Overland flood coverage is interpreted in numerous different ways by the approximately 15 carriers who offer the policies and brokers need to be aware of their Errors and Omissions’ exposure.
That’s according to the
Insurance Bureau of Canada’s director of catastrophe risk and economic analysis, Lapo Calamai who’s speaking at the Flood Risk Summit 2017, on June 12.
“In recent months insurers have made tremendous progress on this file, developing new overland flood coverage to fill the large protection gap facing Canadian homeowners,” he said. “But the market is still at an early stage in its development, and there are significant differences in products to be aware of. If you think about two homeowners who live on the same street that bought overland flood coverage from two different insurers and they get hit by the same flood, can they both expect to get coverage? Or are there going to be differences in consumer outcomes?
Learn more about overland flooding insurance here.
“For some insurers there is a temporal dimension, the water has to accumulate rapidly, others don’t mention that. Some insurers cover both fluvial and pluvial (urban) flooding, while others do not. When you think about home insurance, it’s a fairly homogenous, commoditized, product. But when it comes to the flood component of it, coverage can be quite different depending on which insurer you look at.”
Knowing the differences in a diverse market is key for brokers and Calamai said failing to get the details right is highly consequential.
“The single biggest issue emerging for brokers and agents is E&O liability,” he explained. “Particularly when it comes to the interaction between private insurance and government run financial assistance (Disaster Financial Assistance Arrangements).
“On Thanksgiving weekend, Cape Breton and other parts of Nova Scotia and Newfoundland and Labrador were flooded in a severe event costing about $100 million in insured claims. One of the things we heard from brokers on the ground was many homeowners did not have overland flood insurance. The consumer would in many cases expect their home insurance would cover them.”
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Often governments rely on brokers to certify that the homeowner didn’t have flood coverage and wasn’t receiving an insurance payout in order to make that homeowner eligible for Disaster Financial Assistance from the province or federal government. Additionally, if the broker informs the government that the homeowner was offered flood coverage but declined to purchase, that makes the homeowner ineligible.
Calamai stressed brokers need to have the conversation with their clients about whether or not they have flood insurance, and, if they do, what flood coverage they have because each carrier defines it differently.
“Some carriers offer bundled, comprehensive coverage,” he said. “There are other insurers that layer it, so the consumer would need to purchase separate standalone endorsements for sewer backup and overland flood.”
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