Data sharing between Canadian insurers and municipalities could improve availability and affordability of flood insurance

The rising cost of flood damage has made property insurance less affordable for many Canadians. New research from the University of Waterloo shows that by sharing information about investments in flood risk management, insurance companies and local governments could lead to cheaper insurance coverage and lower premiums.

A team of climate researchers from the University of Waterloo’s Faculties of Environment and Arts developed a research platform that demonstrates the benefits of sharing risk data based on feedback from insurers and local governments.

The study “Evaluation of a public-private data exchange platform to improve the availability and affordability of flood insurance in Canada” was published in Regional environmental changes.

According to the Insurance Bureau of Canada, more than 10% of homeowners in Canada cannot obtain flood insurance.

“Insurance companies use data to calculate a property’s flood risk and resulting costs, including information about the characteristics of a home or the surrounding area,” said Dr. Jason Thistlethwaite, professor in the Faculty of Environment at Waterloo and co-leader of the Climate Risk Research Group.

“But local governments use data to identify flood-prone areas of a city and make decisions to prevent and mitigate flooding in neighborhoods through measures such as infrastructure improvements. The problem is that they have not worked together and the consumer is on the hook.”

According to a recent study by Statistics Canada, claims for damages due to extreme weather events last year totaled over three billion dollars. It was one of the years with the highest insurance losses in Canadian history.

“If we continue to ignore this gap in insurance coverage, things will only get worse,” said Dr. Daniel Henstra, professor in the Faculty of Arts in Waterloo and co-leader of the Climate Risk Research Group.

“Governments and insurers are missing an opportunity to make infrastructure more resilient. Data demonstrating how investments in risk reduction also lead to lower premiums in the long term would go a long way towards improving the business case for climate resilience.”