As temperatures in the northern hemisphere drop, we turn our focus to one of the most prominent risks for commercial insurers and how different technologies can be used to augment traditional risk management capabilities to reduce claims.
As the holiday season approaches, many people look forward to a much-needed break, quality time with loved ones, and maybe even a sprinkling of snow to help get into the festive spirit. However, this period can bring additional risk to commercial properties, exposing insurers to an increased volume of claims and potentially large losses.
Key drivers of additional risk
The holiday season is particularly risky for commercial properties due to escape of water claims, which are typically brought on by bursts and frozen pipes. But why is this such a prominent risk during the festive period, and why is this especially significant this year? There are three key reasons:
1. Lower temperatures
Although the average temperatures usually hit their lowest in late January, late December is already one of the colder periods, with many locations in the northern hemisphere frequently experiencing freezing conditions. In addition, climate change has been linked to the increase in the number of severe cold weather events that can occur during this time.
2. Lack of occupation of properties
As most people take some time off over Christmas, some properties close or have relatively low occupation during this time. This means:
- Water usage is lower (and hence less water flowing through the pipes), which increases the chances of freezing.
- Any leakages are less likely to be detected or will take longer to be detected and stopped, which means the total damage and losses caused are greater.
3. Rising energy costs
As the cost of energy skyrockets this winter, many businesses may be tempted to reduce their heating and leave their properties at lower temperatures, increasing the chances of frozen pipes and escape of water claims.
Ways for insurers to support customers
So, how can insurers help to mitigate these losses? Synpulse has identified three ways insurers can support their customers:
Education
The key is to ensure the risk managers, owners, or operators of commercial properties are aware of the elevated risks during this time. They should also have specific mitigation measures, such as routine checks or patrols of properties and running water to ensure throughflow, and contingency plans in place to reduce the severity in case of an escape of water event. Risk engineering plays a vital role for larger risks, but automated messages and emails in the run-up to the festive season can also be utilised for smaller risks.
Predictive warnings
By using geocoding of risk locations, weather forecast data, claims history data, and property attributes, insurers can predict high-risk properties in the run-up to a cold weather event. Warnings can be triggered through customer applications, dashboards, email, and SMS, which will alert staff to the increased risk and enable them to take preventative action.
IoT sensors and alerts
Through providing IoT technology to customers, insurers and insureds can be remotely alerted in the event of escape of water, as opposed to the leak sometimes going undetected for days. This enables the staff or owners to adopt loss-reducing measures as soon as possible. In some cases, IoT can also be linked to smart valves, which immediately stop the flow of water for near-instant response and mitigation.
All three of these tactics have the added benefit of increasing the engagement between insurers and clients, leading to not only better financial outcomes for insurers and insureds, but also increasing collaboration on risk management and customer retention.
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