Canadian Underwriter

‘Fresh water’ flood coverage available Nov. 17 for new RSA Canada homeowner policies

November 12, 2015   by Greg Meckbach, Associate Editor

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Starting Nov. 17, Canadian insurance brokers will be able to offer policies covering fresh water flooding written by RSA Canada to some homeowners purchasing sewer backup coverage, a senior RSA Canada official said Thursday.

Fresh water flood coverage will be available November 17 from insurance carrier RSA Canada

 A new RSA Canada endorsement, called Waterproof, will include a limited sewer backup endorsement plus “enhanced protection for damage caused by fresh water flooding and damage that is also caused by eaves and downspouts and drains, so it is a much more comprehensive coverage,” Donna Ince, RSA Canada’s senior vice president for personal lines, told Canadian Underwriter.

RSA will launch Waterproof for application of new business Nov. 17 and for renewals Jan. 17.

“If you get Waterproof you get sewer backup and the flood, but if you don’t want the Waterproof endorsement, if you don’t want the flood, you can just buy limited sewer backup,” Ince said in an interview, adding RSA Canada is “putting a lot of emphasis” on training brokers.

Waterproof will be available across Canada, except for Quebec, Saskatchewan and the territories.

“The idea is that this is coverage that we can offer to a fairly large majority of our customers,” Ince said. “Canada doesn’t have a lot of high risk zones with respect to flood.”

For high risk properties, it will be difficult to cover fresh water flooding “because there is almost a guarantee that something is going to happen,” she added.

The fresh water flooding endorsement will not include salt water (unless it’s from a pool), meaning it would not cover coastal floods or tsunami, Ince suggested.

RSA Canada’s new sewer backup endorsement – which would include sump pump and septic system failure – will have more restrictive wording.

“That is going to be very clearly defined as what’s covered and not covered,” Ince said. “In the past, that endorsement was much broader and in some respects would cover flood not intentionally but did cover flood.”

Ince alluded to lessons learned from 2013. That summer, floods in Alberta in June, and in the Toronto area July 13, are Canada’s most expensive and third most expensive natural catastrophes respectively.

“Some of the challenge we had with the floods in Alberta and in Toronto was this concurrent causation issue, where you had sewer backup happening at the same time as you had clean water flood coming in and you can’t really say ‘Part of it is brown water, part of it is clear water,'” she said.

With Waterproof, RSA Canada “tried to make it very clear, very succinct as to what is covered and what is not covered, so it’s easy for brokers to explain to their insureds,” Ince (pictured below) added.

Donna Ince, RSA Canada's senior vice president for personal lines, announced fresh water flood coverage for homeowners in Canada

RSA Canada has been holding webinars explaining the new endorsement to brokers.

Last May, Aviva Canada Inc. launched an endorsement – initially announced in February – on residential property insurance policies covering “losses that result from the accumulation or run off of surface waters, including torrential rainfall when water enters the property.”

Also in May, The Co-operators Group Ltd. announced it would cover, in Alberta, flooding caused by an overflow from a body of water, sewer/water backup and accumulation of surface water caused by heavy rain.

In 2016, Intact Insurance plans to launch a “revised property product,” Intact President Jean-Francois Blais said last month at the Insurance Brokers Association of Ontario (IBAO)’s annual convention at the Sheraton Centre in Toronto.

“Basically we have reviewed the base policy, rewritten some exclusions, removed some exclusions, so we have much better transparency,” Blais said during the CEO Panel at the IBAO Convention Oct. 22. “With a base policy and two additional endorsements, basically you can buy all the water coverage you need and that exists out there in some way or some form.”

New overland flood products in Canada “will likely not deal with all of the high-risk properties and for that we believe we need government involvement,” said Don Forgeron, chief executive officer of Insurance Bureau of Canada, at the National Insurance Conference of Canada (NICC) Oct. 1.

Government involvement “should be focused on pre-planning instead of after the fact financial support,” Forgeron said at NICC, produced by MSA Research Inc. and held in Montreal Sept. 30 through Oct. 2.

Personal lines brokers will not want to risk errors and omissions exposure “by not offering flood cover when it is available” to residential property clients, MSA president and CEO Joel Baker wrote in his firm’s quarterly outlook report for Q1 2015, released last summer.

“With more announcements sure to follow, those that sit on the sidelines risk losing market share,” Baker wrote in the report, referring to the announcements from Aviva and The Co-operators.

Insurance Brokers Association of Canada (IBAC) has a flood principles document which was approved at its meeting in September in Quebec City.

IBAC President Lorne Perry told Canadian Underwriter last summer that in its flood principles document, IBAC proposes principles “that we are looking at, going forward, as to what we think the industry and government should be doing when it comes to the concerns with flood and flood insurance.”

During the IBAO convention October, Perry said IBAC was invited by the federal government “to join with a number of different stakeholders including insurers, engineers, people from Ducks Unlimited, “to a two-day meeting in early November.

“We will be prepared then to share our flood principles document,” Perry said at the IBAO annual general members’ meeting, where was a guest speaker.