Water damage caused by leaks is a major driver of insurance claims in multi-occupancy buildings and losses are on the rise. Leak detection technology can mitigate potential losses and help reduce a building’s risk exposure.
Escape of water (EOW) in multiple occupancy buildings can have major consequences for residents, building owners, construction firms and their insurers. It has the potential to cause serious harm, displace people from their homes, cause thousands of pounds worth of damage and impact a business’ reputation. Furthermore, EOW claims create pressure on underwriting margins and insurers will want to make sure that the increased costs are reflected in premiums at policy renewal. Lockton’s EOW claims data shows that the average claims incurred increased 39% between 2017 and 2021 to £7,364. EOW claims cost increases have accelerated quickly, rising by a further 24% in the first nine months of 2022 alone, to an average of £9,103.
The potential causes of EOW, particularly in multiple occupancy buildings, vary greatly. Something as simple as a minor leak from a shower unit can be claimed, or potentially more serious losses caused by frozen pipes or faulty workmanship can also be to blame.
Owners of multiple occupancy buildings can mitigate the risk and potential cost of such losses through leak detection technology such as auto shut-off devices. Furthermore, abnormal usage monitoring can head off potentially catastrophic events at the pass.
Driven by losses incurred in the market, insurers are increasingly expecting multiple occupancy buildings to have auto shutoff devices installed. It is advisable for real estate developers to implement such technology at the design stage, as it is far easier to install devices during construction rather than retrofitting them into completed projects. The devices can also mitigate risks during the engineering phase of a project, where EOW could seriously impact timescales and safety on site.
Insurer guidance (opens a new window) recommends that automatic shutoff devices be installed onto:
the mains incoming
immediately prior to or after any booster pump set on the temporary and permanent cold-water systems
downstream of any storage tanks that offer gravity supply
These systems should have the following capability:
set to shut off water supplied automatically outside of working hours, including weekends and bank holidays,
alert appointed persons when abnormal flows are detected through remote and audible signalling, and shut off the valve in the event of abnormal flow, and
installation with battery backup, or in the event of power failure the device should automatically lock off the water supply.
Automatic shutoff valves installed to the permanent systems should, in addition to the above, include:
link to a manual isolation device on site, and
remain fully operable until handover.
For construction outfits, following these guidelines is considered a good moral hazard, which should see wider acceptance of terms by insurers. A reference guide from the UK’s RISC Authority (opens a new window) and Fire Protection Association offers further guidance in regards to EOW management during the design and construction phases.
Types of leak detection solutions:
The following systems fit the above guidelines, and can be used just for the duration of a construction project, or can be installed for ongoing use when occupants move in:
Adoption of these technologies by landlords, construction companies and developers are likely to reduce claims cost and benefit insurance buyers at renewal.
To find out more about how we can help you protect your multiple occupancy properties and projects, please do not hesitate to contact us.
Further information on our products and services, please visit our Lockton Global Real Estate and Construction page (opens a new window).