June 20, 2024
Suchinder Singh—Vice President, Personal Lines, Intact Insurance
Brokers have been telling us they see property as an increasingly nuanced product and need help explaining changes in property rates and restrictions, especially around water, to their customers.
We hear you. While all insurance is important, home insurance pulls most directly at the heart. Home is where we raise family, where we dream, where we build our lives. As customers and homeowners, we need to feel our home is protected and that if something happens, our insurance policy will get us back on track.
Here’s what your customers need to know about what goes into their policy.
More Analysis, Customized Coverage
Insurers aren’t just considering square footage, value of contents or postal codes. We’re using flood mapping and geocoding to drill down into the risk profiles of individual properties.
We no longer offer blanket, one-size-fits-all coverage. At Intact, for example, we offer water coverage through our Enhanced Water Damage Package that features several endorsements and levels of coverage based on geographic locations. We’re not alone in this approach.
Climate change is driving insurers in this direction. Extreme weather events are more frequent and more severe, and the claims they bring are more expensive. Their impact on how insurers price property risks is considerable. In this environment, water is the largest peril any insurer needs to cover, accounting for 60% of the premium on most property policies.
Water Has Its Ways
Most insurers differentiate water damage coverage depending on how water enters a home:
- Sewer back-up
- Groundwater
- Overland water
Sewer back-up and water and sewer line coverage, as well as the routine water damage caused by overflowing bathtubs, leaking pipes and cracked toilets, is well understood across the industry and by customers—although it’s always a good idea to review exclusions, limitations and loss mitigation actions and incentives. We’re big fans of mitigation at Intact—if a customer installs a loss mitigation device like a sump pump at the time of an insured sewer back-up loss, we contribute $1,000 towards its installation.
Overland water and groundwater are trickier to understand—and underwrite. Groundwater is, effectively, underground water. It’s found in the cracks and spaces in soil, sand and rock and enters homes through basements and cracks in foundation when the water table rises. Overland water is above ground, fresh water that comes from rivers and lakes as the result of rain, snow melt and spring run-off and includes flooding caused by dam breaks or overflow of rivers, lakes and reservoirs.
It’s with groundwater and overland water where the availability of coverage varies most, by insurer and by geography.
Flood Mapping and Geocoding
To price water damage sustainably for most customers over the long term, we rely on mapping and geocoding.
Flood mapping consists of layers of data—the types of flooding prevalent in the area, causes of flooding, flood return periods, LiDaR and bare earth data—which lets us see the surface of an area stripped of all structures.
Geocoding is how we match the address of a property risk with precise geographical coordinates. In tandem with flood mapping, geocoding considers elevation, topography, proximity of bodies of water and structures like dams and reservoirs, historical rainfall statistics and river flow data, soil permeability, snow melt accumulation and the severity and frequency of extreme weather events.
Territories and Coverage
Based on flood mapping and geocoding, insurers identify territories with similar risk profiles and base price and coverage around it. At Intact we use seven territories—territory 1 is designated as minimal risk, territories 2, 3 and 4 are medium risk, and territories 5, 6 and 7 are considerable risk. We don’t offer overland water coverage in territories 5, 6 and 7, as they represent an extremely high probability of flooding.
As we’ve accumulated increased data, we’ve gotten a better understanding of how water enters buildings, and the frequency and cost of each type of occurrence. This has influenced how we design our coverage and how we price our risks. Our goal is to deliver coverage at a fair and sustainable price, considering a property’s risk profile.
High-Risk Territories
People like to live near water. According to Public Safety Canada, 80 per cent of Canadian cities are built in part on flood plains and 10 per cent of Canadian homes are at high risk of flooding. For those homes, private insurance for overland flooding can be unaffordable or unavailable.
That’s why Canada’s first national flood insurance program for households at high-risk of flooding— currently scheduled to launch in 2025—is so important. Intact, alongside the Insurance Bureau of Canada and key players in our industry, has been collaborating with the federal government to deliver a solution to Canadians. It’s essential that the insurance industry helps close the insurance gap for floods and other risks like earthquake for Canadians.
We’re committed to continuing to advocate for a solution that’s sustainable and affordable for everyone. As flood mapping and geocoding give us more sophisticated insight, brokers and insurers need to work together to educate customers about their risk, changes in coverage, and public or private options for insurance.
Tailored Risks
As a country and an industry, we’re remarkably close to a collaborative, affordable national flood insurance program. At Intact, through our investment in climate action projects like the Intact Centre on Climate Adaptation at the University of Waterloo, we’re able to connect Canadians with practical ways to help protect their homes from flooding and other weather-related risks. These free resources are available on the Intact Centre website—we encourage all brokers to use them to help customers adapt to the consequences of climate change.
Because we have an ever improving understanding of how, and where, water damage is likely to occur, our pricing on property is unique for each customer’s home. Those at lower risk of flooding pay a different price than those built on flood plains. With the government stepping in to provide flood insurance for high-risk properties—and with municipalities getting smarter about where they allow development—property insurance should be a sustainable, stable product.
Best Price, Best Coverage
As property risk analysis continues to evolve, getting all the right information from customers and putting it into your insurer’s hands is key to getting the right rate. For Intact brokers, our 30-minute Pricing It Right eLearning course—part of our Personal Lines Fundamentals Pathway—is an effective way to learn the data you need to get your customers the best price on property premiums. Our one-hour Enhanced Water Damage Package eLearning course—part of our Personal Lines Intermediate Pathway—takes you deep into Intact’s water coverage, including eligibility considerations and real claims scenarios.
We want you and your customers to understand rate changes and restrictions. And we want you to find the best coverage, at the best price, for your customer’s unique property risk.