New technologies are transforming our ability to gather and process data. This is reshaping approaches to risk management, enabling buildings owners to become more efficient and strategic in how they mitigate risks. By adopting a data-led approach to pro-active risk management, owners can also realise insurance cost savings.
Understanding building risks
Regardless of its size, managing risk across a building can be a significant challenge. Buildings are a complex structure containing multiple systems, including water, heating, electrics, and other equipment and machinery.
Inevitably, this brings a series of common risks, including:
Escape of water
Fire
Legionella
System and machinery failures
Public Liability
Escape of water claims are among the most common and expensive, and they have risen in number and cost in recent years due to modern methods of construction. The stacking design of commercial properties, in which toilets (for example) are in the same location from floor to floor, makes them particularly prone. However, escape of water is also a risk to other building types, particularly as large-scale residential properties become more frequent.
High-footfall buildings, such as retail and leisure venues, also face a risk from public liability claims, including slips, trips, and falls. These claims can significantly impact insurers from a claims handling and cost perspective, and they must be mitigated through proactive maintenance.
All the above risks can be exacerbated by oversight and supervision failures. For instance, failure to conduct proper oversight of a building can increase the risk of a major loss, such as a fire, or breakdown of equipment. This brings further risks to visitor health and safety.
Traditional approaches to building risk
Data gathering has traditionally been conducted on a pen-and-paper basis. For example, equipment checks are taken using handwritten reports, which are then returned to a central office to be compiled and processed. Other checks are also conducted manually, such as temperature or water pressure checks. Not only does this incur a stationary cost on a significant scale, but it places a severe time burden on staff, who are diverted from more impactful tasks. It also limits the ability of teams to respond to incidents in real time. The risk of human error is high.
When assessing a building’s exposure to loss, underwriters have typically relied upon historical claims data – along with static knowledge regarding building type, occupancy, construction and location data such as flood and subsidence risk – to create a profile of a property’s risk. However, these factors alone cannot give a full picture. Buildings are living and breathing structures, in which new risks can emerge at any given time. And how those risks are tackled can also change, in the shape of new roles or responsibilities, new management teams, or a fresh approach to risk mitigation.
How data can augment risk management
A data-enabled risk management process can reduce this gap in understanding. Internet-enabled tools can gather data periodically or continuously at minimal effort, which can then be visualised on ‘live’ online platforms. Meanwhile, online incident reporting systems can seamlessly relay data across a site.
This brings several benefits for risk management and response:
Proactive maintenance helps get in front of potential losses, before they occur.
Data may flag an incident earlier, so that teams and loss adjusters can respond sooner, mitigating the impact of the damage.
Incident reporting systems can improve notification of loss for certain perils, reducing the impact on the building and tenants.
Operational expenditure can be better planned for, and issues spotted early, helping to mitigate loss under the excess and a safer/happier building for tenants.
Digitisation supports proactive management of key equipment, improving optimisation and cost control.
Data also provides the foundation of predictive and proactive risk mitigation. As data is gathered over time, it is possible to build up a comprehensive picture of a building, its health, the frequency of incidents, and common risk factors. This insight can shape a building’s risk mitigation strategy, helping to tackle risks before they evolve into a loss.
Other benefits of data enablement:
Onsite teams are enabled and empowered to become more proactive in maintenance, mitigating losses
Lifespan of equipment can be enhanced and maximised
Return-on-investment (ROI) insight to support carbon reduction initiatives
Meet regulatory obligations (e.g. forthcoming Martyn’s Law legislation)
Streamline teams, driving labour cost savings
Stronger relationships with tenants
The benefits of data-driven insurance
By embracing a data-enabled risk management strategy, buildings can give insurers a more granular understanding of their risk. Crucially, data-enabled tools allow owners to more powerfully demonstrate the impact of their risk mitigation efforts, be it through fewer incidents, or faster response times.
This can transform conversations with insurers, who will welcome the additional transparency. The more insurers can ‘see’ a property’s risk, the more comfortable they will be covering that risk. Pricing will more closely reflect the building’s tolerance to risk, and appetite for risk transfer. In practice, this is likely to mean a lower insurance premium.
If the unfortunate does happen, data-enablement can still be beneficial. For instance, buildings with fully data-enabled systems will be able to undertake detailed audits of any incident. This creates greater certainty and defensibility of claims.
For more information, reach out to a member of our team.
Some of the contents of this article were originally delivered on 28 February 2025 during a presentation at the Net Operating Income Acceleration Summit, hosted by RiskTech in London’s Coal Drops Yard.
