Water damage caused by leaks is a major driver of insurance claims in multi-occupancy buildings and losses are on the rise. Student accommodation is no exception. Such losses are often exacerbated by buildings which have multiple floors allowing water the opportunity to cascade throughout the building, and which may spend certain periods of the year under occupied, leading to a potential time-lag in loss discovery without adequate protections – both features of student accommodation.
Leak detection technology can mitigate potential losses and help reduce a building’s risk exposure.
Consequences and Causes of Escape of Water (EOW)
EOW in student accommodation can have major consequences for students, building owners, construction firms and their insurers. It has the potential to cause serious harm, displace students from their lodgings, disrupt their studies, cause thousands of pounds worth of damage and impact a business’ reputation.
EOW claims in general create pressure on underwriting margins and insurers will want to ensure that the increased costs are reflected in premiums at policy renewal. Lockton’s EOW claims data demonstrates that the average EOW claims cost increased by 39% between 2017 and 2021 to £7,364. This year EOW claims cost increases have accelerated quickly, rising by a further 56% in the 11 months to November, up to an average of £11,468.
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 provide building management with early warning of potentially catastrophic events.
Auto Shut-Off Devices
Driven by losses incurred in the market, insurers are increasingly expecting multiple occupancy buildings to have auto shut-off 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 shut-off devices be installed:
Onto 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 capabilities:
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.
Installation with battery backup, or in the event of power failure, the device should automatically lock off the water supply.
Automatic shut-off valves installed as a component within permanent systems should, in addition to the above, include a link to a manual isolation device on site, and remain fully operable until handover.
(Source: Aviva)
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.
Leak Detection Systems
Types of leak detection solutions:
The following leak detection systems fit the above guidelines, and can be used purely 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, as well as greatly enhance ESG strategies and support LEED accreditation. Indeed, in recent months we have become aware of upcoming insurer offerings that include retrofitted water flow monitoring and valve shut-off technology as an integral component of the insurance product.
To find out more about how we can help you protect your student accommodation properties and projects, please do not hesitate to contact us.
For further information on our products and services, please visit our Lockton Global Real Estate and Construction page.
To download our latest Lockton Global Real Estate and Construction Student Accommodation Brochure, please visit here (opens a new window) (Inside EU).
To download our latest Lockton Global Real Estate and Construction Student Accommodation Brochure, please visit here (opens a new window) (Outside EU).
