Property Risk Management: How Tech Can Help

With climate change risks increasing, construction costs surging, and property insurance rates rising, it’s in everyone’s best interest to manage property risks. The good news is advancements in technology are providing new tools that property and business owners can leverage to prevent property damage.

Losses Are Increasing

According to the European Environment Agency, weather- and climate-related extremes have become more severe and more frequent across Europe and the rest of the world. Between 2009 and 2022, economic losses increased by 2.5% a year, resulting in a cumulative increase of 41%.

Inflation has also driven property losses higher. In the UK, the Consumer Price Index increased by 4.7% in October 2023 and by 6.3% in September 2023. These inflation hikes are down compared to a year ago – comparatively, in October 2022, the Consumer Price Index increased by 9.6%. Despite the moderation, prices remain high. As a result, insurance claims are more costly.

The overall impact on claims costs has affected the property insurance market. According to EY, the UK home insurance market reported the worst performance on record in 2022, with major weather events, increased claims frequency, supply chain issues, and high inflation cited as key reasons. Policyholders can expect their premiums to rise by 36% over the next two years for these same reasons. Meanwhile, Fitch Ratings says global reinsurers are cutting back on coverage for medium-sized natural catastrophe risks.

Property Risk Mitigation Is Critical

Risk mitigation is always beneficial, but it’s especially important amid rising property costs. As insurers raise their prices and reduce their exposures, property owners will face greater challenges securing affordable policies that provide adequate coverage.

If policyholders implement proactive risk management strategies to reduce the chance of a claim, they may make themselves more attractive to insurers. At the very least, they’ll be better positioned to keep their claims under control. Below are a few ways technology can help.

Drones Can Catch Problems Before They Become Worse

Some areas of properties are difficult to see, which makes it challenging to determine whether there are maintenance issues that require attention. Drones can go where people cannot, enabling owners to monitor their properties more easily – all without putting workers in physical danger. For example, CTL Engineer says drones can conduct faster, cheaper, and safer building inspections and spot signs of leaks or wear. This is especially useful for high-rise buildings.

Drones are also useful for monitoring sites for security risks. Construction sites are a prime example because they are susceptible to vandalism and theft. Drone DJ says the cost of theft from building projects is as high as $1 billion a year. Drones are helping to mitigate this risk by catching thieves.

Smart Leak Sensors

Water damage can be costly. When leaks aren’t caught quickly, the costs can add up – even if the leaks are relatively small. UK Leak Detection estimates that a leak affecting a kitchen and tiled walls could cost £10,000 to repair.

Smart leak sensors can detect leaks before damage occurs. A study looking at homes with the Flo by Moen Smart Water Shutoff and found a 96% decrease in the number of paid water damage claims. During the same time period, the control group (homes without the smart leak detector) saw a 10% increase in paid water claims.

Other Smart Devices

In addition to smart leak sensors, a number of smart devices can help property owners and businesses manage their risks and prevent losses.

• Smart sprinkler systems can put out fires. According to A-1 Fire & Security Equipment, smart sprinklers extinguish fires faster than conventional sprinkler systems while using less water, therefore reducing water damage.
• Smart security systems can protect property from crime. By leveraging surveillance, alarms, intercoms, and access control, smart security systems add a critical layer of security.
• Freeze detectors prevent water damage. USA Today reports that freeze detectors can tell you when low temperatures are putting pipes at risk of bursting. This gives property owners time to take action to prevent damage.

The current property market is challenging. Encourage your clients to use technology to bolster their risk management strategies. If you have a challenging coverage issue, Costero Brokers can help you explore options to secure property insurance for your clients. Contact us.