Nik Day makes the case for property inspections ahead of policy renewals.
It is fair to say that the greatest exposure and impact of a commercial property policy is within the first year of inception.
First year claims often arise from some kind of unforeseen property damage.
Although traditional building surveys identify many potential defects, it is the hidden risks that cause the most trouble. They can happen the week after the builder's warranty has run out.
Commercial properties, particularly flat-roof properties, are notoriously susceptible to roof leaks, which until now have been impossible to mitigate against. Damaged pipework has been equally difficult to pre-inspect, but nevertheless often requires potentially lengthy and expensive surveying, followed by restoration work.
There is, therefore, a strong rationale for brokers, and indeed policyholders, to insist on a more robust property inspection that identifies hidden risks prior to any policy inception or renewal.
The business case for implementing a leak-detection survey is further strengthened as one UK provider of this service, Munters, is offering brokers risk-free commission on sales generated.
The cost to rectify any quickly identified minor damage from leaks is often not seen by insurers because of the large excess applicable to commercial properties. Instead the policyholder pays for the repair.
- The damage and consequential cost of roof leaks and damaged pipes should not be underestimated. Take a damaged pipe for example - a 0.5mm leak could lose 20 litres of water every hour. That equates to over 14 cubic metres of water per month and, dependent on where the pipe is situated, the leak may not be noticed until the huge bill from the water company arrives and the policyholder is singularly held responsible for the local hosepipe ban.
Even if the leak is noticed, the cost and disruption associated with finding the source of the leak has historically been considerable.
In essence, leak detection requires a plumber to excavate the area by simply smashing as many holes in the wall or floor as is necessary to find the leak. While this may be acceptable in a factory, it is considerably less acceptable in, say, a supermarket where a cavernous hole in the fruit and veg aisle would not be tolerated. And even after the holes had been dug, there was no guarantee that the leak would be found.
Using proven scientific techniques, such as acoustic profiling, thermal imaging, endoscopy or tracer gas technology, the source of leaks can be precisely located with minimal damage to walls or floors.
Acoustic technology is commonly used in commercial properties, particularly if the leak is from a mains feed. The general location of the leak is identified by the noise it makes. Electro-acoustic and sound profiling can then precisely locate the source of the leak to within a few centimetres.
Where the leak is much less obvious such from a pipe joint, tracer gas is injected into the pipe. The gas then permeates up to the surface, where it is detected using sensitive equipment.
Endoscopy techniques can also be employed where the leak is in an inaccessible location such as in a cavity wall or sub-floor.
Heat diagram
Thermography is particularly useful for precisely locating leaks in hot water pipes and under-floor heating systems. Using an infra-red camera to create a heat diagram of the area, the source of a problem can be quickly identified.
The integrity of a commercial property's pitched or flat roof should be of real concern to brokers and the customer. Of course, flat roofs that are well installed offer excellent performance and enjoy a considerable life.
However, those roofs that are poorly installed are prone to problems of leakage very early on.
In fact, data produced in the US suggests that up to 40% of badly installed flat roofs develop problems within year one.
If left unchecked, roof leaks can lead to damage not only in the roof but also throughout the building, the worst scenario being a total replacement of the roof and ceiling below. Taking the supermarket example, imagine the business interruption and loss of trade from such an event.
Rather like leaking pipes, traditional methods of identifying moisture ingress in a roof tend to be high on disruption and low on accuracy, which is why high-tech, low-cost, minimal-disruption techniques, such as thermography are now used by leading leak detection companies.
Using an infra-red camera to detect temperature differences in the roof material, technicians can identify areas of trapped moisture and damaged insulation. Because wet material retains heat longer than dry material, the wet insulation shows up clearly on a thermal image.
Not only is this method non-destructive, it is also quick. A 500m2 area can be scanned and assessed in as little as four hours.
Business interruption
The real cost of commercial property damage is of course much greater than the cost of repair. Business interruption cost and loss of trade can be catastrophic.
It is estimated that 80% of businesses never recover from a major disaster caused by fire, flood or water damage, and it is not just obvious cases like supermarkets that suffer. Any organisation that needs premises to operate is at risk, and the disruption and stress of finding temporary accommodation has its own inherent cost.
By selling these property inspection services prior to policy inception or renewal, brokers can benefit from a risk free income and negate some of the 'hidden' risks associated with commercial property.
They are also able to proactively improve their customer satisfaction ratings, better assure their policyholders businesses and of course protect their premiums.
