29 Aug 2023
by Ady Hall, Ian McLennan

According to the Association of British Insurers (ABI), nearly 2 million EOW claims are reported daily, with many more that pass under the radar.  

A collaboration of insurance trade bodies identified that claims for household water leaks were up more than 30% in the first quarter of 2021, compared to the previous year and these huge spikes are ongoing. 

For organisations with responsibility for housing stock, the increase in this type of loss can present a considerable burden on their insurance programme. 

An expensive problem 

EOW incidents can be due to various factors, from general wear and tear to poor installation of domestic appliances, defective or badly designed plumbing components, water pressure fluctuations, physical damage, and blocked or frozen pipes. Accidents can happen, but sometimes a disgruntled tenant can leave a tap running in a bath or sink as a parting gesture. 

Any leak that isn’t dealt with quickly can lead to serious damage to the fabric of the building including; walls, ceilings, floors, doors, skirting boards and fitted cupboards. These water-damaged materials must be removed promptly to prevent long-term damage and to allow a structure to dry out. Then repair and replacement starts. 

This has always been a slow and expensive process, but over the last few years, claims costs have escalated. In the building trade, material and labour prices increased by 25% in 2022, which put rebuild costs up by 19%.  

Also, alternative accommodation options remain in short supply, particularly in and around London, which drives up rent and deposit arrangements. 

As a consequence, an increase in insurance premiums or higher deductibles or excesses might be introduced for EOW claims, separate from the rest of the insurance programme. This impacts public sector budgets and could remove much-needed funds from other community services. In the current market, underwriters are also far more risk-averse: in some cases, cover for EOW might be removed altogether, particularly in high flood-risk areas. 

A challenging claims experience can also lead to tension with tenants. If the damage isn’t repaired quickly or the tenant is housed in ‘lesser’ alternative accommodation, they could involve social, local or national media, leading to reputational damage. There’s also potential for an increase in disrepair claims, where various ‘no win, no fee’ agencies are ready to represent unhappy tenants with any potential claim.  

Managing and mitigating EOW claims

It’s crucial to have a regular inspection and maintenance regime. You can’t beat ‘boots on the ground’ to stay on top of potential issues.  

A regular review of claims information can provide insight. Through interrogating the claims data you can spot trends. For example, bad workmanship which can be traced back to one tradesperson or the supply of faulty parts. Also, with the growth in smart home installations, some repair solutions are no longer fit for purpose. 

Early claims notification can save on repair costs substantially. We’ve seen water-damaged properties that might have only cost £15,000 to put right immediately, however leaving notifying us for months intensified the damage, and repair costs were ten-fold. 

When considering the scope of any property repairs, introducing resilient measures limit the potential for future damage. Simple fixes such as changing the flooring, raising electric sockets and using waterproof plaster can help buildings recover faster following a flood or EOW. 

Employing innovative repair solutions and new technology is important. Leak- bot, for example, is a new and beneficial EOW detection device. It’s a small box that clips to a water pipe near the stop tap and monitors the flow of water through the system 24/7. It can detect a leak, even just a dripping tap, and automatically shut off the water supply. This prevents a major EOW in the first place. 

Risk improvement

Staying on top of the claims experience and regularly looking for peaks and troughs in the data is essential. This will help you identify issues at the earliest stage and deal with them before they escalate. Schedule regular updates with insurers and loss adjusters and take advantage of any risk management advice and surveying assistance they can offer.  

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