Which scenario sounds more likely to happen to a property: attempted
theft or a water leak?
There is no doubt that a burglary can be devastating. However, insurance
data shows that theft accounts for just
one percent
of insurance claims.
One of the most significant and costly risks facing real property is
damage caused by water. According to the Insurance Information
Institute, a staggering 29 percent of insurance claims in 2019 were for
damage caused by water leaks and freezing and the cost of these claims
is rising. The average homeowner loss has
doubled to $11,098 since 2007. And to top it off, household water damage costs up to $20 billion
annually across the U.S.
Damages for small businesses tend to be more expensive. According to ,
The Hartford,
15% of all claims from SMBs are from water damage and can cost
commercial P&C carriers
$17,000+ per claim.
At Notion, when we hear about a water leak from homeowners, it’s often
followed with: “I never thought this would happen to me.” In fact, we’ve
found that
84% of users have never monitored for water leaks before using
Notion’s multifunctional sensors.
And although water damage can run the gamut from minor to catastrophic,
leaks can still cause major headaches, time lost on phone calls, and
incurred loss to carriers.
The good news is that, for carriers, water leaks don’t have to feel like
death by a thousand paper cuts. Technology exists to help notify
policyholders when leaks occur and educate them on this peril, reducing
the likelihood of high loss ratios due to water damage.
What you’re about to see next is chilling – read on to see how four
policyholders react and deal with water leaks in different scenarios.
Will they stop the leaks in time? And could smart home technology have
helped this issue?
When Melissa bought her dream home in Chicago, she did everything right.
She used a qualified home inspector to check out all the systems and she
put together a home maintenance schedule that included seasonal HVAC
checkups. However, one evening during the summer, Melissa got home from
work to find water everywhere.
"There were several inches of water on the floor and my dog Cooper
was soaking wet and very distressed," said Melissa. "He'd been
running madly around the house, almost destroying the sofa and my
bed. My floor rugs were sopping and the bottom of the drywall looked
like it was starting to bulge. I just cried!"
With a bit of investigation, Melissa discovered the HVAC system was
leaking. She immediately turned off the cooling equipment – it had been
running to keep Cooper cool while she was at work - and called her HVAC
company.
The technician explained that mold blocking the unit's condensation
drain trap caused it to overflow. He estimated it was probably draining
around three gallons of water an hour. He turned off the electricity and
repaired the problem.
Melissa moved into an apartment while a restoration crew cleaned and
dried the home and contractors replaced flooring, baseboards and some
damaged drywall. It took four months before she could get back into her
home.
*These scary stories are all fictional, but they’re based on real-life events.
HVAC repair and labor cost
$1,549
Mold remediation
$2,347
Apartment rent (4 months)
$8,800
New sofa & new carpet
$1,390
If policyholders understand where their riskiest areas are and get notified
when they have a water leak, they can immediately act to minimize the damage
by shutting off the water main, calling a plumber, or simply cleaning up.
Many carriers that offer policies with complimentary sensor devices empower
the owners of homes and businesses to monitor high-risk areas even when they
are away. From the policyholder’s perspective, their insurance provider
isn’t just the place to turn in a crisis, but a partner in home monitoring
that will help them reduce potential damage to their valuables. At Notion,
we’ve found that if policyholders keep sensors active, it can help reduce
carrier loss related to water claims by 20%.
Joel lives in Seattle and works as a banking industry consultant. When
he returned from a multi-day business trip, Joel noticed water streaming
from a basement window.
Concerned by the amount of water and the risk of getting an electric
shock, Joel decided not to go into the house. Instead, he called the
local fire department and his insurance company for assistance. The fire
department turned off the utilities, and a water damage mitigation
company was on-site within hours. They used submersible pumps to extract
the water so they could enter the house and identify the source of the
problem.
"My hot water tank had failed while I was away," said Joel. "It was
like a swimming pool down there."
Despite the basement being built from cinder blocks, moisture had seeped
into the rest of the home. The damp atmosphere damaged the floor joints,
subfloor, and drywall of the rooms above the basement and mold was
growing all over the house. A building engineer inspected the property
and declared it structurally unsound. He calculated that it would be
less expensive to rebuild than to try to repair the home.
Joel was able to retrieve many of his belongings, but soft furnishings
such as mattresses and the sofa couldn't be salvaged. He lived in a
furnished apartment for two years while his home was rebuilt. From
insurance paperwork to creating a detailed inventory of his home's
contents to selecting all the fixtures for the new building, it took
countless hours of work and effort to put his life back together.
*These scary stories are all fictional, but they’re based on real-life events.
Cutting and rebuilding house
$350,000
Basement Cleanup
$10,000
Storage unit fees
$2,400
Apartment Rent
$96,000
New water heater & installation
$999
Many connected home apps, such as Notion’s, offer ways to connect with local certified plumbers to help resolve the issue quickly. With smart home technology, Joel could have been notified of a water leak in his basement. Then, even though he was away from home, he could’ve called a neighbor to check in on his home, he could’ve reached out to a plumber for immediate repair.
When Eleanor and Jonathan decided to remodel their home to accommodate
their growing family of triplets, a second-floor laundry was top of
their list of wants. They installed a large capacity appliance in a
re-purposed bedroom.
“My new laundry was perfect until the day it wasn’t,” said
Eleanor.
“I'd just left the babies with my Mom for the afternoon. I remember
opening my door to see a waterfall in the living room. It took me a few
seconds to make sense of what was happening before I went to see what
was causing all the water.”
Eleanor discovered the water was coming from the supply hose connected
to the wall behind her new washer. She immediately turned off the water
and tried to soak up the excess with towels, but it had already soaked
everything through.
She called Johnathan so that he could alert the insurance company and
come home to help with the clean-up. The two felt like they were lucky
to discover the leak quickly. The insurance company called in a
restoration company to dry out the house and clean the carpet. The
family's remodeling contractor repaired the damaged ceiling.
*These scary stories are all fictional, but they’re based on real-life events.
Water Clean-up Service
$2,000
Laundry Drywall Repair
$3,000
Ceiling Repair
$2,500
New Carpeting
$1,500
New Washer
$1,500
Making an insurance claim can be highly stressful for policyholders. In this
case, with sensor technology, the Davies could’ve been notified about the
leak, empowering them to call for help instead of dealing with a big
headache.
Many carriers understand this and are starting to offer technology to help
prevent a similar disaster from occurring in the future at the time of
renewal or at the end of a major claim. This helps to create an opportunity
to turn an unhappy customer into a brand advocate.
Laura and her partner Janel could not believe their luck when they found
lower-level office space near Austin's warehouse district for their new
digital agency.
Unfortunately, inside the walls of this early 20th-century structure,
the plumbing system was in poor condition. In March, the pipes failed,
and water cascaded from the first-floor men's bathroom. And since no one
had been in the office in weeks due to the company’s work-from-home
policy, the air felt sticky and humid inside.
"It was a disaster," said Laura. "The tenant on the upper floor
discovered the burst pipe, and they turned off the water and power.
But water flows downhill, so our office was a mess."
Dirty water trickled from the ceiling, pooled on the floor, and dripped
from the computers. The office chairs and all the paperwork on the desks
were sodden. Laura called her insurance provider and then met with her
staff at a local coffee shop to discuss their next steps. Even though
those with laptops and smartphones could work from home, the company
would have to deal with the significant remodeling of their space.
If the company had some way to detect the leak earlier, they might have
been able to save their equipment. It took several weeks to complete the
repairs, dry the office and negotiate new computer-equipment leases. In
the end, the insurance claim for the landlord totaled $180,000.
*These scary stories are all fictional, but they’re based on real-life events.
A water leak event that’s handled quickly may require little more
than wiping down surfaces.
Especially when properties are left empty for longer periods of
time, water can be left unchecked, allowing water to sit.
In recent years, increased storm severity and weather changes have
led to unexpected burst pipes and water damage for property owners.
In 2021 alone, this factor cost insurance companies $105B.
As buildings get older, they’re more likely to get into a state of disrepair, causing issues with broken pipes and unexpected water damage.
Leaks can happen at any time, and those that occur when people are away
from a building and go unchecked for hours or even days can cause
extreme damage and lead to significant claims payouts. With Notion,
water leak notifications are sent to the policyholder’s smartphone,
allowing them to take the appropriate action without delay. In every one
of the horror stories in this ebook, the amount of damage caused by the
leak would have been less severe if the policyholder had known and acted
on it sooner.
The Notion app, which users can access anytime from anywhere using their
smartphones, puts people in touch with the properties where they live
and work. This gives people peace of mind that things are okay, but it
also helps keep maintenance top of mind. Policyholders who monitor for
problems can become stewards of their homes and workplaces and help
reduce risk for their insurance carriers and help improve loss ratios.
As mentioned above, Notion helps to reduce loss by 20% when systems are
kept online.
As an IoT (Internet of Things) device, Notion gathers a wide range of
behavioral information and insights carriers can use to transform
current risk assessment metrics, rate modeling, and the development of
insurance products. This is especially vital for legacy brands facing
increasing competition from market disruptors. For example, when a
carrier knows a policyholder has activated a Notion Sensor for a water
leak task, they know that person has taken action to lower their risk of
a severe water leak claim. In all of the stories in this book, early
detection of the water leak would have helped to cause less disruption,
limited damage, and lower payouts.
According to research conducted by Notion, policies that include our DIY
sensors on average see claims fall by 50% in the first two years. When
applied to 50,000 policies, for example, smart home technology can save
carriers more than $5.3 million.
Brands that develop smart insurance offerings look innovative and prove that they listen to the needs and wants of customers who place a high value on smart home devices and appreciate how they help them manage their homes and lives. These products allow carriers to keep in contact with policyholders and provide valuable tips and educational information that can help people proactively maintain their property and prevent loss. Building a close relationship with policyholders also improves customer lifetime value.
Prevention is better than cure when it comes to water damage and the cost of satisfying claims. Providing easy-to-install, modern IoT sensor devices like Notion gives carriers an operationally simple and relatively low-cost way to reduce the frequency and severity of claims due to water leaks and freezing pipes. Those savings can be passed on to the policyholders through discounts and lower premiums that may lead to an increase in market share.