Brokers threaten to drop carriers selling overland flood protection

Published: November 24, 2017

Updated: July 24, 2018

Author: Luke Jones

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Canada’s overland flood insurance market continues to be swamped in confusion. Insurance companies have been offering protection since 2015, but still want the government to get involved. The government on the other hand is struggling to manage an escalating flood crisis. In the latest setback, angered Canadian brokers say they will drop carriers over errors and omission (E&O) claims related to overland flood protection.

Glenn McGillivray, managing director for the Institute for Catastrophic Loss Reduction (ICLR) told Canadian Underwriter this week there is a “host of wordings out there”.

“This causes and will continue to cause confusion, as premiums, deductibles, caps/limits, exclusions and policy wordings are all over the place,” McGillivray said. “I have heard of brokers threatening to ‘fire’ companies who don’t offer an overland product, because they don’t want to have to explain that to insureds.”

Overland flood coverage is still new and a welcome addition to homeowners who found their previous home insurance would not properly cover them. Insurers now also have a distinct way to avoid paying for claims that used to fall unambiguously under sewer backup.

However, the Insurance Brokers Association of Nova Scotia says it is observing “great concern over the potential for E&O where [overland flood] is an optional coverage,” IBANS president Gina McFetridge said Thursday in an interview.

There is a high level of misunderstanding among general consumers over what historically has been covered and what may or may not be covered moving forward,” she said.

McFetridge admits it is “wonderful” companies are now offering overland flood coverage and seeking ways to diversify their solutions. A market is being developed around competitiveness.

“Overland essentially covers everything that is not sewer backup (surcharge through a pipe) or seepage,” McGillivray said in an email. “Overland flood comes when water flows over the surface of the earth, and may include riverine flooding (i.e. fluvial), heavy rainfall-related flooding (i.e. pluvial), burst municipal water mains etc.”