B.C. flooding: How will insurance companies manage as climate risks get worse?

The cost that comes from Canada’s changing climate has been in the spotlight for years, be it from wildfires or ice storms.

But historically, water damage has been the most expensive — and British Columbia, which dealt with severe wildfires this summer, is now dealing with historic flooding in several towns following torrential downpours.

In the past, severe Canadian floods have come with price tags that can range into the billions, and with extreme weather events becoming more common, insurance companies will have new challenges on their hands to keep costs low, experts say.

“Over this past decade, the insurance industry has been paying out on average annually about $2 billion in severe weather damages,” said Rob de Pruis, director of consumer and industry relations with the Insurance Bureau of Canada (IBC).

“In the decade before, that number was just over $600 million, so we’ve seen some very significant increases.”

In several parts of B.C., severe rainfall over Sunday and Monday has washed away roads, submerged cars and spread debris everywhere.

Some residents have been forced to evacuate their homes, including the entire community of Merritt. It is not known when residents will be allowed home.

At least one person has died, and search teams have started to look for people who might have been lost in the landslides. Canada’s two biggest railways have reported serious damage to their networks.

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Historically in Canada, home insurance policies haven’t covered loss or damages caused by extreme flooding of the likes in B.C., be it from sewer backups or natural water flowing into the house.

The federal government has said flooding causes more than $1 billion in direct damage to households, property and infrastructure, each year.

After severe floods in Alberta in 2013, more insurance companies have begun offering protection from floods and sewer backups, but de Pruis said some challenges remain.

“The insurance industry is continuing to evolve, and as we start to better understand some of these severe weather events … insurance companies are starting to develop products,” he said.

“One of the challenges that we face with flooding is that there is no type of publicly accessible portal that’s available so that homeowners can really understand what that risk is.”

One company that is trying to change that is The Co-operators.

Tara Laidman, associate vice president of national product and portfolio, told Global News the company began offering flood protection in Alberta in 2015, and has been doing so in B.C. since 2018.

To help customers understand their flood risk, Laidman said The Co-operators has created a search platform where users can enter their postal code and find out how much of a flood risk they face.

“The unfortunate part of this is we do know that flood insurance still is in its infancy in Canada,” Laidman said.

“That’s really important to Canadians and unfortunately, there is a lack of insurance in the market for that right now.”

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The Co-operators flood protection policy, which Laidman said has been purchased by 97 per cent of its B.C. customers, offers anywhere from $5,000 to a customer’s total policy limit worth of coverage.

Customers can also choose their deductible based on their comfort, she added.

“Those are the ways that we try to allow clients some choice because the reality is we do price based on flood exposure,” Laidman said.

“Clients who would be at the highest risk of exposure would pay a premium more proportionate to the risk than those clients who didn’t have that exposure to flood.”

Last year, the federal government created a task force to examine a national residential flood insurance program for homeowners living on high-risk areas for flooding. The group will present its findings by the spring of next year.

As the climate threat grows, one of the areas insurance companies must tackle is education, said Blair Feltmate, head of the Intact Centre on Climate Adaptation at the University of Waterloo.

By having conversations with customers about their risk to extreme weather events, Feltmate said it could result in a win for both sides if they’re on the same page, specifically if insurance companies can teach them ways to mitigate flood damage.

The more risk is controlled, the lower the insurance premiums will be, he added.

“Going forward, the frequency and the magnitude of flooding is going to increase in the country,” he said.

“So when people put their homes back into working order, they should be thinking about putting measures in place to make it such that the next time a major event occurs, the probability of them coming into harm’s way is much lower.”

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On average, the costs associated with basement flooding, be it from a sewer backup or outside water flowing in, is $43,000, he added.

Feltmate said some protective measures residents can take include cleaning out eavestroughs, regularly testing sump pumps, extending downspouts away from the home’s foundation and even ensuring the grading around the house directs water away from it.

However, the onus can’t just be on customers to protect themselves, Laidman said.

“With an extreme flood event like what we’re seeing in B.C. right now, the truth is that loss prevention efforts may not be enough,” she said.

“We’re going to need to do more as a society to invest in flood resilient and climate-resilient infrastructure going forward … so outside of just providing coverage, there’s other things that insurance companies can be doing and need to start paying attention to.”

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Infrastructure, like dams, berms and even municipal stormwater management systems, are examples of supports that could use investments from insurance companies, de Pruis said.

“Even though you have infrastructure that may protect you against a one-in-100-year flood, as soon as you have a one-in-100-year flood event, that infrastructure may not be as impactful as you thought it was going to be,” he said.

“We really need to take that proactive, forward-thinking approach on what we can do to better protect these communities … and make sure that we get all the stakeholders involved to develop the right products, the right infrastructure and make those educated decisions on what we can do to better protect everyone.”

When it comes to future protection, there needs to be an “all hands on deck” approach, Feltmate said.

“The homeowner should be obviously intimately involved in protecting their home from basement flooding, (and) the insurer should be providing guidance on preparedness,” he said.

“Home inspectors need better training in this whole area … (and) municipalities themselves should be looking at … putting measures in place to direct water to safe locations and keep people and property out of harm’s way when these big storms hit.”

For those impacted in B.C., de Pruis said before beginning their claim process, the first step is to ensure your safety.

Then, reach out to your insurance provider to start the initial claim process and understand what help you can receive.

“Your policy may provide you with some additional living expense coverage,” he said. “Have that conversation and start that claims process to understand what coverage you have and how your policy can help you during some of these difficult times.”

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Laidman advises customers, if they can, to keep all their receipts as they evacuate, put some items in watertight containers, move possessions onto higher floors and take pictures of damage you see.

“That’ll help you at the time when you’re going to put in your claim,” she said.