Non-weather-related water damage is one of the most frequent and expensive property loss claims filed for industrial buildings, retail outlets, mixed-use properties, and hotel complexes. And such claims have increased in both frequency and severity over the past few years, causing millions of pounds in financial losses. Direct costs for clean-up, repairs, replacements, and mould remediation, as well as indirect costs, such as legal fees, delayed projects or business interruptions, will massively impact a business’ bottom line and profitability.
According to the Association of British Insurers (ABI), the industry pays out around £1.8 million on a daily basis to customers who’ve made “escapes of water” claims on their home insurance. Moreover, one in five claims made on buildings and contents insurance is for damage caused by water leaks. Water-related claims have now become so frequent that many brokers have introduced disclaimers into their respective policies and any property owner/manager not reading the small print may well find they are not awarded the pay-out they were expecting. Conversely many insurance companies don’t have water mitigation strategies to deal with such eventualities.
“Sensors, and more importantly the detailed insight offered by the data captured, provides the foundations needed for a claims processing overhaul and a move towards predict and prevent.”
Jonathan Custance
Director at Green Custard
In a digital world teeming with IoT and sensors, it is preposterous, even alarming that these claims are so high, and that the deployment of water/temperature detection sensors are not a fundamental requirement of all property insurance policies. A series of water and temperature detection/monitoring sensors provided by the insurer as part of the package and precisely installed in any residential or commercial property, will be able to accurately detect any leaks thus preventing any long term damage. Moreover, sensors can be configured to switch off the mains supply automatically, or even pre-empt a leak and trigger a predictive maintenance alert to rectify the situation before any damage is caused. The cost of implementing IoT sensors in these situations would immediately be offset by a large claim and offer the potential to deliver further savings in the long term.
Some large brokers are already leveraging IoT, not only as a means to reduce pay-outs, but as an incentive for property owners to share the install costs, thus resulting in a lower premium for the consumer. Chubb Insurance, one of the world’s largest publicly traded property insurance companies, has wholeheartedly embraced IoT, to the extent it is now integral to their sales and marketing strategies. More than 300 of their insured properties have water sensors installed to mitigate damage and two years down the line, millions of dollars in property losses have been prevented.
Apart from empowering insurers to drive down their pay-out bills, IoT will also help reduce fraudulent claims due to the accuracy of data captured. Mildew-related claims, for example, no longer need to be paid by default because data from correctly configured sensors can validate water damage.
Gas leaks are another area of concern and deploying intelligent sensor technologies capable of detecting these in advance would not only reduce fire damage payouts, they could also save lives by raising an alarm and automating switch off of the mains supply.
The world is going digital and insurance companies must follow suit and change their classic approach from being “repair and replace” to “predict and prevent”, utilising IoT if they want to differentiate themselves. Insurance companies need to be able to centrally review data from hundreds of different claimants, and this information needs to be presented in an easy-to-understand format for regulation, due diligence, and traceability purposes. This may be straightforward for residential installations but more complex for commercial settings.
This is where organisations like Green Custard, an AWS Advanced Tier Services Partner, is able to help by accessing the tools, libraries and services to build powerful, resilient and secure IoT applications for highly regulated sectors such as insurance in a timely manner and for a modest investment.