How to help clients mitigate water damage risk Canadian Underwriter
Because water damage claims from infrastructure failures cost the industry much more per year than natural disasters, brokers need to be more proactive in helping clients understand coverage and mitigation strategies.
Water damage to infrastructure and plumbing is one of the biggest challenges for property managers, but real estate agents often struggle to convince clients to buy coverage or invest in mitigation, said Chris Della Mora, senior risk advisor at HUB International’s Toronto office. Canadian insurer.
“The risk of water damage is not often seen as a major risk by many customers. When one thinks of insurance coverage, images of coastal flooding, storm damage, wildfires and other major events usually come to mind,” Della Mora said.
But water damage to infrastructure is more a matter 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 while the damage with a water damage claim is likely to be less than with other claims, the probability is significantly 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 piping system in the building can reduce or increase the risk of water damage.”
The primary loss exposure for tenants of both residential and commercial rental properties is content damage/improvements, Della Mora said.
“While some tenant owners require that they have a full policy that covers property and liability, the loss is essentially transferred from the owner’s insurance insurer to that of the tenant.”
Multi-storey housing units have specific risks, as water damage from higher floors can affect lower floors.
“This is one of the reasons why many large rental complexes actually require tenants to carry full rental coverage,” he said. “This protects those tenants affected by a water loss on lower floors by not requiring them to make a claim through their policies. Instead, the claim continues for all affected units the policy of the tenant where the leak originated.
What should you tell your customers?
Della Mora offered five ways for building owners to reduce their risk of water damage and protect their property:
- Make a cost-benefit analysis. Determine if remediation is the right course of action: whether it be a complete replacement of all components, replacement of fixing systems, replacement of fittings between plumbing types, or all of the above. Understand the strengths and weaknesses of all the different plumbing systems.
- Create a water damage mitigation plan. The larger the damaged area, the more expensive the repair. Every extra square meter of damage results in more time, material and manpower to repair it.
- Perform regular maintenance. Routine inspections of sanitation infrastructure are important and should be part of insurance renewal applications, especially where there have been previous claims.
- Have regular inspections. Damaged boilers and other machines can cause major water damage.
- Increase the deductible. This can work with well-maintained buildings with a lower overall risk threshold.
Feature image via iStock.com/thefurnaceroom