August 17, 2021 by Canadian Underwriter Staff
With water damage claims due to infrastructure failures costing the industry much more per year than natural catastrophes, brokers need to be more proactive in helping clients understand coverages and risk mitigation strategies.
Infrastructure and plumbing related water damage is one of the biggest challenges for property managers, yet brokers often struggle to convince clients to purchase coverage or invest in risk mitigation, Chris Della Mora, senior risk consultant with HUB International’s Toronto office, told Canadian Underwriter.
“The potential for water damage isn’t often seen as a high risk for many clients. When someone thinks about insurance coverage, images of coastal flooding, storm damage, wildfires and other large events typically come to mind,” Della Mora said.
But infrastructure water damage is more a case of frequency versus severity.
“There is a much higher frequency of claims when it comes to water damage than other claims; however, the severity of the claim is much lower. So although the damage is likely to be less with a water damage claim then other claims, the probability is substantially higher.”
Another common misconception is that aging infrastructure leads to the most water damage. “Relatively modern systems can also fail due to improper installation, poor product quality or connection types and the effects of water chemistry on plumbing systems over time,” Della Mora said. “The type of plumbing system within the building can either mitigate or increase the risk of water damage.”
The primary loss exposure for tenants of both residential and commercial rental properties is damage to contents/betterments, Della Mora said.
“Although some owners require tenants to carry full policies covering property and liability, it’s essentially transferring the loss from the owner’s insurance underwriter to the tenant’s.”
Multi-story residential units have specific risks as water damage from higher floors can impact lower floors.
“This is one reason why many large rental complexes actually require tenants to carry full rental coverage,” he said. “This protects those tenants impacted by a water loss on lower floors by not requiring them to run a claim through their policies. Rather, the claim for all units impacted will run through the policy of the tenant where the leak originated.”
Della Mora offered five ways for building owners to lower their risk of water damage and protect their property:
Feature image via iStock.com/thefurnaceroom
Good article, but I’m wondering why there is no mention of using technology to reduce the risk of water damage? There are now various wireless sensor solutions that can provide early notification, and even shut the water off (if a plumber is involved).
Edited as per comment policy.
Laurie, great recommendation. I find also that technology, though may fail, can be a great tool that millennials can use once they become homeowners. Despite the advent in technology however, I do believe that natural pen-to-paper type plans are more effective once disaster hits.