From torn washing machine hoses to burst pipes, it's no wonder that water damage is among the leading causes of homeowners' claims across the industry.
Anyone who has ever dealt with a water issue at home or been involved with a water loss claim can speak to the devastation. The loss is typically greater than the property that is destroyed.
In a recent phone call with Stephen Poux, senior vice president and head of risk management services and loss prevention for American International Group Inc.'s Private Client Group, he recalled a wedding celebration having to be relocated after a pipe in a third-story bathroom leaked throughout the first and second floors of a home. The damage destroyed the home and also left the bride and groom scrambling for an alternative venue. Poux recounted another situation in which a vacation home was destroyed when a frozen pipe ruptured, dumping thousands of gallons of water throughout the home and turning the basement into a swimming pool.
For high-net-worth personal lines insureds, water damage can be a particularly costly disruption for the agent as well. Rebuilding to match prior quality, particularly in the case of custom homes, is a time-consuming undertaking. The frustrations alone can threaten once-solid client relationships. Depending on the circumstances surrounding the claim, clients may see increased premiums. Re-marketing the risk or even losing the client are both valid concerns.
However, there is a solution. Where central station burglar and fire alarms have saved homes from the destruction of fire and spared personal valuables from theft, automatic water shut-off systems are changing the game when it comes to water losses.
There are generally two types of systems, flow-based and sensor-based alarms, and both will shut off the water to the house if they sense a leak, preventing major damages. A flow-based system detects the volume or length of time water is flowing through the pipes, while a sensor-based system has sensors placed in high-risk areas to signal the valves to close if they get wet or the temperature changes. Each system has its benefits, and they can even be combined for maximum protection.
|Tools to mitigate water damage
As big data and innovations in the insurance technology community have grown — and homes become bigger and smarter than ever before — insurance carriers are devoting the necessary resources to loss prevention, designating subject experts, and investing in R&D to find solutions and combat claims. This has led to huge innovations in water shut-off technology, and this technology is transforming the insurance industry.
Yet despite all of these efforts, water damage occurrences are as pervasive as ever. As agents, we need to do a better job in getting the word out. Truly educating the consumer does not work without an adviser, and carriers in the high-net-worth space are publishing more and more content to facilitate conversations. We have the tools to transform the marketplace further by cutting off water damage before it has a chance to wreak havoc.
Another hurdle to seeing real results from shut-off device technology has been the systems themselves, which can range from $5.99 to nearly $2,000. Installing any sort of shut-off system will not necessarily result in a reduction in claims. It has to be the right system. In some instances, carriers have contracted with companies to help with the installation process.
AIG Private Client Group, for example, has a relationship with Water Security Solutions. They will conduct an assessment of the home and the plumbing system by phone or e-mail to determine what is needed, supply the equipment and refer a contractor. Taking steps to mitigate water damage also often leads to premium credits.
Having a conversation with your high-net-worth clients about the preventable nature of water damage serves two purposes. First, it can lessen the chance of experiencing a claim and all the inconveniences that come with it. Second, it positions you as a true adviser, bringing added value to your clients and strengthening those long-term relationships.
Nicholas W. Ruickoldt is an insurance agent at the Russell Agency in Southport, Conn.
Related: My homeowners' policies covers that?
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