December 13, 2024
Kevin Gu is CEO of BAYS tech, with rich experience in property & construction risk management.
Insurance companies are seeing a surge in water damage claims, significantly driven by "white water damage"—leaks, burst pipes and plumbing failures unrelated to natural disasters. This form of damage now poses a growing risk for the industry. While natural disasters often take the spotlight, white water damage quietly remains a persistent and costly threat, often overlooked by building owners and insurers alike.
White water damage stems from internal sources, such as plumbing failures or leaks from water-dependent appliances like dishwashers, water heaters and HVAC systems common in office settings. Unlike high-profile disasters, white water damage often creeps in gradually, lacking the immediate visual impact but delivering long-term effects. In commercial properties, undetected leaks can compromise structural integrity, leading to extensive repairs, health hazards and potential business interruptions.
Additionally, water that seeps into concealed spaces can create mold—a risk to both infrastructure and health. This is especially concerning for buildings with significant occupancy. This type of damage frequently goes unnoticed until it escalates into substantial repair projects, transforming what might have been a manageable repair into an extensive, costly renovation.
A leading contributor to the increase in white water damage claims is aging infrastructure, particularly in areas with older commercial buildings. Many structures have outdated plumbing systems with corroded pipes and worn-out fixtures, which are prone to leaks and failures. Older plumbing is often not designed to handle the water pressures and usage demands typical in modern buildings, exposing even well-maintained properties to unseen vulnerabilities.
The proliferation of water-dependent systems and appliances in commercial properties also raises risk. From water-based HVAC systems to appliances in employee break rooms, these conveniences introduce potential points of failure. Even minor issues, such as a loose connection or a small crack in a water line, can lead to extensive damage.
Climate change contributes as well, as fluctuating temperatures cause pipes to expand and contract, potentially resulting in cracks or bursts—particularly relevant for properties in regions that experience freeze-thaw cycles.
For insurers, the financial burden of white water damage is significant. Unlike natural disasters, often covered under specific policy exclusions, white water damage usually falls under standard commercial property insurance, resulting in frequent and high-cost claims. As the volume and severity of claims rise, insurers may increase premiums, impose stricter underwriting requirements or limit coverage for properties deemed high-risk.
Moreover, the costs of white water damage often extend well beyond initial repairs. Secondary impacts like mold remediation, structural restoration and replacing damaged equipment can significantly increase a claim’s total cost. What may initially appear as a manageable claim can swiftly escalate into a considerable expense for insurers.
Addressing the rise in water damage claims requires proactive measures, including the adoption of smart building technologies. Modern tools like smart leak detectors, automated shut-off valves and water monitoring systems can help commercial property owners detect leaks before they cause extensive damage. By integrating solutions such as these, insurers can help reduce the frequency and severity of claims, providing building owners with peace of mind.
For office and building owners interested in implementing smart technology, there are some initial challenges to anticipate. Here are strategies to make adoption smoother:
Many property managers worry about scalability. Start with a system that can be expanded as your needs grow. Consider compatibility with existing infrastructure to reduce retrofitting costs.
Implementing new technology can be challenging for staff unfamiliar with smart systems. Offering training sessions, clear manuals and continuous support helps employees understand and manage these systems. Making sure staff knows how to respond to alerts, conduct maintenance and troubleshoot minor issues ensures a smooth transition.
Technology alone can’t prevent all issues. Regular plumbing inspections and proactive replacement of aging components can further reduce risks. Combining tech with routine maintenance offers the best protection.
Many technology providers offer partnerships with installation services that specialize in commercial buildings. Leveraging these partnerships can simplify setup and ensure optimal performance.
As more buildings age and water-dependent systems continue to increase, the potential for plumbing-related failures will grow. Insurers will need to find a balance between providing affordable coverage and managing the risks associated with white water damage.
By focusing on prevention through technology, education and strategic partnerships with commercial property owners, the industry can better mitigate the risks, supporting improved outcomes for insurers and their clients.
