Risk management conversation with policyholders, data investment key to sustainable flood insurance

NICC 2013 – Insurers have to put more effort into engaging with their policyholders and clearly outlining what their entire homeowner policy covers before a viable flood insurance program can work in Canada, says Kathy Bardswick, president and CEO of the Co-operators.

While the home insurance product in Canada isn’t quite broken, it has become a commodity where consumers have the expectation that everything is covered, Bardswick noted during a panel discussion at the National Insurance Conference of Canada in Gatineau, Que. this week.

“They do have to worry about it because they’re not being taken care of,” she said.

Insurers need to start sitting down with their policyholders and have them make more deliberate decision-making on their policies, Bardswick added.

“I think the ideal that we should be working toward is helping the consumer make the appropriate risk management decisions that they need to make.”

The industry must also keep working to encourage homeowners take effective risk mitigation measures, and to also discourage rebuilding in high-risk flood zones, noted Guy Vézina, senior vice president of general insurance with TD Insurance, another panelist at NICC.

“It’s a challenge right now to make the insurance affordable,” he said. “The only solution to me is prevention.”

He noted that about half of the structures destroyed in the June flooding in Calgary were built after 2005, another year that had severe flooding in the province. Despite that, people still chose to build in a floodplain, he said. “It is urgent right now to stop building houses in flood zones.”

Part of that problem is that many consumers likely don’t know they’re in a floodplain.

For flood insurance to work in Canada, the industry needs to invest in data to better understand the risk, and inform consumers of their exposure, Bardswick noted. “We’re starting from a position of lack of knowledge, and therefore lack of credibility when we talk about this,” she said.

She likened investing in flood data to other major investments the industry had made, such as in the Health Claims for Auto Insurance (HCAI) site in Ontario – expensive, but a needed investment.

“There is no reason in my mind why we can’t turn our attention, bright and capable and caring and committed as we are, to finding a solution.”