Predict & Prevent™: How a New Generation of Tech Is Mitigating General Property Losses Before They Occur

A raft of new innovations and technologies is advancing the cause of predicting and preventing general property losses.

By: David Agnew | April 8, 2023

By the time you smell smoke, it may already be too late.

In scenarios that can lead to property loss — a fire, say, or a frozen pipe — an immediate response can make all the difference. Sprinkler systems, burglar alarms and other technologies that alert us to loss events are critical to mitigating property damage and protecting human lives.

But what does the next generation of property loss tech look like? Could it stop these events before they occur?

Better data collection and artificial intelligence now allow us to scale up our efforts to prevent property damage — to widen the scope of threats we can evaluate, to analyze more data and reveal actionable insights, and to target proactive measures at the property, site or even infrastructural level.

Sensor Sensibility

There’s no discounting the value of systems that alert people to a loss event in progress. But traditional alarms typically have serious limitations: They’re not incorporated into a larger diagnostic system, can’t alert off-site users when an event is in progress, and they can’t project how conditions that are within the bounds of acceptability may deteriorate in the future.

Internet of Things-enabled sensors can do all of the above.

Remote oversight is especially crucial to monitoring more risks at greater scale. One example is Sensor Solutions by HSB, which makes a range of sensor hardware operable via its Protect app — cellular or LoRa (long-range WAN) sensors to detect temperature, the presence of water and more.

Cellular sensors boast the ability to communicate with users anywhere on earth even during a power outage; LoRa sensors, meanwhile, can run on battery power for years, making them easy to install and maintain.

John Riggs, senior vice president, Applied Technology Solutions, HSB Group

“We provide reporting and dashboards on the program,” said John Riggs, senior vice president, Applied Technology Solutions for HSB Group. These let users know “how many sensors are deployed, what kinds of occupancies, what locations, and helps them monitor alerts on a portfolio view … I can look at every single sensor. I can see the temperature of the room, I can see the battery life of the sensor, I can see if it’s detected a freeze condition or the presence of water. And I can do all of that from remote.”

In combination with algorithms that assess not just present conditions but also changes over time, a diverse sensor array can be an incredibly powerful tool to alert property owners to potential loss.

“We can track trends in ambient temperatures, pipe temperatures and water flow through a pipe by monitoring the actual water flow, either intrusively or externally,” Riggs said. “We can also predict mold growth by looking at humidity and temperature … I can put a temperature sensor in a commercial refrigerator, and if the temperature of that refrigerator goes out of bounds, it could alert a lot of things — it could alert that the compressor’s breaking down; it could alert that refrigerant has leaked. It could alert that someone left the door open, believe it or not. There’s a wine solution we have where, in many instances, an alert led to the discovery that the wine cellar door was left open. It’s as simple as that sometimes.”

Added to the system, Whisker Labs’ Ting sensors measure minuscule fluctuations in a building’s voltage 60,000 times a second, then analyze them for the signatures indicative of tiny electrical arcs — the result of poor wiring and a common culprit in structure fires.

“We can look at voltage readings and predict, ‘Hey, that’s not you running your power drill — somebody left an electric blanket plugged in and never turned it off’ … and something is not going well,” Riggs said. “That’s a prediction. There’s no fire in your home yet. We’re predicting the potential peril.”

A Bird’s Eye View

Sensor and camera arrays can keep close tabs of on-the-ground conditions at various points throughout a property, but for the full picture of a site’s perils, you’ll need to take a more holistic view.

Kevin Tulp, senior solutions engineer, Nearmap

Like sensor hardware, remote analysis of on-site perils is benefiting from advances in improved data collection and analysis. While satellites and drones can also be used to gather aerial snapshots, “the plane’s kind of the Goldilocks for imagery,” said Kevin Tulp, senior solutions engineer of geospatial mapping company Nearmap. “You get really high resolution, closer to a drone in resolution, but then you get pretty good temporal resolution, meaning multiple times a year, like a satellite.”

Nearmap’s imagery and LIDAR maps are available for sale, “but I think the magic happens in all of our machine learning and post-processing we do,” Tulp said. “We turn that into AI products, property intelligence products, and 3D recreations of what we’re seeing in the world. Because it’s such a high resolution … we can do some really realistic modeling.”

Among Nearmap’s clients are Betterview and CoreLogic’s Protect, property intelligence platforms that turn geospatial data into purpose-built site analysis. By combining geospatial with data from various other sources — climate models, claims histories, even MLS listings — they’re able to digest complex variables into scores that insurers can use to evaluate risk.

“Investors and shareholders are expecting companies, more and more, to leverage the preventative and mitigative approach over the reactive approach.”
— Kat Kraft, director of product, Teren

Besides risk scores, Betterview and CoreLogic provide insurers with detailed breakdowns of individual site perils, effectively drawing a roadmap for loss mitigation measures.

“Carriers are starting to do a better job at helping residents [be proactive],” said Garrett Gray, president of Protect, CoreLogic. “For example, asking that there not be vegetation that goes right up to the house … There’s about 12 different mitigating factors that the California DOI is now preparing to ask carriers to look at,” Gray said. “It could be other property data in terms of cost to rebuild, the typical characteristics for that house or property — there’s a number of things, depending on what they’re looking at, that we can help them [with] in their underwriting process.”

David Tobias, cofounder, Betterview

“You can do things on a micro level,” added David Tobias, cofounder of Betterview, “to really make a risk better even in an high-hazard area. That’s what this type of technology allows you to do, which [historically] you really couldn’t do at scale without sending people out, a very tedious, expensive kind of process … Geospatial intelligence allows you to look at an individual risk.

“We’re using machine learning, specifically computer vision, to detect things like roof shape, roof material, damage to the roof [by looking at] missing shingles, staining, ponding, things like that. And then other characteristics around the property — is there a pool on site?” Tobias continued. “And we have a data science team that works on figuring out, ‘Well, for roof claims or wind and hail claims, what combination and weights of shape and material and damage and so on matter?’ What is predictive of loss?”

Outside-the-Fence Events

In addition to on-site perils, a predictive approach addresses extrinsic events like floods or wildfires that, while unstoppable by an individual property owner, can be ameliorated with the right preparation.

Kat Kraft, director of product, Teren

“We focus on … aggregating remotely sensed data from a variety of different sources,” said Kat Kraft, director of product at risk modeling firm Teren. “[Data] about the terrain and hydrology and different mechanisms on the landscape that can manifest as a hazard, such as a landslide or a wildfire or a flooding event. And then we integrate weather analysis into that.”

After identifying high-exposure areas, Teren zooms in on specific vulnerabilities of the physical environment, then uses AI to calculate how they might impact clients’ assets.

“Imagine if you have a transportation corridor or a pipeline right of way,” Kraft said, “or that you’re a commercial property owner and have 1,000 storefronts across the U.S. You’re going to want to understand not only where the most vulnerable spots are, but … in the event of a significant weather event, an anomalous weather event, where water is most likely to cross the landscape and pool at your doorstep or in your basement, for instance.”

Dodging misfortune by redirecting stormwater runoff, replanting vegetation or avoiding risk-prone sites in the first place is “not just environmentally friendly,” Kraft said — it’s also far more economical.

“Investors and shareholders are expecting companies, more and more, to leverage the preventative and mitigative approach over the reactive approach,” Kraft added.

The Bigger Picture

Each of these technologies is powerful when used on an ad hoc basis, but their untapped potential lies in how they can work in concert. Widening the data stream to include more sources of real-time information and leveraging AI to parse these mountains of data can provide a highly detailed yet highly contextualized picture of risk.

The task ahead is to turn these insights into a set of best practices that can transform our built environment and the ways we inhabit it — and to bring more stakeholders on board.

“Things are changing really rapidly,” said Tobias. “That requires people working together, because you can’t just rely on your insurance company to keep buying you a new roof.” &

David Agnew is an associate editor at Risk & Insurance®. He can be reached at [email protected].

How a Carrier Partner Can Help Navigate a Challenging Management and Professional Liability Market

A combination of a choppy economy with increased claims frequency and severity could lead to rate increases in the Management & Professional Liability market.

By: Risk & Insurance | April 3, 2024

Rates in the management & professional liability (M&PL) markets were on the rise from 2020 to early 2023 and are now falling rapidly.

M&PL divisions manage a number of different insurance products including management liability (D&O), professional liability (E&O), employment practices liability (EPL), fiduciary liability policies, cyber, etc. In 2023 and into 2024, a big influence on the marketplace has been the extremely aggressive and softening public company D&O market.

Though these rates have been softening for management liability, that may change over the next few years as companies continue to adjust their business models motivated by economic uncertainty. Layoffs were up nearly 200% last year, Forbes reported, even as other recession indicators, like the inflation rate, improved. A recession could lead to an increased claim activity and force carriers to raise rates.

“Whenever there is a meaningful downturn in the economy, we tend to see claim frequency pop up,” said George Schalick, Jr., senior vice president of the Management and Professional Liability Division at Philadelphia Insurance Companies (PHLY).

With continued fiscal uncertainty, businesses potentially already burdened with pandemic-related claims should seek a carrier with a long history in M&PL products. They will provide much-needed risk management guidance and be better positioned to support their insureds during market fluctuations.

Why Insureds Might See an Uptick in M&PL Claims

George Schalick, Jr., Senior Vice President of the Management and Professional Liability Division, Philadelphia Insurance Companies

The current soft market might come as a bit of a surprise as it does not track with previous underwriting cycles and economic conditions. Afterall, many privately held and non-profit organizations struggled during the early days of the pandemic with shutdowns and rapidly declining revenues. But the Government assistance programs, like the Paycheck Protection Program loans, helped keep many afloat during the tough times.

“During COVID many organizations stopped doing business until they were able to sort out all of the health and safety challenges,” Schalick said. “They were forced to lock down, but then all the government assistance programs allowed them to keep people employed. The increased volume of claims we anticipated we would see coming from the lockdowns and restrictions that were imposed upon businesses in the U.S. didn’t manifest at first.”

“Just because there wasn’t an onslaught of reported claims at the beginning of the pandemic, doesn’t mean the circumstances that would give rise to a claim being reported didn’t occur. Courts and the judicial system were closed or slowed and now that they are back open, we’re starting to see the circumstances that occurred during the COVID lockdowns becoming claims today,” Schalick said. “Litigation is progressing.”

Added to the delayed pandemic litigation is a concern over newer claims that might be filed as the country inches toward an economic downturn. Though a recession was avoided in 2023, experts think a soft dip could occur in 2024, with 76% of economists saying there’s a 50% or less chance of an economic downturn this year — that almost always results in more management liability claims.

“During the Great Recession in 2008, we saw an almost immediate spike in claims because of the economic conditions and the pressure it placed on organizations. They were making personnel changes with significant belt tightening almost immediately.” Schalick said.

What’s in Store for M&PL Policy Rates in 2024?

Despite an uptick in claims and increased economic uncertainty, management liability rates haven’t increased, resulting in market-wide pricing levels that may not meet the increased pressure of rising settlements and jury verdicts.

“Rates are going the other direction and settlement values are not falling,” Schalick said.

The mismatch between rates, claim frequency and severity is, in part, because carriers experiencing the dramatic soft market in the public D&O market are seeking premium gain in the private and non-profit market.

“In the public company market, the rates have been decreasing significantly. The rates were increasing in the private, not-for-profit market, and rightfully so, but there’s a desire to supplement overall mid-size D&O for carriers who also write private not-for-profit, and they see that as an opportunity to aggregate premium,” Schalick said. “So the always competitive landscape in the private, not-for-profit market has dramatically increased in the last 18 to 24 months.”

Still, companies of all sizes and types should be concerned about management liability rates in the future. Legal system abuse is resulting in increases in both the amount of litigation and the size of verdicts plaintiffs are receiving.

Certain areas of the country are particularly vulnerable to this type of legal system abuse. As a result, insureds in these localities are likely to be vulnerable to rate increases.

“The environment is so positive for the plaintiff that forces premium increases so carriers are able to stay in that market long term,” Schalick said.

Why a Tenured Carrier Partner Can Help Insureds Navigate An Uncertain Market

It’s clear that insureds are facing an uncertain M&PL market over the next few years. Fortunately, carriers with a long history in the M&PL space will be there to offer stability.

Philadelphia Insurance Companies has been supporting this market for 35 years. PHLY is committed to offering long-term rate stability, even as economic and claims trends start to push premiums upwards. They have an appetite for all sorts of companies, large and small, for-profit and nonprofit alike.

“We’ve been at this game for a long time and are one of the most tenured underwriters in this space,” Schalick said. “We like to stay very consistent.”

PHLY has worked with both for-profit and non-profit on management liability policies. With dedicated M&PL teams throughout the company’s 13 regions, PHLY provides the support agents and brokers are looking for on behalf of their clients. The teams know their regions well and can respond to local trends. They’re also dedicated to making the renewal process as easy as possible for their partners and policyholders.

“We have real confidence in our results, so we focus a lot on making the renewal experience as painless as possible for all agents and insureds,” Schalick said.

The company is also investing in tools to help insureds avoid losses. Earlier this year, they launched a new online risk management platform, PHLYGateway, which offers resources for insureds on how to create an employee handbook and trainings on issues such as recognizing workplace sexual harassment and discrimination.

If insureds have questions, they can consult a Best Practices Help Line, provided via the platform. That way, they can get on the spot risk management guidance to help them prevent claims.

To learn more, visit: https://www.phly.com/mplDivision/managementLiability/default.aspx.

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Philadelphia Insurance Companies. The editorial staff of Risk & Insurance had no role in its preparation.