This article explores the increasing challenges of obtaining affordable insurance in the face of more frequent and severe natural disasters. It proposes a mandatory multi-peril insurance plan as a solution to mitigate financial risks and ensure equitable coverage for all Canadians.
Claude Lavoie, a contributing columnist for The Globe and Mail and former director-general of economic studies and policy analysis at the Department of Finance (2008-2023), discusses the growing issue of insurance affordability in the face of increasingly frequent and severe natural disasters. He highlights the financial burden these events place on insurers and the resulting reluctance to offer coverage, particularly in high-risk areas.
Lavoie cites examples such as State Farm discontinuing fire coverage in California and the limited insurance coverage for Hurricane Helene's devastation, demonstrating the widespread impact. He points out that the situation is mirrored in Canada, where insured losses from flooding and forest fires in the summer of 2024 surpassed $7 billion, leaving many households vulnerable. Lavoie argues that the current system, where only high-risk homeowners are incentivized to insure, creates a financial burden on taxpayers. Governments often end up covering the losses through programs like the Disaster Financial Assistance Arrangements, leaving taxpayers footing the bill for events beyond their control.Lavoie proposes a solution involving a mandatory multi-peril insurance plan that covers damages from all natural disasters. He suggests that a national public insurer, similar to the Canada Housing and Mortgage Corporation, could administer this plan, ensuring coverage for all households with some exceptions. Lavoie explains that this approach would pool risks across all households, leading to more affordable premiums. He also proposes income-based subsidies for existing homes and premium reductions for households taking proactive steps to mitigate climate-related risks. Lavoie emphasizes the need for governments to recognize the growing certainty of future weather-related disasters and factor the potential public liability costs into the national debt. He concludes by urging the government to move beyond the narrow focus of current task forces and take decisive action to address this pressing issue
NATURAL DISASTERS INSURANCE CLIMATE CHANGE GOVERNMENT POLICY CANADA
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