According to two of the largest Strata Insurers, water damage from internal and external sources is now the single most common cause of claims. And what’s more, not only are water damage claims on the rise, but they’re becoming more costly. Chubb Insurance for example, has reported an increase in average water related claim costs of 72% from 2014 to 2018, bringing the average claim to $30,361. In 2018, Insurance industry claims data disclosed more than 30,000 claims for water damage, at an estimated value of $320 million.
At Honan, our largest water damage claim was submitted in 2019, at a value exceeding $500,000. In addition to financial hardship, the costs to occupants in time, personal inconvenience and emotional toll can be substantial.
To help mitigate risks associated with water damage to your Strata property, we’ll step you through:
- common issues to avoid
- the impact to renewals and premiums
- simple actions you can take to reduce the likelihood and severity of a water damage claim.
Common causes of water damage
- Burst Braided Flexi Hoses
IAG reported that in 2016, Braided Flexi Hoses caused 22% of water damage claims in Australian Households. There are numerous Braided Flexi Hoses on the market, with life expectancies ranging anywhere from 2-10 years. Deterioration of Flexi Hoses is caused by incorrect installation, causing small leaks that allow chloride deposits to form on stainless steel braiding, leading to corrosion. Water hammer also increases stress on these hoses, and chlorine from cleaning chemicals (often kept under sinks or vanities) can cause rapid corrosion.
2. Appliances, internal hot water systems & air-conditioning systems
There are now more “plumbed in” appliances in our houses and apartments. Washing machines, dishwashers, water filters, InSinkErators, and refrigerators all have hoses and connectors that may be of varying quality. Internal hot water systems generally have a life expectancy between 7 – 10 years. Air-conditioning outlet pipes can become blocked, causing water to back up and leak back into the property. Make note of the age of such appliances and systems in your Strata property, and check them at timely intervals for wear and tear.
3. Blocked Drains
Modern homes typically have more internal drain holes to safeguard against points of leakage and overflow. More drains can result in more points of blockage by foreign material, paper, hair or even roots and leaves. If you have a new Strata property, ensure your tenants are vigilant with cleaning of pipes, and dispose of waste in bins rather than washing down the sink as much as possible.
4. Holiday periods
There is a strong correlation between the severity of water damage claims and holiday periods when tenants are away. The time taken between when the leak first occurs, to when it is detected and shut off, can often mean thousands of dollars in difference to damage. Be sure to set clear guidelines for your tenants on ‘out of property’ periods; providing them with a household maintenance checklist to address pre-departure is highly recommended. You may even like to suggest switching off water mains entirely through such a time.
How do adverse water damage claims impact renewals & premiums?
When it comes to claim history, insurers are generally more concerned with the frequency rather than severity of claims. To them, a high frequency of claims suggests there is either a building defect, or a lack of maintenance causing repeated water damage. A large, one-off water damage claim will likely have less of a negative impact on renewal than multiple smaller claims.
Insurers will generally respond to an elevated history of water damage claims by declining to renew or applying very large water damage excesses and/or increasing the premium. For instance, we have one scheme with a history of significant water damage claims (three over $200,000) that now has a $50,000 water damage excess and the premium increased by 75% on renewal. Schemes that have a poor water damage claims history are difficult to renew, as insurers see the same claims history and are equally risk averse. The lack of competition will drive premiums up.
Top tips for reducing the risks of water damage:
- Consult your plumber about installing water stop flow valves to the main water pipe into the lot. The device detects changes in water pressure and automatically shuts off water when a preset value is reached. These devices can be mechanical or electronic, and often reduce the severity of water damage claims considerably
- Turn water mains off when away on holidays
- Replace flexi hoses in all appliances, sinks and cisterns at least every 10 years, those in cupboards where chemicals are stored should be replaced every 5-7 years
- Be vigilant in checking ceilings for water marks, this may indicate the unit above has a slow leak in the bathroom, laundry, or kitchen
- Where leaks are detected in roofs, waterproof membranes and/or rendered walls or expansion joints, have the site of the leak repaired immediately. If a claim develops and it is shown to be a known issue that was not rectified, the claim may not be paid. In turn, this can cost the Body Corporate even more to fix
- Hot water systems have a limited lifespan – keep an eye out for water in the drip tray or puddles around the unit
- Where safe and possible, ensure gutters and drains are clear of leaves and remain unblocked
- Have a preventative maintenance plan for the Body Corporate, budget for the plan and make sure it is followed.
We’re with you all the way.
From understanding the risks faced by Strata building managers, and advising on how to prepare for the future, we are only a call or email away. To learn how Honan can further support your business, please reach out at any time.
Author: Chris Glass – State Manager, QLD – Honan Insurance Group
0419 566 258