Up to 10% of homes could now be ‘uninsurable’ because of flood risk. Could yours be one?

Many owners are unprepared for flooding because they lack important data thanks to murky actual property guidelines, incomplete floodplain maps and an insurance coverage trade pulling again from high-risk areas, a Marketplace investigation has discovered.

Marketplace additionally discovered owners who misplaced their flood safety because of a number of claims or particularly because of the rising danger of local weather change. The Insurance Bureau of Canada (IBC) warns it is a state of affairs extra Canadians could discover themselves in.

  • Watch the total Marketplace investigation tonight at 8 p.m. (8:30 NT) on CBC-TV and CBC Gem

The IBC advised Marketplace it estimates that wherever from six to 10 per cent of Canadian homes are presently uninsurable due to flooding and that estimate could go up as extra insurance coverage firms replace their danger assessments to account for the rising risk of local weather change.

“As the risk from climate change increases, yes, more Canadians could become uninsurable,” stated Craig Stewart, vice-president, federal affairs with the IBC.

According to a 2019 federal authorities report, Canada’s local weather is warming at double the speed of the remainder of the world, and the IBC estimates that presently 1 in 10 Canadian homes are at excessive danger of flooding and a few face doable repeated flooding over the subsequent 20 years. 

But would potential owners be warned about that danger? Going undercover, posing as new homebuyers in Ontario, a Marketplace group discovered there isn’t any Canada-wide requirement for brokers or sellers to warn potential consumers that they are transferring right into a flood-prone space. Marketplace was advised on two events that homes weren’t in floodplains when public information confirmed in any other case. In one other check, a producer posing as a potential residence vendor additionally discovered brokers did not at all times advise her to disclose previous flood injury.

The latest flooding in British Columbia has made the problem of flood insurance coverage protection high of thoughts for a lot of owners, as some residents there, unable to discover protection, flip to provincial catastrophe help, and others assess what protection they’ve because the cleanup begins

‘They’re attempting to defend their cash’

But in some circumstances, even being ready is not sufficient. Derrick Terakita knew his residence in Richmond Hill, north of Toronto, was in a floodplain and thought he had satisfactory protection, till he received his insurance coverage renewal this yr. In May his insurance coverage supplier knowledgeable him it was taking away his overland water protection. The purpose: the rising severity of climate due to local weather change.

“I was a little bit ticked off, but then it’s an insurance company, they’re trying to protect their money,” Terakita advised Marketplace.

WATCH | Insurance nightmares: Many Canadians not shielded from flooding disasters:

Murky real estate rules and insurance eligibility leaving Canadians with big bills after flooding

Flooding is the most costly and common natural disaster in Canada, but risk-averse insurance companies and the lack of a nationwide requirement for real estate agents to disclose flood risk are leaving Canadians vulnerable. 2:16

Overland flood insurance typically protects homeowners from flooding from a body of water overflowing onto dry land. According to the IBC, protection from flooding due to burst pipes or appliances is typically included in most home policies. Sewer backup protection is also commonly available as an add-on. But overland flood insurance only became an option in Canada in 2015, following massive flooding in southern Alberta in 2013 that, at the time, was ranked as the costliest natural disaster in Canadian history

Marketplace connected Terakita with an insurance expert to better understand his situation. He then contacted his insurance broker to see if his provider could reinstate his coverage if he took steps to protect his home. The answer was no. 

‘Insurance will become a luxury for the rich’

“We can’t really offer the coverage because again, it’s no longer applicable to your territory,” the broker told Terakita over the phone as Marketplace cameras rolled. “Even if there was some sort of mitigation put into place, it’s still not going to be applicable.”

Insurance expert Jason Thistlethwaite says that if we don’t manage climate risk better, insurance may eventually become a luxury and unaffordable for most people. (Steven D’Souza/CBC)

Marketplace showed Terakita’s experience with his insurance company to Jason Thistlethwaite, an associate professor in the School of Environment, Enterprise and Development at the University of Waterloo in Ontario.

“It’s unfortunate but insurance companies are businesses and they’re looking at their bottom line and they are going to make a judgment on their risk appetite,” said Thistlethwaite, who noted that flooding is the most costly and common hazard in Canada. 

Thistlethwaite worries that many more Canadians will soon find themselves in Terakita’s shoes. 

“Insurability — or markets where insurance is available and affordable — is eroding in Canada,” Thistlethwaite said. “Unless we make more effort to manage climate risk, insurance will become a luxury for the rich and unaffordable for most.”

Insurance industry responds

Stewart from the IBC agrees that insurance companies need to do a better job of giving incentives to customers like Terakita who want to be proactive in protecting their home.

Craig Stewart, seen here evaluating the aftermath of a tornado, is with the Insurance Bureau of Canada. He says the industry can’t shoulder all the risk for insuring high-risk homes and that a government-backed, high-risk insurance pool needs to be created. (Submitted by Craig Stewart)

He says in a competitive marketplace, customers like Terakita can shop around for coverage. Though he acknowledges that finding another option isn’t guaranteed and the industry has its limitations when it comes to overland insurance protection.

“The industry’s new to [overland flood protection] in Canada, but we’re only going to be able to provide a certain amount of protection. We are going to need to collaborate with the government, especially for those who will continue to reside in the highest-risk areas in the country.”

The solution the IBC proposes is a national high-risk residential flood insurance program, which would provide insurance to residents in the most flood-prone areas, funded by the federal government. 

It’s one idea the Liberal government is studying as part of it’s National Task Force on Flood Insurance and Relocation, which was formed last year. The group is also studying options to relocate people who live in areas with repeated flooding.

Stewart, a member of the task force through the IBC, says they’ll present recommendations to Minister of Emergency Preparedness Bill Blair in the spring, but programs aren’t likely to roll out until 2023 or 2024.

“We need all hands on deck, and insurers will absolutely play their part in addressing the problem, but we can’t do it alone,” Stewart said. 

Debris litters a road in the Sumas Prairie flood zone in Abbotsford, B.C., on Nov. 22. (Ben Nelms/CBC)

Asked by CBC News about the insurance situation during a news conference in Ottawa last week, Blair said the recent flooding in British Columbia underscores the importance of the task force’s work.

“It does, I think, add an element of urgency to our work with the insurance industry and the development of a National Flood Insurance Plan,” Blair said. 

Government-backed flood insurance does come with its share of problems. In the U.S., the National Flood Insurance Program has a $20 billion US shortfall and is often criticized for using outdated information and incentivizing rebuilding in problem areas.

Homeowners unaware of the risk

Despite the stark warnings about the impact of climate change and the threat of flooding, the issue isn’t always top of mind. A 2020 survey by Partners for Action, a climate resiliency network based at the University of Waterloo, found only six per cent of Canadians living in designated flood-risk areas knew they lived in such an area, and only a quarter said their insurance company had discussed flood coverage options with them.

In Toronto, Woodee Aboy recently moved into his home but didn’t know the neighbourhood is a floodplain designated by the Toronto and Region Conservation Authority until Marketplace knocked on his door. He was also unsure that his home insurance policy covered him against all types of flooding.

After Marketplace connected him with an insurance expert, he contacted his provider and found he was in fact fully covered for a range of flood scenarios, including overland.

“Gaining that confidence, gaining that peace of mind has been a very fulfilling experience to tell you honestly,” Aboy told Marketplace.

No Canada-wide requirement for disclosing future flood risk

Aboy and other homeowners Marketplace spoke with say they were not informed when they purchased their home that there was a risk of potential flooding. 

Toronto resident Woodee Aboy wasn’t aware his home was located in a flood-prone area until contacted by Marketplace. He later confirmed that his home insurance policy does protect him for a range of flood scenarios. (Steven D’Souza/CBC)

Part of the challenge, Marketplace found, is that disclosure rules around future flood risk are vague and vary across the country. It’s not information real estate agents may know how to find, or the flood mapping in the area may be out of date or incomplete. 

In an undercover test, Marketplace posed as buyers looking at Greater Toronto Area properties situated in floodplains — areas designated in publicly available maps by the Toronto and Region Conservation Authority. The result: agents selling two of four properties denied the homes were at risk of potential flooding.

Marketplace: “I noticed there’s a waterway nearby. I’m just wondering, are there flooding issues, or is flooding a concern for that area?”

Agent: “For that property? No, it’s too far away.”

Marketplace: “So it’s not on a floodplain or anything?”

Agent: “No no no.”

Marketplace: “So we shouldn’t be worried about that?”

Agent: “No, no.”

Later, posing as a seller looking to unload a home that had had previous flood damage, a producer called agents in five cities: Vancouver, Calgary, Winnipeg, Toronto and Montreal. Marketplace found nine out of 10 agents were clear that past flooding should be disclosed. But one agent said that if the cause of the flood had been repaired, then there was no need for disclosure.

WATCH | Here’s how to protect your home from flooding:

Insurance knowledgeable Cheryl Evans explains how to flood-proof your property

Cheryl Evans, a director on the University of Waterloo’s Intact Centre on Climate Adaptation, explains what steps owners can take to try to flood-proof their homes 2:00

The agent’s recommendation, nonetheless, appears to line up with data Marketplace obtained from the regulator in his residence province, the Real Estate Council of Alberta (RECA). “If the defect is properly repaired, there is no longer a defect, and disclosure is not required,” RECA stated.

The guidelines round disclosure in some provinces additionally go away some room for interpretation. For instance, the Real Estate Council of Ontario (RECO), the regulator in that province, says that previous flooding is “often” thought-about a latent defect — outlined as “a physical defect that is not discoverable through a visual inspection.” RECO says sellers are solely obligated to disclose these when the problem is “dangerous” or could make the property “uninhabitable,” although it notes the problem usually leads to the courts.

“It is to your advantage to be as truthful as you can, for your own protection, when you’re making these declarations,” one agent suggested.

Marketplace producers additionally requested some of these brokers whether or not disclosing future flood danger or floodplains was really useful, however solutions have been much less clear. Some really useful disclosing, some stated it was speculative and “buyer beware.”

Toronto actual property agent Chris Chopik needs to see extra transparency within the trade round local weather danger. (CBC)

The problem, specialists say, is that there isn’t any Canada-wide requirement to disclose future flood danger.

“There’s a requirement to disclose known risks, so the question comes, what is known and what’s knowable?” stated Toronto actual property agent Chris Chopik.

Chopik has been pushing for years for extra transparency round local weather danger in actual property. He’d like to see one thing akin to a stroll rating, however for local weather: an easy-to-digest quantity assessing a house’s total danger from the impacts of local weather change.

Floodplain mapping missing

In the U.S., the Federal Emergency Management Agency (FEMA) and personal firms like ClimateVerify have flood-risk maps, the place a person plugs in an handle and will get a flood-risk evaluation.

The federal authorities has dedicated $63 million to bettering floodplain mapping inside three years, however specialists say there is a great distance to go.

“I would describe floodplain mapping as saying, right now we’re at the Windows ’95 version of flood mapping,” stated Stewart with the IBC. “What we need to do in pretty short order is get up to Windows 10. We are behind other countries.”

That means owners are left to navigate quite a few websites from insurance coverage firms, in addition to provinces and native conservation authorities. Experts like Thistlethwaite on the University of Waterloo say some maps throughout Canada are inconsistent. Some are years out of date and lack the element that some different international locations present.

Prince Edward Island lately launched a brand new coastal hazards platform, whereas a researcher at Western University in Ontario lately launched what the college calls the first Canada-wide maps displaying how floodplains could be affected by numerous local weather change situations over the subsequent 80 years.

Chopik says that whereas there are fears that extra details about potential flood danger could devalue a house, finally extra data will stage the enjoying area and make potential consumers conscious of climate-related dangers.

“If we’re going to make this a fair marketplace where we have caveat emptor — buyer beware — we really need a place where everyone can look at the risk soberly and then make decisions.”

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