Did You Know...? Part 3: Technology Works!
Did you know...
... that our proven IoT technologies work 24/7 to address and mitigate costly water issues in construction, with amazing results!
In our previous articles, we explained that non-flood water damage claims in Builder’s Risk insurance programs cost the insurance industry a whopping $15 billion each year. Altogether, they represent over one-half of all insurance payouts, which do not include repair costs absorbed by the insured in deductibles or uninsured delays, soft costs, and project disruption.
We also described that many of these losses are either preventable or can be significantly mitigated. However, while it’s clear the hardware and software tools that make up an effective water damage risk control and detection solution are readily available, having a successful outcome ultimately depends on making sure these valuable tools are being fully and correctly utilized.
With IoT technology, the goal is to eliminate larger water damage losses, the majority of which occur when water is allowed to run free for hours, days, or even weeks due to non-detection. Let’s examine the data proving technology’s impact when the presence of water or rapidly falling interior temperatures are known in time to remediate the cause and minimize property damage.
Focus On Large Water Damage Losses
In a first-of-its-kind analysis, Insight Risk specialists established that the vast majority of water damage loss payments arise from a relatively small number of large claims. Our analysis involved over 1,000 water damage claims during a five-year period which resulted in claims payments exceeding $270 million. Using Pareto analysis, we established that the largest 200 claims comprised $225 million, or 83% of the total paid out.
The reason is clear: large losses are nearly always the result of late discovery of the underlying problem, such as a leaky pipe or water intrusion. When the situation is detected early, the problem gets fixed; if not, the results can be catastrophic for contractors and building owners.
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In addition to the direct costs of repairing any water-related damage, remediating the jobsite, and replacing construction materials, furnishings, and equipment, there are also the potentially significant costs of a project delay. In the current environment, with tight crew scheduling and the persistent labor shortage in the construction sector, there’s the ever-present risk that any delay might wind up being much longer and costlier than initially anticipated.
It's one of the reasons why making an investment in the right technology to monitor and mitigate the potential for water damage is both prudent and cost-effective.
Quantifying The Benefits Of Early Detection Through Technology
A study conducted by a leading Builder’s Risk insurer shows the significant reduction in losses incurred when risk control technology is deployed. The carrier examined 66 construction projects – 27 of which utilized IoT water sensing devices while 39 did not. From project start through completion, the insurer tallied 27 separate water damage claims across the 66 projects, with total incurred losses of $1.9 million. Of that amount, only $73,000 of these losses were incurred on projects protected by water damage sensors, amounting to only 4% of the total! 
Similar results were realized in a multi-year pilot conducted by a major domestic Builder’s Risk insurer. In the period leading up to the pilot, the insurer paid 19 water damage claims of $1 million or more. That number fell to just one claim during the trial period, another indication that when properly designed and implemented, water damage prevention technology works!
In addition to formal studies and analyses, a 24/7 monitoring capability provides regular reminders that deployed sensors are working every day to provide early notice of water-related issues. Most incidents can be remediated by on-site project teams with little difficulty.
While it’s clear that using technology can help prevent large water damage losses, the technology alone is not a panacea. As mentioned in our previous articles, there are several options for monitoring water leakage and flows. Getting the desired results calls for careful decision-making around the available options, including design, pricing, deployment, and system health and reliability support.
In our next article, we’ll share what you need to know to make the right choices for your project.
"Did You Know ...?" is a series of articles created to help risk and construction executives identify, prevent and mitigate water damage and other perils affecting construction jobsites. Future articles will address: Keys to Success and Our RiskTech Future.
