Water, Water Everywhere: Loss Data May Surprise Homeowners

Water damage is the leading cause of property-related losses for homeowners, according to Chubb claims data.

A recent Travelers report reveals similar findings: After analyzing eight years of claims data, the insurer found that 20% of homeowners claims were attributable to non-weather water issues including plumbing, sewer or appliance leaks and failures—making non-weather water losses the second most common homeowners claim, after wind (24%). Meanwhile, 11% of homeowners claims were caused by weather-related water.

Beyond just contributing to claims frequency, water is also the culprit in many devastating losses. Travelers reports that non-weather water and weather-related water damage accounted for 17% and 7% of the most expensive homeowners claims in 2009-2016, respectively—and since 2015, water losses exceeding $500,000 have doubled, while those exceeding $1 million have tripled, according to Chubb.

Despite all this evidence, however, consumers may not be taking water threats as seriously as they should. Regarding weather-related water losses, Chubb reports that nearly half of homeowners believe weather reporting is “regularly” or “frequently” exaggerated, and 36% believe it’s “sometimes” exaggerated.

Furthermore, between summer 2017 and 2018—a timeframe that encompassed one of the worst hurricane seasons on record—Chubb reports that 64% of homeowners did not change their home protection strategies.

But people are still at risk from hurricanes even if they don’t live near the coast: 33% and 31% of Chubb’s Hurricane Harvey and Irma claims, respectively, were 25-50 miles away from the shoreline. And hurricane or not, flood remains the No. 1 disaster in the U.S., says Ana Robic, COO, Chubb Personal Risk Services.

“A lot of people think, ‘This is never going to happen to me—this is only a problem in X location,’” says Tanya Brown-Giammanco, lead researcher on the Insurance Institute for Business & Home Safety’s Hurricane Harvey Wind Damage Investigation Report. “But most locations in the U.S. are prone to some kind of disaster.”

Non-weather water can also be more devastating than many homeowners may realize. “Once a consumer has a water loss, they’re definitely more aware of it for the next time,” says Angi Orbann, vice president of Product Personal Insurance at Travelers. “But other than that, consumers typically aren’t thinking about those type of water losses.”

Whether it’s a leaky pipe or a problem with the connection between the refrigerator and the icemaker, “as supply lines and materials age, they can break down,” Orbann points out.

And if a homeowner is away and doesn’t notice a leak immediately, “the damage can be quite severe,” Orbann adds. “Think about a two-story home where there’s a bathroom on the second story. If that hose line goes, it’s easy for it to be running down to the downstairs and possibly the basement for eight hours or longer if you’re away for a weekend. Those claims tend to be very disruptive.”

Robic outlines a real-life scenario in which a homeowner was away on vacation when their washing machine hose burst, causing water to run unmonitored for several days. The water caused significant damage to the first and second floors of the home, including substantial damage to a newly renovated kitchen on the first floor.

Understanding your clients’ most common and most expensive risks is the first step in determining “the proper coverage for every insured,” Orbann says. But equally important is “advising them on how to prepare or prevent some of those losses.”

For details on how you can make sure your homeowners clients are not only properly covered for water-related losses, but also informed about what steps they need to take to prevent them from happening in the first place, keep an eye on IAmagazine.com and next week’s Markets Pulse e-newsletter.

Jacquelyn Connelly is IA senior editor.