It’s a drip of a tap. A rush of a sewer. Or a torrential downpour that accompanies a storm. Regardless of the method, water damage is the fastest rising cause for claims and the focus of revision and review for many policyholders, brokers and insurers.
Roughly three years ago the insurance industry, as a whole, assumed it was just going through a bad year when water claims began to increase. Yet, claims due to water damage have risen year after year, prompting the industry to question whether or not homeowner policies should be revised, given they were originally constructed to protect against losses due to fire and theft. It’s a revision that seems long overdue, considering 40% or more of claims have some kind of water component.
The rise in claim costs due to water damage is not only due to increased storm frequency. Over the past 20 years claims costs have increased as more and more people choose to furnish their basements with high-end or luxury finishings. Rather than using basements as storage, many homeowners are now using it as valuable living space—an extension of their home and their lifestyle. That means that the average sewer backup claim jumped from $5,000 to $55,000 (CDN) in just 15 years.
These significant changes have prompted insurers to develop new products to handle these risks, but this is not the only solution. Carriers are also examining the efficiency of processes, productivity and staffing models, in order to get to a customer faster and resolve claims quicker. This includes solidifying relationships with vendors—which is changing the face of the restoration business regionally, nationally and internationally.
Municipalities also have a role as associations across Canada actively lobby government to repair and improve decaying infrastructure.
For the industry it means investment into those trained to handle such events, such as adjusters and appraisers.
This focus on claims professionals is good news for Patti Kernaghan, president of the Canadian Independent Adjusters Association (CIAA). “Licensing and cross-border regulation is a big issue for us,” says Kernaghan. “It becomes a logistical issue” as these licences are not transferable, says Kernaghan. “And that means we are lobbying for harmonization.”
The CIAA will also focus on the developing best practices for ensuring efficient and effective communication with all parties involved in claims, and will concentrate on professional development and attracting and retaining new talent.
Originally published in CI Top Broker Magazine in April 2010