From Fires To Floods

As some industry veterans may well remember, homeowners insurance — in fact, all property insurance — was once known as ‘fire’ insurance, since this was the major peril against which policyholders were insured. Indeed, many of the earliest insurance companies to be formed in Canada had the word ‘fire’ in their names, with the Halifax Fire Insurance Association (1809) and the Quebec Fire Insurance Company (1819) being two of the earliest.

But somewhere along the line, as more and more perils came to be covered under the standard policy, came the advent of the all-perils form, in which essentially all insured perils were folded into a single policy and riders were largely done away with. (The operative word here is “insured,” since the typical homeowners policy in Canada does not cover overland flood, shake from earthquake, or subsidence — i. e. landslide and erosion. Perhaps the term ‘all-perils’ should be replaced with ‘most-perils.’) Today, roughly 80% of all homeowners’ policies sold in Canada use the all-perils form.

Also somewhere along the line, fire dropped from being the primary cause of concern for property and casualty insurance companies. Although fires are still disconcerting (too many people perish in blazes each year and too much damage is caused by fire and smoke), water damage is now the main concern from a claims perspective.

BASEMENT FLOODING: A GROWING PROBLEM

Basement flooding, caused by overland water flows, infiltration and sewer backup, is a major concern for many (if not most) urban municipalities in Canada. Increases in the frequency and intensity of heavy rainfall events exacerbated by rising urbanization, deteriorating infrastructure and climate change will increase basement flood risk in the future. Effective management of flood risks requires improving sewer infrastructure, and also the cooperation of more informed homeowners.

Sewer backup is caused by ground and storm water infiltration and inflow into sanitary and storm systems, which can increase pressure and push sewage into lower levels of buildings through sanitary sewer connections and then enter basements through plumbing fixtures and floor drains. The existence of combined sewer systems, which convey both storm water and sanitary sewage, exacerbates sewage backup risk in older parts of cities.

Damages from this hazard can be extensive. In August 2005, a severe rainfall event in the Greater Toronto Area (GTA) caused extensive overland flood and sewer backup damages, resulting in more than 13,000 sewer backup insurance claims at a value of Cdn$247 million. The City of Edmonton was hit with two severe rainfall events in 2004, resulting in 9,500 sewer backup insurance claims valued at Cdn$143 million. Many other communities across Canada have experienced similar loss events.

The proliferation of finished basements has exacerbated the basement flood problem. In the January 2009 issue of Canadian Underwriter, Irene Bianchi, vice president of claims and corporate services at RSA, is quoted as saying that: “[In 2008] we had the majority of…[basement flooding] claims occur in the GTA, where lots of people have very nice, expensive finished basements in their homes. So instead of dealing with regular, unfinished basements that maybe only had laundry machines experiencing the water damage problem, we’re dealing with a beautiful basement that the family spends a lot of time in — basements that are very well-equipped with big-screen TVs, nice laminate flooring and beautiful furniture.” As a result, the average cost of sewer backup claims has went from just a few thousand dollars to the five-digit range.

Sewer backup is generally perceived as strictly an infrastructure problem, but effective management of basement flooding requires actions at both the municipal and homeowner levels. Indeed, many homeowners’ eavestrough downspouts and foundation drains contribute a significant amount of unwanted and unnecessary water into sewer systems, which exacerbates sewer backup problems. Still others have improper landscaping that conveys water toward the house, rather than direct it away.

While municipalities should continue to upgrade existing sewer systems and adhere to improved standards when building new systems, upgrading infrastructure is an expensive and long-term proposition. In areas where upgrading of municipal infrastructure may take several years to complete, actions by homeowners can immediately reduce their risk of damage. Homeowners should also be informed of their role in contributing to sewer backup, and should be encouraged to reduce their contributions of unwanted water into sanitary and storm sewer systems.

NEW HANDBOOK ON FLOODING

A few years ago, ICLR commissioned a survey to determine how much average homeowners understand about their insurance coverage. Two important findings of the professionally administered survey were: (1) homeowners expect to receive information about how to protect their families and property from the impacts of natural hazards; and (2) they expect to receive such information from their insurance company.

In this spirit, ICLR’s Handbook for reducing basement flooding attempts to address the concerns of homeowners, local governments and homeowner insurers of the increasing instances of basement flooding. It provides comprehensive information on how to prevent such a loss from occurring or, at the very least, mitigating the impacts of such an event.

The handbook is meant to represent ICLR’s advice on preventing basement flooding. It is a substantial 56 pages in length, although ICLR will in the near-future produce a smaller guide that highlights some of the immediate steps homeowners can take to prevent basement flooding. Additionally, municipal governments and insurance companies can use the handbook to produce their own material for homeowners.

The handbook covers such topics as what basement flooding is and why it happens; simple and inexpensive things that can be done to prevent basements from flooding; and other measures that can be taken that require more effort. In all, the handbook contains 20 measures that homeowners can take to prevent basement flooding from happening.

Additionally, the publication contains several technical photographs and professionally rendered engineering drawings illustrating such things as the dynamics of overland flooding and sewer backup, foundation cracks, cross connections (i. e. when storm water downspouts are connected to sanitary sewer lines), sump-pump and backwater valve installation and basement flood reduction. What’s more, the handbook contains a glossary of common terms related to basement flooding, sanitary sewer and stormwater management.

The threat of fire to property has fallen from top position due to the concerted efforts of the insurance industry, municipal and provincial governments and homeowners to reduce the risk and impact of fire. The hope is that by providing information on basement flooding, ICLR — in partnership with local governments and insurance company members — can make the same happen with water-related claims.

For more information on ICLR’s basement flooding reduction handbook or for a copy, contact handbook author Dan Sandink at dsandink@iclr.org.

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Although fires are still disconcerting (too many people perish in blazes each year and too much damage is caused by fire and smoke), water damage is now the main concern from a claims perspective.