We sat down with Daniel Mirkovic, President and CEO of Square One, to ask him a few questions about flood insurance in Canada, or the lack thereof, and what Square One is planning in terms of offering Canadians flood insurance coverage.
Q: Why don’t Canadians have access to flood insurance?
A: If you were to ask most home insurance providers, they’re going to give you three reasons. First, is that there are incomplete flood maps, so, unlike many of the other developed countries that have invested in flood maps and keep flood maps up to date, Canada hasn’t, and it’s kind of been on a province by province basis.
So, without complete flood maps, home insurance providers believe it’s tough to assess the risk and charge the right price for the risk. Another reason is…they’ll site is improper zoning.
Really, it doesn’t make sense for communities to allow homes to be built on flood plains, but that, unfortunately, is happening and has happened. Then, it’s a question of when a loss is going to occur, not if a loss is going to occur…which makes it very difficult from a pricing perspective.
And then the final reason is that there is a lot of outdated infrastructures. And this really varies by community across Canada. Without governments continuing to invest in storm and sewer lines…and updating those lines as required…it makes it hard to assess the risk and charge the right price for the risk because it’s a matter of when the loss is going to occur, not if.
Really, it doesn’t make sense for communities to allow homes to be built on flood plains, but that unfortunately is happening and has happened.
Q: Why is Square One interested in offering flood insurance?
A: The reason that Square One wants to offer flood insurance and is developing our own in-house flood insurance product, is because frankly, people need it. The government disaster financial assistance programs are not providing adequate coverage for people.
They typically will assist those affected by flood on a needs-based adjustment or loss reimbursement. They’re not going to rebuild your home to the way it was before the loss, they’re going to rebuild it to a standard that they deem sufficient. They’re also not going to cover some types of property. So, if this is a vacation property that you own or a rental property that you own, you may not be able to get reimbursed through government programs.
The government disaster financial assistance programs are not providing adequate coverage for people.
Q: Are there other country models that impressed you?
A: Absolutely. Almost every other developed country in the world offers flood insurance to its residents. Canada is the one country that relies on the government and the disaster financial assistance programs. We’ve looked at the Australian model the closest and we’re using that model as a basis for what we plan on doing here in Canada.
Q: Are you getting feedback from clients about flood insurance?
A: We are getting a lot of feedback from clients indicating that they clearly do want flood insurance. What we’ve learned though, is that people don’t really understand the difference between flood damage and water damage. So often, we’ll hear people say “my home is flooded” when a pipe has burst…when in reality, from an insurance perspective, that’s not overland flood. That’s considered water damage.
So, part of what we’re working on now is building a site that has a lot of information on not only flood damage but water damage…and explaining the difference between the two. And also explaining what flood insurance might offer when it’s introduced in Canada.
Q: Can you give us a brief overview of the definition of flooding, as it relates to home insurance?
A: When it comes to overland flood, there are actually three different components to it. So one, is for example, a river or a lake breaching its banks and water overflowing onto normally dry land and ultimately into your home.
Another one would be considered urban flooding. And that is usually when there is a heavy rainfall and the sewer systems can’t accommodate the water and as a result, water enters your home…cause it has nowhere else to go.
And then the final one is commonly called coastal or surge storm. What that relates to is events…usually hurricanes or as a result of an earthquake that causes waves or tsunamis to come in.
So, looking at the three different components there…depending on where you live, you might not be close to a coast, so storm surge may not be a concern to you. But almost anywhere, this concept of urban flooding will apply.
So, as you start looking for home insurance and flood insurance that is offered under a home insurance policy…that it covers the various types that are of most concern to you.
Almost anywhere, this concept of urban flooding will apply.
Q: Where should people go if they want to find out about flood insurance?
A: We’ve developed a special website, and the URL is getfloodinsurance.ca. And that site is dedicated to everything people might need to know or want to know about flood damage and water damage. A subset of water damage is water backup related losses and that too is described there.
On that site, we describe what’s currently available in Canada. We’ll also look at some options for what we’re looking at offering to our clients across Canada. We look at other countries and the models they have for flood insurance.
Finally, we provide a whole bunch of information that can help you protect yourself against both flood and water damage.