Lower Business Interruption Claims with IoT Water Sensors
In their annual risk barometer report, Allianz Global lists the top 10 threats to the insurance market. The top three threats are interesting, as two are heavily correlated.
Business Interruption (BI), which has been the number one threat for a few years running, is poised to continue to lead as the top threat to the insurance industry. Our global markets are a major contributor to BI, along with supply chain disruption and our modern day just-in-time production model.
However, the correlation between natural catastrophes and BI is tough to ignore. Water losses make up roughly 50% of all insurance claims and claim payouts, with BI a large part of the total losses.
As most commercial insurance policies are offering Actual Loss Sustained coverage, the insurer agrees to indemnify the insured until the level of profit matches pre-loss levels. In addition to Profits coverage, the following are also covered in the event of a loss:
- fixed costs
- temporary location
- commission and training costs
- ordinary payroll
- extra expense
- contingent coverage
- consequential loss
- civil authority ingress/egress
Water damage thus affects all aspects of business but its devastating effects are especially pronounced when it comes to multi-residential buildings. Water escape on upper floors puts the lower floors at risk of water damage, turning a 1 unit claim into a 10 unit claim.
Key to minimizing the severity of water damage for businesses and multi-residential buildings is response time; the sooner the water event is detected, the greater the chance of mitigating or avoiding the claim.
Leaks and floods in multi-unit buildings can be detected early with Internet of Things (IoT) and Analytics of Things (AoT) devices, internet enabled water flow sensors and leak detectors that provide real-time analytics. Monitoring water flow through the water meter, with granularity on leaks and sudden water discharge, is the first step to understanding a building’s water health.
The next step to ensuring complete property protection and quick response times to water events is remote detection of water escape throughout the building. Remote IoT and AoT devices can be placed in areas where water escape is most likely to occur:
- next to water heaters
- in elevator pits
- throughout the building common areas
Considering the advancements in IoT and AoT technology and the large payouts for Business Interruption claims, cost is not a significant barrier to subsidizing the installation of water sensors at policyholders’ businesses and multi-residential properties. Who knows: with the widespread deployment of IoT and AoT water sensors, water damage claims could be knocked out of the Top 5 in the 2020 edition of the Allianz Risk Barometer.