By Rik Temmink, Chief Product Officer, geo
Leaks and escape of water incidents in homes are so prevalent in the UK that last year, the head of the General Insurance Policy at the Association of British Insurers called for the problem to be addressed as a number one priority for the domestic property insurance market. Given that claims for escape of water rose by 24% between 2014 and 2016 and that the average value of claims is also rising, this is hardly a surprise.
The extreme weather that we have experienced in recent years, particularly during the ‘Beast from the East’ and Storm Emma last year serves to intensify what is already a major headache for insurers. Following these weather incidents, £194 million was paid to restore the damage caused by burst pipes – the highest amount ever paid by insurers in one quarter.
Whilst research and analysis into the reasons for the increase in escape of water claims and claim values has helped insurers gain a better understanding of the risk factors, it is still an uphill struggle to encourage householders to adopt preventative measures.
Expensive homes, high claims
Claim values are rising because Britain’s homeowners are investing more in expensive fixtures and fittings. The cost of damage and repair to fully-tiled wet rooms, underfloor heating and high-spec shower and bath ‘furniture’ is far greater now than even ten or twenty years ago. In addition, modern plastic pipes and push-fit fittings are arguably less effective than more traditional copper pipes. When it comes to the rising number of claims, this is likely to be due to the growth in multiple property ownership, with many residences being used as second homes which are often left empty for long periods of time. The risk of frozen or burst pipes, particularly in the cold winter months, is greater, as is the amount of damage that can be caused before the problem is resolved.
Increasingly, however, the insurance industry is introducing a new initiative that will help to prevent escape of water and alert homeowners if an incident does occur. Even better, they will reduce the cost of premiums to incentivise home insurance policy holders if they get involved.
Insurers are partnering with select providers of smart solutions that have been designed to detect leaks and shut off water systems. Our own solution, Waterlock, uses a remote controlled stopcock attached to the mains water supply. Sensors placed around the home will detect standing water or an increase in humidity, automatically activate the valve controller to close the stopcock and send an alert to the homeowner via email or a mobile phone app.
According to a Water Security Survey conducted by The Consumer View in 2017, “only 18% of UK consumers close the mains pipe and the inflow to the washing machine before they go away”. The main reason for this is that stopcocks are out of sight and therefore out of mind, Stopcocks also tend to be in places that are hard to access, and as many as 60% of stopcocks are either require fully seized or extremely hard to turn. Not only can solutions like Waterlock automatically turn off the stopcock, they also allow it to be done quickly, simply and even remotely by the homeowner.
The use of a smart water controller will help to reduce potential damage to a property if there is an escape of water and by preventing a leak, the homeowner is likely to suffer less disruption too. The added benefit is that they will enjoy lower home insurance premiums once they have installed the device. For insurers, the benefit is in a reduction in the number of claims and a lowering of the value of claims because water loss is minimised.
Protecting vulnerable unoccupied properties
Second home owners are an obvious early market for this type of preventative solution. Apart from being left unattended for months at a time putting them at greater risk, these properties attract higher premiums than regular home insurance policies – £800 to £1000 per year instead of approximately £300 and this is a straightforward route to reducing that cost. Households that have previously made escape of water claims are another target. According to a 2017 study from The Consumer View, 54% of households have suffered at least one water damage incident, and insurers understandably regard these as a higher risk.
When insurers and brokers are talking to customers about the benefits of taking preventative measures by using smart solutions, it is not just the cost of repairs that have to be taken into consideration. In a recent case, over a hundred students were forced to move into temporary accommodation when a large leak in a top floor apartment went undetected for days, resulting in a major flood of the building. The financial implications for repairing the damage and housing the students were one issue, but this incident occurred during a busy exam period, so disruption to the students’ lives was also a factor.
Unless measures are taken now to arrest leaks and prevent escape of water incidents, the number and value of claims will continue to rise. The availability of policies that reward homeowners for installing smart water detection solutions will help to address this difficult issue. It is estimated that using these systems could reduce insurance premiums for householders by as much as 15% and for insurers will result in savings amounting to hundreds of millions of pounds every year.
