Water damage is a common cause of commercial real estate claims.
Sensor technologies can mitigate these claims
Commercial real estate insurance companies can suffer from water damage claims.
The loss can be sudden after freezing temperatures, or it may occur gradually due to inadequate installation or the deterioration over time of an aging infrastructure.
According to ISO industry data for 2021, water damages caused by weather or non-weather account for about $500 million of loss each year in the United States. This makes it the leading cause of loss of property.
Rob Sullivan is The Hartford’s lead for real estate practice.
It is also a major cause of property loss in commercial properties.
Water damage insurance claims could force insurers to increase their rates in a market that is already highly competitive.
Insurers have seen their premiums rise year after year and their conditions tighten.
They may also see different water damage deductibles depending on whether the event was caused by weather or not. Sullivan claims that they’ve become more prevalent in the past three or four years.
You can have separate water damage deductibles of $50,000 or $100,000, as well as a $25k AOP-deductible for all perils.
Water damage claims are on the rise in this market. Insurers want to lower their costs and appeal to insurers.
Sensor technologies can be used by insurers to identify water intrusion problems before they cause major damage in claims that are not weather-related.
Avoiding Water Damage Claims with Sensors
Leaky pipes, sprinkler systems that malfunction, and plumbing issues can cause water damage to commercial buildings.
Water damage that is not caused by weather can cause havoc to a structure and go unnoticed.
One example is a leaking HVAC system.
Property managers turn on HVAC systems in the spring without inspecting for leaks. This can cause damage over time. About 75% of all water-related losses can be attributed to plumbing systems, HVAC units, or other appliances which accidentally leak liquid.
When a seal doesn’t work, a crack appears in a pipe, and then, boom, water damage can occur, hidden or unnoticed,” Sullivan explained.
Sensors can detect water intrusions in pipes or systems that are near them. They will alert managers of risk before any major damage is done.
Insurance companies that insure commercial real estate often use technology to safeguard their major assets against a wide range of possible exposures.
Camryn Santos is the director of IoT Innovation and Strategy at The Hartford. She said: “We concentrate on data centers, utility areas, and other locations where leaks can have more serious consequences.”
These devices can detect leaks and monitor temperature, humidity and other factors such as mold and frozen pipes.
Risk managers and their insurers can work together to install sensor technology that is appropriate for the building type.
Santos said that the goal was to be more consultative when determining property vulnerability based on age, construction year, and number of floors.
We recommend these types of solutions as a result X, Y and Z. The profile of each property will vary.
The sensors can alert the risk manager to any possible issues with water leaks in real-time, and they are able to take action immediately by shutting down valves or calling repair experts.
The quality of sensor technologies is only as good at the users who are using them. Claims can occur, for example, even if sensors have been placed incorrectly, or risk managers fail to respond when alerts are raised.
If the client does not react to the alerts, or if devices are not placed strategically around the property we might not be as effective as with technology.
If the alert is sounded all weekend long and no one responds, we still suffer a significant loss.
Commercial property owners and managers should form a team and train them to be ready to react quickly to an alert from a water sensor in real-time. The response time is crucial in preventing damage from water.
Sullivan said that the program is aimed at formalizing a prevention of water damage.
He explained that the core team should be well-trained, perform a vulnerability assessment, identify the sources of intrusion and shut off valves. They must also conduct an annual inspection of the site, implement mitigation measures, hire contractors for restoration and remediation, and do some sort of checkup every year when they buy or sell properties.
Sensors can make insureds more appealing to insurers due to recent tough market conditions. They also help prevent claims.
Over the last two years we have seen progress on risk mitigation, and are more proactive rather than simply absorbing rates increases every year”, Sullivan stated.
According to Sullivan & Santos, The Hartford spent many years researching the advantages of sensor technology. They found it could be a very powerful tool in mitigating claim.
As part of the renewal process, The Hartford provides this program to many types of insureds.
Hartford has embraced water damage prevention technology, believing that the positive impact it can have in reducing water loss is both material and beneficial,” Santos stated.
How do we get them to be adopted?
By preventing the escalation of claims, preventative technologies like water sensors reduce premiums over time. Risk management strategies that are proactive will be appreciated by underwriters.
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