Paid IoT Solutions and Claims Reductions

At just after 10 am on an average Thursday morning, a 20-floor apartment building in downtown Toronto experienced a leak in their riser stack between the 5^th and 6^th floor. The leak was detected by an IoT sensor system, which immediately alerted the property manager. Within minutes, the water was turned off to the affected riser, preventing a major water damage incident that would have flooded the 5 units below, displaced five families, destroyed drywall, flooring, and personal property, and ultimately resulted in a substantial insurance payout and commensurate premium increase.

Just weeks before, while a Burlington family enjoyed a sunny March break vacation, their under-floor heating system malfunctioned and began to leak water into their finished basement floor. Instead of flooding their basement, their leak detection system’s automatic shutoff feature deployed, turning off the water. Instead of returning to a flooded basement and the subsequent mold growth from 3 days of water saturation, the family returned to a minor plumbing bill and no insurance claim.

These are real scenarios that demonstrate the massive advantages of IoT technology in diverting claims and tackling the mounting risk of water damage in the P&C insurance industry.

The statistics around water damage are shocking. In 2013, water damage accounted for a startling 44% of total paid claims. By 2018, this has risen to over 60% – representing a 40% increase in just five years. Whether in commercial or residential properties, water damage is more prevalent than ever before, and insurance carriers are turning to innovation to stop the drain.

The answer? IoT Solutions
The Internet of Things (IoT) is a system of interrelated devices, whereby device-driven data is transferred over a network. IoT devices are becoming commonplace, used everyday for convenience, savings, or enhanced control. Whether a homeowner is at the office or on the beach, they have control over what happens in their homes with IoT technology.

In insurance applications, IoT solutions create a proactive environment that helps avoid future loss, avoids displacement and business interruptions, and prevents deficits due to out of pocket and deductible expenses. IoT systems that monitor and control water within buildings and homes are beginning to gain traction with carriers.

In single family home applications, smart devices are installed on the water main, with remote and automatic shutoff capability. For faster and more precise detection, wireless sensors can also be placed next to major water sources. When water is detected by a sensor, a notification is instantly sent to the client with the exact location of the incident, and when accompanied with a remote or automatic shutoff at the water main, damage can be mitigated immediately.

In buildings, the water protection and systems required are much more complex given the sheer scale and complex nature of the risk. For zone feeds on the domestic and common distribution lines, buildings can be outfitted with a combination of shutoffs and water sensors to shut off water in the event of a burst or leak at a pressure reducing valve or loss within the domestic and amenity distribution risers. Depending on the required business rules, onsite shutoffs can be activated either automatically or remotely to each zone independently. The riser distribution system brings the water to the units and amenities. For closed loop protection, IoT systems can control all closed loop heating and cooling lines for an entire building, which monitors the makeup water consumption in order to find continuous or extreme flow events that would indicate a loss. On the unit level or in the common and mechanical areas sensory data can inform of losses or potential losses in high risk locations, where valuable building assets are located. Ultimately, many IoT systems can be configured to meet a building’s unique use cases and onsite requirements.

Commercial and retail sector applications are similar, with a great deal of focus on the reduction of business interruption. Due to the diverse nature of the businesses operating in these facilities, onsite needs may vary significantly, and the success of such deployments are heavily tied to both software and business rules implementations.

Data insights are an essential component to accurately measure and understand what has happened in the past. Models are then built to show what is likely happen in the future, based on the relationship between variables we know to exist from examining the collected data from the past. Using predictive modeling, the insurer can determine the possibility of an incident based on behavioral data against other users in their database.

IoT technologies can offer this data. On an individual level with homeowners and unit owners through a smartphone app, as well as on an aggregate level to property managers and other stakeholders through a dashboard, giving them the water data needed to better determine risks, understand water usage, and make quick decisions. On a carrier level, IoT devices provide the controls and data to impact their bottom line with improved loss ratios and better overall client protection.

Written by:

Shkya Ghanbarian, Director of InsurTech at Eddy Solutions, who spoke on IoT Solutions to Reduce Claims at the 2019 RIMS Conference in Boston on April 30, 2019. Click here for more details about Eddy Solutions.