My husband and I recently paid $13,000 for a new roof on our house. We were pushed into it by our home insurance company.
Shortly before the policy renewal date, our insurer called to say it would not cover water leaks unless we updated the flat roof and shingles. We went ahead, knowing our patched-over roof was ready for replacement.
Home insurance companies paid out a record $3.2 billion in weather-related claims in 2013. This has resulted in some customers being confronted with higher rates, restricted coverage or demands for upgrades when their policies come up for renewal.
A $15,000 limit on sewer backup coverage does not go very far, as an Ottawa homeowner learned after a rainstorm this past summer.
“As a result of a city drain surge, our basement was flooded. The insurance company sent an emergency cleaning service – two young men – to remove flooring and walls and take our previously finished basement down to the studs,” she said.
One day of emergency services cost her $8,000, leaving a grand total of $7,000 to rebuild the 400-square-foot basement. The insurance company said she was on the hook for the amount, since it wasn’t responsible for what the restoration contractor quoted.
A Toronto woman, who owns a home and artist’s studio, claimed for a basement flood loss in 2013. It was her second claim in 50 years of being with the same insurance company.
When her insurance came up for renewal, she found the amount she had to pay out of pocket (the deductible) went up to $2,500 from $500 – and she had to submit to a home inspection later this month.
“An inspection is OK with me. What is not OK is being told that I have to agree in advance to any changes in rates or conditions as a result of the inspection,” she said. “The agent has made it clear that if I don’t agree to an inspection, the policy will be cancelled.”
Home insurance is not regulated in Ontario. However, all insurance companies provide a list of consumer complaints officers and their contact information to the Financial Services Commission of Ontario (FSCO).
The customer felt better after I referred her to the female ombudsman at her insurance company. They had a phone conversation that helped clarify her options.
“She listened with care, checked my record with the company and explained a couple of things,” the customer said. “She advised me to go ahead with the inspection, saying I didn’t have to agree unconditionally to the terms imposed afterward. There might be room for negotiation.
“She said I could switch to a more reasonable, hopefully civil, agent once the policy is renewed and she would bring this matter to the attention of the area manager.”
Severe weather events, caused by climate change, could result in higher damage claims for residential and commercial buildings in the years to come. Are insurers ready?
Here’s my advice, which I gave to an insurance audience during a panel discussion on catastrophic claims at a national conference in Ottawa.
• Talk to your customers
If you are raising their rates or reducing their coverage as a result of weather-related damage, give them the facts. Let them know they are vulnerable even if they haven’t made any claims.
• Give enough notice
If you make material changes to a policy, you have to let customers absorb the news and look for coverage elsewhere. Send information 60 days before the renewal date. Less than 30 days’ notice is unfair and deprives people of options.
• Run education campaigns
If you want fewer flood claims, teach policyholders about preventive measures. What is a backup valve? Who offers rebates for installing them? Give advice about what not to keep in your basement, such as home theatre equipment or home office files.
In 2013, the Alberta government forced some large insurers to approve claims for flooding they had refused to cover before. Unless the industry gets in front of this issue and tells policyholders how to protect themselves, they could face more government involvement in their business.