic LeBlanc told reporters the feds are still in talks with the insurance industry and the provinces and territories, since much of the regulation surrounding insurance is under provincial control. jurisdiction.
“It’s an ongoing conversation. It’s a complicated issue… but if the Government of Canada can work with (the provinces and the insurance industry) to find the right set of instruments that can provide better protection at an affordable price for people, we would be happy”. have those conversations. And, in fact, they have already started,” he told reporters.
HOW TO PROTECT YOUR HOME
In the meantime, Roberts recommends opting for a comprehensive insurance policy that also includes protection against flood damage, such as sewer overflow or surface water.
“I always recommend a minimum — the absolute minimum — of $100,000 for sewer and ground water support,” he said.
Inland water protection only became available in 2015, amid an increase in flooding across Canada. However, inland water protection does not protect against storm surge, which means that many of the coastal homes in Atlantic Canada destroyed or damaged by Fiona will likely not be covered.
“It’s very difficult to find coverage against storm surge in Canada. It’s difficult for us to model and the risk is increasing,” Stewart said.
Roberts also recommends looking around your home to make sure all of your belongings are covered on your insurance policy, as there may be limits on some items, such as jewelry or artwork.
“If something happens and you lose everything inside the house … make sure you contact your insurance company and see what is covered and what isn’t,” he said. “Sometimes having a lower insurance limit saves you money in the long run. But when a claim happens, you won’t be protected.”
With archives from The Canadian Press