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Water Damage Claims Behind Soaring Home Insurance Rates

In a March 31, 2011 article from the Globe & Mail entitled “Water Damage Claims Behind Soaring Home Insurance Rates”, writer Rob Carrick investigates increasing home insurance premiums. Carrick quotes Wayne Ross, vice-president of property claims for Aviva Canada – the country’s second-largest property insurer – who cites a significant increase in claims related to changing weather.

“[A] factor in higher water claims is a big increase in the number of severe rainstorms,” says Mr. Ross. “Every year we seem to see more catastrophes, by which I mean an event where there’s a lot of water that creates a glut of claims.”

According to Ross, water damage – that’s sewer backups, basement flooding, burst pipes, and leaky foundations and roofs – accounted for 20 per cent of losses a decade ago, compared to 40 per cent today, a shift big enough to push the old king of claims, fire, down to second spot. This rise in water-related disasters is in keeping with climate change projections for all regions of Canada, which predict more precipitation falling as rain as winters warm up, and more extreme weather events overall.

Insurers are feeling the pain: the average cost of a water damage claim for Aviva has risen to more than $14,000 as of last year, up from $5,423 in 2000, and the total paid out last year in water damage claims was over $124 million.

ACT’s Climate Change Adaptation and Extreme Weather report, released in 2009, discusses impacts such as these, as well as the insurance industry’s role in adaptation planning. Zurich Canada was a key sponsor for the six-month research session and conference series leading to publication of the extensive report, which was authored by eminent Canadian climate scientist and former ADM of Environment Canada, Dr. Gordon McBean.

“It behooves our industry to examine the role of insurance in climate adaptation for extreme weather events, and map out solutions to the challenges insurers face in developing products to support climate adaptation,” says Lindene Patton, Zurich’s Chief Climate Product Officer.

The ACT Extreme Weather report also identifies policy options for all orders of government in Canada, designed to help them take the lead in addressing the risks associated with extreme weather driven by climate change.

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