A tremendous challenge for the Canadian insurance industry has been in crafting financially affordable and appropriate private insurance policies for overland flooding. Alberta has faced yet another summer of severe weather hammering its buildings and landscapes, the topic is at the front of many people’s minds.
Bow Valley Insurance of Calgary serves Alberta as an independent broker of the products from several nationally recognised insurance companies. We save our clients on their insurance premiums through the power of market competition for your business.
How to Make Flood Insurance Affordable
The difficulty in offering what is commonly called “overland flooding” coverage, as opposed to coverage for a burst pipe, or a sewer backing up is that such events in the past have been horrifically costly in terms of damage. It took a wildfire driving 80,000 people from their homes in Fort McMurray to topple the 2013 Alberta flood from the top spot as the most expensive disaster in national history. But the bulk of the weather incidents making up the rest of the list of the top ten most expensive disasters remain flooding disasters.
Without going into too much detail about combined risk pools, reinsurance, or governmental subsidy, one of the largest problems in figuring out how to offer affordable overland flood insurance, in any form, has been in predicting individual risk. Where once the industry thought was that anyone who lived along a river was at high risk for flooding events destroying their property as a matter of course, sophisticated modeling has changed these ideas. Moving on from the “certain disaster” line of thought in the industry, to one of figuring out “relative disaster,” allows risk to be allocated correctly and the broad outlines of a private flood insurance market can begin to take shape.
Who Needs Flood Insurance
It is now seen that not all rivers flood with regularity, but even for those that do, some surrounding sections are more frequently, or heavily, damaged than are others. By thoroughly mapping out who may be affected drastically, and who may be merely forced to fill precautionary sand bags, companies can now arrive at premium rates that are more in tune with real, rather than imagined, flood risks. Say that it can be said with certainty that your home or business lay within the historical 200 year flood event basin of a given waterway. Now, with some mathematical precision, it can be determined whose policies are going to run into the hundreds of dollars annually, based upon objective risk, and whose will be much less – while still making for a prudent purchase – based upon science, rather than conjecture.
Just as critically, the proper allocation of risk promises to make future flooding disasters more financially manageable than before. Premium dollars, and the risk underwriting tied to them, tend to modulate risky behaviour and ill-advised building activities over time. Just as with wildfires, where clearing dead fuel stock, making fencing boundaries double as starting points for pre-designated fire breaks, capping one’s home with tile or rubber roof, replacing vinyl siding with stucco siding, installing back flow valve in the basement, sump pump with a battery backup etc. can all reduce the damage by weather related events.