Showing posts with label insurance claim. Show all posts
Showing posts with label insurance claim. Show all posts

Assessing the Damage. CBC Ombudsman Finds Wrong Flood Damage Values Reported, Notes "broader concern that there is a pattern of imprecision in CBC’s coverage relating to flood events"

The CBC Ombudsman has found violations in the CBC’s Journalistic Standards and Practices related to an April 11, 2019 article entitled "Canada's building code is getting a climate change rewrite. Is your home ready?" (link).

The violations relate to publishing the wrong value for flood damages resulting from a Toronto August 2018 storm, and failing to note corrections to an article.

The CBC has always been very responsive to feedback on extreme weather reporting, including on the frequency of extreme events.  In January 2019, the Ombudsman also found violations related to reporting of more frequent extreme rainfall events (i.e., 100-year storms) - corrections to a couple stories were required.  Those Ombudsman's findings are noted in a previous post.  Other CBC story corrections have been made since 2015, again relating to storm frequency and the causes of flooding, and are noted in this previous post.

The new Ombudsman findings are described here.

While the complaint surrounding the April 11, 2019 article is related to a single storm, the Ombudsman noted that there is a broader issue stating:

"I have a broader concern that there is a pattern of imprecision in CBC’s coverage relating to flood events."

This comment is based on the fact that the cited average flooded basement claim or payout was $43,000 was really based on an extreme 2013 flood event in Toronto - not an average at all - yet it has been repeated over and over by the media including CBC.

A previous post shows how this value started (as $40,000 back in 2017) and how it has been expanded to cover the whole country.  It has been used in Intact Centre on Climate Adaptation's infographics as well:


Intact Financial Corporation's website refers to the $43,000 value too:


Global News. The Globe and Mail. Canadian Underwriter. TVO's The Agenda. All repeat the incorrect $43,000 value. Only CBC has been keen enough to entertain a review and make corrections to the record.

The full review is noted below for reference

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Assessing the Damage
  • Sep 20, 2019
    CBC reported that concerns about climate change are causing government to re-think the rules for construction of buildings and infrastructure. Complainant Robert Muir took exception to several details in the online article. Among them was an estimate of damage caused by one particular storm, which led to this review about expert sources, and the importance of precision in journalism.

    COMPLAINT

    You listed four deficiencies in the original version of a story headlined Canada's building code is getting a climate change rewrite. Is your home ready? which was published on April 11, 2019.
    The article concerned various proposals to create tougher standards for the construction of buildings and infrastructure projects in Canada. It explained to readers that governments are considering these changes in order to mitigate the expected impact of a changing climate.
    Two of your points prompted CBC News to make amendments to the article. One concerned wording that implied that predicted changes in extreme rainfall events had already been demonstrated. The other concerned the use of incorrect terminology to describe a backwater valve. Many homeowners will recognize this device which can decrease the risk of a sewage backup in their home.
    Your third point suggested the article should have more fully addressed the cost effectiveness of the various proposals.  In response, CBC News explained that this was outside of the scope of this particular article. 
    You were satisfied that those three points were properly addressed. However, on your fourth point, you requested a review. The remaining dispute relates to a section of the article which included an interview with Natalia Moudrak, Director of Climate Resilience at the University of Waterloo's Intact Centre. At one point she discussed the amount of damage caused to homes by flooding in Toronto.
    Here is the relevant excerpt of the article:
    While architects and construction workers grapple with reducing emissions from large buildings, average Canadians will face other problems. 
    "Flooding is the biggest challenge" linked to climate change for most homeowners, said Natalia Moudrak, director of climate resilience at the University of Waterloo's Intact Centre. 
    And there are measures homeowners can take now to safe address flooding.
    If a homeowner has a pump to get water out of a basement, "it's important to install a backup generator," she said. Widespread flooding often leads to power outages, leaving regular pumps useless when they're most needed.
    Homeowners can also take simple steps to elevate valuables, like expensive electronics, off their basement floor or put items in plastic or steel containers in case water does creep in, Moudrak said. 
    To prevent sewage from flowing into your home during a flood, David Foster, a spokesperson for the Canadian Home Builders' Association, recommends installing a backwater valve, a mechanical backflow prevention device linked to the plumbing and designed to allow water from sewer drains to only flow away from the home.
    "There is not a lot of cost involved in that, it just involves changing the way things are done," said Foster, who has consulted with the government on the new code. 
    When constructing a new home, installing a backwater valve costs roughly $400, Moudrak said. When retrofitting an existing home, it usually costs about $3,000. But municipalities often offer subsidies to help offset that expense.
    The problem, she said, is most people don't know about them.
    Only six per cent of Toronto homeowners took advantage of the city's flood resilience subsidy program, she said. When floods hit the city last year, she said the average cost to affected homeowners was $43,000.
    The sentence at the heart of your complaint is the very final one. You wrote that the $43,000 figure was “misstated”. It reflected the Intact Centre’s Toronto 2013 Flood Report, not the 2018 one (i.e. - the article states “last year”). You also suspected that the calculations of the estimate are based on studies done in the United States by the National Flood Insurance Program.
    You said more accurate numbers could be obtained from the CatIQ database, which you describe as “the definitive source for compiled flood damages from Canada’s insurance companies.” Based on the number of claims and total value of payouts from the 2018 storm, you suggested that a more accurate number was $18,509 rather than $43,000. You wrote:
    I believe that it is important to clarify given the fact that urban flooding is a significant issue, the costs of risk reduction are immense, and sound economic data and analysis is required to make evidence-based decisions on damage reduction management strategies. Flood damage data is a key piece of this economic data and many municipalities have cited the $43,000 value in federal infrastructure grant applications, which may not reflect actual damages, and could therefore adversely affect how scarce resources are allocated to address an important infrastructure challenge. 

    MANAGEMENT RESPONSE

    Paul Hambleton, the Director of Journalistic Standards and Practices, responded on behalf of CBC News:
    To be clear, the story quoted Natalia Moudrak, director of climate resilience at the University of Waterloo’s Intact Centre on Climate Adaptation: “When floods hit [Toronto] last year, she said the average cost to affected home owners was $43,000”. That information is also included in Weathering the Storm: Developing a Canadian Standard for Flood-Resilience in Existing Communities, a report published in January and co-authored by Ms. Moudrak.
    In a footnote, the report attributes that estimate to the Insurance Bureau of Canada (IBC) “based on Toronto flooding in 2013”. However, you wrote, the actual source is FEMA’s National Flood Insurance Program (NFIP) cited in a July, 2012 story in Forbes. The story cites the interactive “Cost of Flooding” found on the NFIP page as estimating nearly $40,000 damage to a 2,000 sq. ft. home after a 6-inch flood.   
    It’s interesting to note that in looking at it now, almost seven years later, “Cost of Flooding” estimates damage of a little over $20,000 for a 1,000 sq. ft. home and about $52,000 to a 2,500 sq. ft. one-storey home. (There was no estimate for 2,000 sq. ft. home).
    It’s pretty clear that there is a range of estimates and, it seems, little public information about how those numbers were reached. But you have touched on an interesting issue here.
    On one level, while reporters can tell us what they see and hear, there are many things that they don’t witness or can’t know. In those instances they attribute the information. That way, readers know the source and can make their own judgment about its reliability. In this instance, we attributed the information to Ms. Moudrak, identifying her position and the organization she works for.

    REVIEW

    In a perfect world journalists would have expertise in every subject they cover. In the real world, many reporters, along with their editors, are generalists who strive to learn as much as they can in a short time so they can report faithfully and accurately on the subject at hand. 
    This means that there are times where they reasonably rely on subject experts to explain how something works, why something happens, or what might happen next. It might be a doctor, a realtor, or a marketing executive. In each case, the reporter looks to use their expertise as a way to improve the story with informed insights. 
    In such situations reporters willingly put themselves at the mercy of the expert’s knowledge. If an expert were to give bad information, CBC’s Journalistic Standards and Practices doesn’t let either of them off the hook. There is a section called “Responsibility and Accountability Related to Interviews” which reads as follows:
    CBC takes responsibility for the consequences of its decision to publish a person’s statements in the context it chooses. When we present a person’s statements in support of our reporting of facts, we ensure that the statements have been diligently checked. In the case of comments made by a person expressing an honest opinion, we ensure that the opinion is grounded in facts bearing on a matter of public interest.
    The interviewee also takes responsibility for his or her statement. As a general rule, we offer the interviewee no immunity or protection from the consequences of publication of the statements we gather.
    Sometimes the experts provide a recitation of facts, but not always. Often they are called on to analyze a situation or express an opinion related to their field. It is sensible that there is wide latitude in these cases for what constitutes reasonable comment. Realtors may disagree on which way the housing market is going. Marketers may clash over whether that new trend will fizzle. Doctors may have varying levels of enthusiasm for a prospective new drug.  
    The estimate of how much damage the average affected homeowner experienced during Toronto’s big summer storm of 2018 falls into this category of commentary and professional judgment. There is no single demonstrable number that has universal support, so the reporter went looking for someone to estimate the total.
    You disagreed with the Intact Centre’s methodology. Instead, you pointed to the CatIQ database, which is an excellent starting point. However, as you know, that database represents only the payouts insurance companies made to people who put in a claim. Others might think you should add in property damage not covered by the insurance policy, or people who opted not to file a claim. There are other expenses that could be considered as well. Should you include the value of time homeowners missed from work as a result? What about the cost of infrastructure repairs absorbed by government, or the cost of policing, firefighters and ambulance drivers? Should they be included or costed separately?
    Looked at through a different kind of prism, how much of the damage was caused by flooding, and how much was caused by wind, or by lightning? 
    Now, I recognize that you know a great deal about all these subjects. You have your own expertise, and you have told me about work you are doing that seeks to consider both direct and indirect costs to come up with a ratio of overall losses to insured losses. However, it is apparent that determining an estimate has at least some degree of subjectivity. 
    With all that in mind, it was acceptable journalistic practice for the CBC reporter to use the Intact Centre as its expert source and ask them to estimate the damage from a big storm. The Intact Centre is an applied research centre affiliated with the University of Waterloo. That may not bring it reputational immunity, but it does come with an inherent base level of credibility. The reporter was entitled to use Ms. Moudrak as an expert, so long as he attributed the estimate to her. I disagree with you that the JSP standard of “diligent checking” of her statement meant the reporter should have done extensive research to test that estimate. It is more reasonable to believe that diligent checking refers to facts that can be categorically confirmed or refuted, not to a matter of professional judgment such as this. 
    Nonetheless, you are correct that the number in the story WAS the wrong number, regardless of the quality of the estimate. The $43,000 figure did not represent the Intact Centre’s estimate for the 2018 Toronto storm, but instead was their estimate for the 2013 Toronto storm - something raised by you in your complaint, acknowledged by Mr. Hambleton in his response, and confirmed in my own communication with Ms. Moudrak.
    That this was wrong is, naturally, a violation of policy. That it has not been corrected means it continues to be so. It does not matter whether the original misunderstanding was caused by the source or by the journalist. It ought to be clarified for the record, and for the readers. 
    Further, I noted while reviewing the story that there is no note on the web page acknowledging the two other corrections prompted by your initial complaint. This is a second violation of policy.   
    I have a broader concern that there is a pattern of imprecision in CBC’s coverage relating to flood events. You provided me with a list of other recent CBC stories which make reference to the $43,000 damage estimate. Several confuse the matter by not indicating this is a specific estimate for the 2013 Toronto floods. One said, “The average basement flood in Ontario costs the homeowner $43,000.” Another said, “The average payout for a flooded basement is $43,000 and rising.”  These types of references take a single (and unusual) event in 2013 and treat it as if it is now a generic standard.
    Reporters and editors need to ensure they understand what's included (and what's not) in any estimates provided, and they need to ensure that they associate that estimate with the correct event - or events, as the case may be. Based on my review, that is not happening consistently enough. 
    All of this needs to be distinguished from your belief that the Intact Centre’s $43,000 estimate to be incorrect, even when attributed to the 2013 storm. I would encourage CBC News to take your perspective into account, but that is as far as I will go. It is not my intention to take sides on the quality of the Intact Centre’s estimate. If journalists continue to find the Intact Centre credible, they continue to be free to consult them for stories.
    Sincerely,
    Jack Nagler
    CBC Ombudsman

    Flooded Basement Cost in Canada - How Dwelling Size and Regional Differences Affect Cost Benefit Analysis and Return on Investment in Flood Risk Remediation Strategies

    Flooded basements dominate natural hazard damages in many parts of Canada. The cost to lower flood risk varies considerably from several hundred to a few thousand dollars for simple lot-level best management practices, up to many tens of thousands of dollars per home for significant and complex infrastructure upgrades. Cost Benefit Analysis (CBA) can help guide what scale of risk reduction investment is appropriate given the implementation cost and the long term benefits of deferred damages over the lifecycle of the investment.  While CBA is uncommon in traditional municipal infrastructure planning, it has been applied in the past to identify municipal flood infrastructure priorities and is now a requirement for large scale projects under the new Disaster Mitigation Adaptation Fund. This blog post explores basement flood cost estimates that may be used to in CBA to help develop flood mitigation strategies and prioritize cost-effective best practices, programs and projects that deliver timely risk reduction.

    The Insurance Bureau of Canada (IBC) has identified the cost of a flooded basement in Canada to be $40,000 - this has been described as an "average cost". This is an important number in CBA since it drives the value of deferred damages associated with flood risk reduction best practices.  A recent report "Blueprints for Action, Minimizing Homeowner Flood Risk in the GTHA"
    (July 2017) prepared by Civic Action, IBC, and the  Intact Centre on Climate Adaptation indicates that value reflects damages for two particular flood events, the including the Toronto area July 8, 2013 storm and the 2013 flooding in Alberta, which included extensive river flooding - the report indicates "Combined with flooding in Alberta that same year, affected homeowners faced
    a $40,000 repair bill on average." and " The average cost of repairing basements damaged by flooding in Alberta and Toronto in 2013 was more than $40,000 for each affected homeowner." citing a CBC news article in which the Intact Centre on Climate Adaptation indicates "The average cost of restoring water-logged basements in Alberta and Toronto in 2013 was more than $40,000 for each homeowner".

    Correspondence with IBC suggests the value of $40,000 reflects Greater Toronto Area (GTA) costs for 2013 flooding, and not Alberta basements as noted in the Blueprints for Action report, and that values have been 'rounded up'. IBC also noted Intact Centre on Climate Adaptation relies upon US data in Forbes: "More specifically, according to the National Flood Insurance Program in the United States, a 15-centimeter flood in a 2,000-square-foot home is likely to cause about $40,000 in damage”  (Flood Insurance: Protection Against Storm Surge. 2012).

    Let's review this basement damage cost and also consider how it can be used in cost benefit analysis that must take into account the frequency of these damages, that is, the return period or probability of such damages occurring.

    First, what geography does the $40,000 damage value apply to? That is unclear and seems to grow over time:
    i) The July 2017 Blueprint for Action report suggests it applies to the Toronto area and Alberta,
    ii) A May 2017 Global News article suggests it applies to all major cities according the the Intact Centre on Climate Adaptation: "A flooded basement costs an average of $42,000 in major cities",
    iii) A 2018 infographic by the Intact Centre on Climate Adaptation suggests that it applies more broadly to basements across Canada, not just major cities,

    iv) Intact Centre on Climate Adaptation's presentation to the Standing Senate Committee on Energy, the Environment and Natural Resources Issue No. 38 - Evidence - February 8, 2018 (see transcript) notes "This is very problematic, because the average cost of a flooded basement in the country right now, in urban and rural areas, is about $43,000.", expanding the damage estimate of "about" $43,000 to include rural areas too.
    v) Shortly after the Intact Centre on Climate Adaptation appears to firm up the estimate on TVO's The Agenda, Assessing Ontario's Flood Risks, March 23, 2018 (see transcript) and notes "It's highly problematic. The average cost of a flooded basement in Canada right now is $43,000."

    So the estimate has changed from characterizing Toronto and Alberta flooding in 2013 extreme events to applying to "major cities", then more widely to "urban and rural areas", and has changed from an estimate to a more definitive "average cost" across Canada.

    How do the flooded basement damage values compare to other sources?

    KPMG's report "Water Damage Risk and Canadian Property Insurance Pricing" (2014) for the Canadian Institute of Actuaries summarizes water damage trends from Aviva Canada:

    "In a media release dated April 10, 2013, Aviva stated: Approximately 40 per cent of all home insurance claims are the result of water damage . . . and the average cost of water damage claims rose 117%, from $7,192 in 2002 to over $15,500 in 2012, a year in which the company
    paid out over $111 million in property water damage claims. (source)

    An older media release in early 2011 also highlights the concern: “Aviva Canada’s data found that
    in 2000, the average cost of a water damage claim was $5,423. In 2010, it was over $14,000 – an
    increase of nearly 160 percent”. (source)"

    Aviva Canada has also commented that average flooded basement costs has increased in a Canadian Underwriter article stating "The average cost per residential water damage claim has increased significantly – going from $11,709 in 2004 to $16,070 in 2014, a 37% increase.". These values may reflect damages in years that did not have widespread record-breaking flood events like 2013, characteristic of more average or typical low-flooding years.

    So average water damage claims at Aviva Canada have been given as:

    $5,423 in 2000
    $7,192 in 2002
    $11,709 in 2004
    over $14,000 in 2010
    over $15,500 in 2012, and
    $16,070 in 2014.

    Why are 2013 claims cited by IBC so high? The KPMG report offers some insight:

    "... good practice for property pricing requires that actuaries have the ability to link claims data with detailed exposure data. Thus, actuaries require accurate cause of-loss coding for all property claims. This coding is particularly important following the occurrence of major events such as the Alberta and Toronto floods of 2013. Many losses arising from the Alberta floods, in particular, were covered by insurers as a goodwill measure and to enhance the long-term relationship with customers and not because the peril of water damage was covered in the insureds’ policies."

    So 2013 damage values include perils that were not covered, e.g., overland flooding. Why else are 2013 claims cited by IBC so high? Because of the severity of the 2013 storm event in the GTA. The chart below shows 3-hour rainfall totals in comparison to return period totals in west Toronto and Mississauga. The Gauge 1, 2 and 3 3-hour rainfall depths of 138 mm, 121 mm and 96 mm were identified by Toronto Water in a ICLR Friday Forum workshop February 19, 2016 entitled 'Reducing flood risk in Toronto' - see slide 19 in the presentation.
    July 8, 2013 extreme rainfall frequency analysis for basement flood damage estimation and flood risk mitigation strategy development
    July 8, 2013 Extreme Rainfall Frequency Analysis and Comparison to Design Rainfall Intensities
    An excerpt from the Toronto Water presentation is shown to the right showing the location of the 3 gauges that recorded over 100-year storm amounts.

    IDF data for the Toronto City (Bloor Street) gauge are used in the frequency analysis chart above. The version 2.3 datasets with 61 years of record have been extended to include 2017 data obtained from Environment and Climate Change Canada, extending the record to 70 years. Frequency analysis on the extended dataset using a the Gumbel distribution was completed by the City of Markham who uses this gauge in its stormwater management and engineering design guidelines and standards. Frequency analysis was also extended for the Pearson Airport gauge. A summary table showing the updated IDF values, including the 3-hour duration rainfall depths in the chart is shown below.


    For large portions of the GTA where flooding was concentrated, the observed rainfall amount exceeded the 100-year design rainfall and at two rain gauges even exceeded the 2000-year (not 200, 2000!) rainfall statistic. So 2013 was certainly not an average year for basement flooding.

    Another reason that the IBC flood damage value may be so high is that it has been vetted by comparing to much larger homes in the US. While the damage for a 2000 square foot home in the US may equate to $40,000, the most flood-prone homes in Canada are much smaller. Most flooding in Canadian cities occurs in older subdivisions build before modern drainage and wastewater servicing design practices, in general, before 1980 - a previous post shows this quantitatively. A Globe and Mail article quotes M Hanson Advisers, a U.S. research firm that caters to institutional investors, indicating "In 1975, the average size of a house in Canada was 1,050 square feet." - this is about half of the comparative house size used to vet the $40,000 damage estimate. The average claim-count-weighted US flood damage is much higher than the Canadian average event claims, perhaps reflecting the severe nature of hurricane event damage as explored in a previous post that evaluated FEMA flood damage payouts - our analysis generated inflation-adjusted claim-count-weighted average payout of $60,600, considering 116 events between 1978 and 2017.

    So IBC has identified a 'rounded-up' basement flood damage cost associated with a very extreme rainfall event in the GTA and that considers extensive riverine flooding in Alberta where payouts appear to have been for uninsured perils as a means of goodwill and client retention. The Aviva Canada reported average claims suggest a lower water damage amount in average years without the unique 2013 considerations in the GTA and Alberta.

    What flooded basement damage amount should be considered in deriving deferred damage benefits and in return on investment (ROI) calculations for flood remediation projects? Yes, that was how this post started. Such calculations can take two approaches, one a top-down aggregation approach to guide long-term flood remediation program spending, and another bottom-up property-by-property approach at that recognizes variability in individual property risk.

    Stay tuned for our economic model of flood damages and remediation strategies!

    ***

    New - CBC Ombudsman reviews $43,000 value and finds it is not an average but based on one extreme, unique flood event in Toronto in 2013 (July 8, 2013) - see post: https://www.cityfloodmap.com/2019/09/assessing-damage-cbc-ombudsman-finds.html