Study finds flood coverage knowledge gap amongst Canadians

Published: December 7, 2018

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Flood insurance is a hot topic in the Canadian insurance industry, but few customers show understanding of coverage that’s available. A recent study found only around half of Canadians asked understand what water damage is covered by flood insurance policies currently available.

Desjardins Group spokesperson John Bordignon explained this week that a gap in consumer knowledge provides brokers with an opportunity to provide education to customers.

“For insurance brokers and agents, understanding someone’s unique insurance needs, discussing the increasing trend in water damage claims and the specific things that are and are not covered is a good idea when reviewing homeowners’ insurance coverage,” Bordignon said.

“The industry needs to do a better job of educating consumers about the increasing frequency and impact of water damage, what is covered, and the options available to help consumers mitigate damage,” he added, “whether that’s caused by frozen pipes and ice damming in the winter or the increasing severity of rain storms, hail and flooding in the spring and summer.”

Current home insurance policies cover accidental water damage, such as an overflowing sink or burst washing machine. Customers can purchase additional flood coverage that protects them against ground water, above ground water, sewer backup, and other types of flood.

Additionally, many insurers now offer flood insurance which covers overland flooding. However, there are gaps in the market as coastal flooding is not included, while insurers will not cover homeowners who have property in areas known to be at high-risk of flooding. This market gap is unlikely to be filled by insurers as the risks are too high, leading many to call for government intervention.

This gap is a problem because water remains the leading source of home insurance claims costs according to Desjardins, accounting for 50% of costs.

Alongside the coverage gap, there is also a knowledge gap on the consumer side. The company recently published an online survey with 3,020 participants aged 16-74 from around the country. Just 26 percent say they have had a water damage issue in their home, despite water accounting for most claims costs. Furthermore, 43 percent were unaware of mitigation techniques to prevent water damage.