Sun Sentinel Palm Beach Edition
Water, water everywhere?
Proponents of leak-detection systems say devices can reduce insurance fraud
Can newly emerging technology help solve South Florida’s insurance claims crisis by sharply reducing incidents of water damage?
A company that sells whole-home leak detection and water shut-off systems says insurance companies and state regulators should investigate its product — and reward customers who take steps to protect their homes.
Rates for home insurance coverage in the region have been escalating over the past two years.
Insurers blame the rising cost of covering losses from ruptured pipes, failed water heaters and malfunctioning appliances. Water damage claims — often fraudulent — are spiraling out of control in the state, they say, triggering an explosion in expensive lawsuits and forcing them to charge everyone more for coverage.
Just this month, state insurance regulators approved higher rate hikes than requested for two insurers, saying they are needed to cover heavy claims costs in South Florida.
But a South Florida businessman says his company’s product should qualify his customers for insurance rate discounts by minimizing prospects they would ever file an expensive water damage claim.
Neil Schwartzman sells a product called PipeBurst Pro. It’s a building-wide water leak monitoring system that automatically shuts off water at the main supply line to a home or business whenever it detects a water leak.
If everyone had them in their homes, expensive water damages would be virtually eliminated, Schwartzman says.
It works like this: Sensors are placed around the home under or next to anything connected to a water line, including sinks, toilets, water heaters, washing machines, refrigerators and bathtubs. If water touches the sensor when it’s not supposed to, it sends a signal to a control board that in turn sends a command to shut off a valve at the main supply line.
The system also monitors water flow through the home’s plumbing system and can close a valve installed in the water line feeding a home if it senses water flowing at a greaterthan-expected volume or duration.
Like other “smart home” systems, this one gives users the option to turn their water supply on or off remotely on their smartphone or other device.
The PipeBurst Pro isn’t the only device of its kind on the market. Competing products with leak-detection and water shut-off functions are marketed under such names as floLogic, Leak Defense System, leakSMART and FloodMaster.
Schwartzman says that while he prefers
customers buy his company’s product, he hopes to persuade insurers to offer incentives for the installation of any system that prevents “catastrophic damage.”
State insurance regulators currently do not authorize companies to offer premium discounts for water leak detection systems the way they can for home security systems, impact windows, tile roofs and other preventative features.
But Paul Handerhan, senior vice president for public policy for the Fort Lauderdale-based watchdog group Florida Association for Insurance Reform, says the technology holds promise. He would like to see regulators authorize companies to offer discounts on a demonstration basis while gathering data on how effective they can be in reducing water losses.
That data could then be used to fine-tune how much should be discounted based on the type of system a homeowner installs, he says.
Jay Neal, FAIR’s CEO, says offering discounts wouldn’t stop fraudulent activity. But it could benefit responsible customers by offsetting rate hikes made necessary by other customers’ water claims, he says.
Plus, insurance companies would know “a customer who would install something like that is a customers that would be good to have,” he says.
Rich Widdicombe, president of Heritage Property & Casualty, concurred. “Yes, we would be interested in learning more about that,” he said in an email Friday. “If customers go to that length to protect against water losses, they should get a discount.”
State-run Citizens Property Insurance Corp. has been among the most vocal advocate for laws that would quell abuses by water damage restoration companies. Citizens and other insurers say the contractors work with attorneys to submit inflated invoices and file suit when insurers balk at paying them. Attorneys perpetuate the scheme so they can collect legal fees if insurers opt to settle, Citizens and other insurers contend.
The average loss to Citizens for a non-weather water claim from the tricounty region nearly doubled, from $10,301 to $19,968, over the last five years, the company says.
But while Citizens has passed the costs of abuses onto its customers, the company has not yet explored creating incentives for customers to install leak-detection systems, spokesman Michael Peltier acknowledged Friday.
Citizens’ product development team plans to look into the possibility of incentives, “but I don’t know if it will lead to policy changes or not,” Peltier said in an email.
Chubb, a global insurance company that markets homeowner insurance to high-end properties in Florida but is not regulated by the state, offers a range of incentives to its customers to install shut-off systems, spokeswoman Laureen Taylor says. Those include premium discounts for customers who install qualifying systems, and even reimbursement for labor costs for customers who install systems after a major water claim.
“By encouraging our customers to adopt these kinds of devices, we help our customers protect their home and belongings, help them avoid having to move out while repairs are being made, and reduce claims that can drive up insurance costs. It’s a win for everyone.”
Amy Rosen, spokeswoman for Deerfield Beachbased People’s Trust Insurance, says her company is interested in offering discounts to customers with water shut-off technology but believes systems currently on the market are too expensive for most homeowners.
“There is not yet critical mass on the industry, but we are eager to see it grow,” she said. “We hope the cost issue is addressed to encourage broad use.”
Systems currently start in the $2,000 to $2,500 range, said Matt Starr, sale and marketing manager for GreenField Direct, the Nebraska company that makes the PipeBurst Pro system. That would outfit a midsize home fed by a 1-inch supply line with just two or three sensors,
Owners of bigger homes with larger supply lines can expect to pay $4,000 to $5,000 for a system with 10 or 15 sensors, he said.
Starr says he expects prices to drop. “As the product develops and the quantity grows, the price obviously comes down.”