April 21, 2016 by Angela Stelmakowich, Editor
No country offering flood protection has got things “100% right,” but Insurance Bureau of Canada (IBC) will continue to refine its proposal for a national flood strategy that ensures all areas, even high-risk areas, are covered and that works for all stakeholders, IBC president and CEO Don Forgeron said Thursday.
“In our estimation anyway, no country yet has got it 100% right,” Forgeron (below left) told Canadian Underwriter after IBC’s Annual General Meeting in downtown Toronto.
In every jurisdiction with a flood program, “every program has aspects that don’t necessarily work well, either for consumers or for government or for the industry,” he said in an interview. “So the challenge is to continue to refine our proposal, which we believe is a very good proposal, but to refine it in such a way that it does work for all the stakeholders,” he said.
“We’re engaged in discussions with the industry, we’re engaged in discussions with government, we have international conversations under way as well to determine which aspects of our proposal that we continue to need to refine in order to arrive at that place where we can confidently say that all stakeholders will benefit from and have a well-defined role to play,” Forgeron reported.
Any program, however, will need to include protections for high-risk properties. “I think the only way that the program will work is if all of those high-risk properties fall under the program in some way, shape or form,” he emphasized.
Countries internationally have come up short when programs are purely voluntary, he suggested. In Germany, for example, “most, if not all, of the high-risk properties continued to be uninsured. So it’s not working – it’s not working for consumers and it’s not working for government, likely, because government then is being pressured to step in,” he explained.
It is also not working for industry, which is “actively trying to sell the product, but it’s likely that a mindset has developed that says, ‘Well, if I don’t buy it, government will still be there to step in.’ That’s an example where you really do need that critical mass,” Forgeron told CU.
Sylvie Paquette, chair of IBC’s Board of Directors, said in an interview that IBC discussions with the new federal government are “progressing quite well.”
Ottawa seems “really open to talk about that (flood) because it’s directly related to climate change. The big question is about the subsidy that is needed for the high-risk areas,” Paquette pointed out. “Will there be a subsidy or not? What level, in which forms? So that’s the discussion that we have right now. I do hope that by the end of 2016 we will have a solution with the government.”
The flood discussion is something that can benefit from p&c insurers in Canada taking a collaborative and consistent approach, Paquette said during the annual meeting. “It makes sense to act together and support IBC’s development of a national flood program in partnership with governments – one that will reduce potential customer confusion and aggravation when the next big flood hits, and ensure coverage across the country,” she said.
A number of insurers have recently introduced their own flood programs. It was suggested that there are both pluses and minuses when it comes to insurers offering products before a consistent industry approach has been established.
This is “well and good. They’ve innovated and reacted to a need in the market. But at the same time, I still believe we need a consistent solution for the entire Canadian market, including for high-risk areas,” Paquette (left) told attendees.
She later told CU that making products available is also helping to raise awareness. “It’s either not affordable for high-risk areas right now or not available. So, yes, when you are making an offer that is really expensive, it brings the discussion as to why you are there,” she said.
Forgeron pointed out that longer term, these would be issues that need to be addressed. “But in the short term, I believe what it does is send a strong signal to government especially, but also consumers, that the industry is willing to do its part, that the industry is willing to step up and make the coverage available, which up until now had not been available,” he told CU.
“So I see that as a positive sign that the industry is ready to roll up its sleeves, play its part, and we have to define as we go forward how that role is played. But it sends a good strong signal to government that we’re there, that we’re ready and it’s time for them to step up as well,” Forgeron said.
He told meeting attendees that IBC has just completed a major provincial and national government relations effort to advance the notion of a national flood program. “This five-week, co-ordinated campaign – the kick-off to a full-year government relations effort – leveraged our flood mapping project to clearly show why Canada needs a co-ordinated national flood program,” Forgeron said.
“We need to continue to engage various levels of government, who have an important role to play in this and continue to convince them that a national strategy is what is required,” he said in an interview. “Everyone off doing their own thing is not in the best interest of Canadians,” he suggested, adding that IBC will continue to engage government both federally and provincially.