Governments at both the provincial and the federal level are increasingly trying to pass the buck to homeowners when it comes to shouldering the cost of flooding.
But have regulators done enough to ensure Canadians can and will purchase private insurance coverage?
Reporting by Global News suggest that’s not the case. Homeowners often don’t have enough information to know they need flood insurance, nor are they guaranteed to find affordable or adequate coverage.
Governments are attempting to offload costs amid ever more frequent flooding
Much like water levels in Quebec, Ontario, New Brunswick and British Columbia, the cost of disaster relief has been rising to threatening levels in recent years.
The federal government channels about $1 billion a year to provinces and territories that are responding to and recovering from natural disasters, with flooding accounting for 75 per cent of those costs, according to a 2017 report by the University of Waterloo.
As a result, Ottawa has been trying to offload some of those costs onto provinces, by raising thresholds for federal disaster assistance. And both federal and provincial governments are trying to reduce flood-related cash outflows by encouraging homeowners to get flood insurance.
“Because private flood insurance is becoming ‘readily and reasonably available,’ some provincial governments (e.g. British Columbia) are notifying residents that flood damage no longer qualifies for disaster assistance,” reads the report.
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Canadians often don’t know they should have flood insurance
Since the devastating Alberta floods of 2013, 13 of the country’s 15 largest insurers have started offering overland flooding insurance, according to the Insurance Bureau of Canada.
Such coverage protects homeowners facing damages from water coming in from waters flowing above ground and seeping in through windows, doors and walls.
But cutting off from government assistance homeowners who could have bought such insurance sets a mighty high bar for due diligence.
Federal and provincial authorities haven’t done nearly enough to spread awareness among Canadians about the risk of flooding and the need to purchase insurance, Jason Thistlethwaite, professor of environment and business at the University of Waterloo, told Global News.
When the university polled 2,300 Canadians living in areas designated by the federal government as having a high risk of flooding, it found that 74 percent of them did not believe they were vulnerable to flooding.
“Only 6 per cent of homeowners know they are located in a designated flood risk area,” the report noted.
Prospective homebuyers in the U.K. need only type a property’s postal code into a government website to check out whether it’s located in an area prone to flooding, said Thistlethwaite.
In Canada, by contrast, homebuyers are usually blissfully unaware of the risks. Flooding doesn’t generally come up in conversations with real estate agents and insurers, according to the University of Waterloo study.
In fact, only a quarter of Canadians polled in the report said insurers had contacted them about flood insurance options.
WATCH: How the City of Calgary is preparing for potential flooding in 2017
The federal government’s last major effort to draw up a flood risk map dates back to the 1970s, according to an op-ed Thistlethwaite recently co-authored in the Montreal Gazette.
But Canadians often aren’t aware that they might need to buy additional insurance even if they live nowhere close to a large body of water.
Sewer back-up, which occurs when heavy rains overwhelm the sewer system, is a much more common source of flooding that is also tied to climate change.
Many plain-vanilla insurance policies do not include water damage from sewer-backup, for which coverage is sold as an optional add-on.
Homeowners in high-risk areas may have trouble buying insurance
The other issue in Canada is that private-sector insurance isn’t always affordable or even available for homeowners who live in flood-prone areas or who have experienced severe flooding.
Unlike auto insurance, home insurance isn’t mandatory in Canada, said Anne Marie Thomas of InsuranceHotline.com, an insurance comparisons site.
Mortgage lenders require home insurance, which de facto means that the overwhelming majority of Canadians have coverage for their homes, she added.
But whereas even drivers with extremely poor records are sure to be able to buy coverage, that guarantee doesn’t exist for extremely high-risk homeowners, noted Thomas.
Bad drivers in much of Canada, for example, can turn to the Facility Association, a non-profit to which private insurers contribute funds in order to pool the risk of covering the most dangerous motorists.
Canada doesn’t have an equivalent of the Facility Association for home insurance, although similar setups exist for property insurance in other countries, such as the U.K..
WATCH: National strategy needed for flood insurance coverage
Another option would be for Ottawa to subsidize premiums on flood insurance, according to Thistlethwaite, as other jurisdictions do.
The fact that not all homeowners can buy flood insurance, curtails the government’s ability to shed the role of insurer of last resort, he added. In other words, if insurers won’t cover you, the government still has to come to the rescue.
The government, though, is generally less generous than insurance, noted Thistlethwaite. While home insurance generally covers the cost of restoring a home to its previous condition, government assistance will usually only pay for the cost of making the house “livable” again, he noted.
Even when flooding insurance is available, it might cover only a fraction of the costs
Another key difference between auto and home insurance is that the latter is much less regulated, said Thomas.
As a result, “coverage isn’t as robust,” she noted.
Even when high-risk homeowners can buy flood insurance, they might find that coverage maxes out at $20,000 or even $10,000.
By comparison, the average cost of a flooded basement in a major urban city in Canada is $42,000.