There are two completely different categories of technology inside a commercial real estate building. Most ownership groups treat them as one. That mistake is costing them more than they rea...
Smart Sensors, Smarter Underwriting: How Innovative Insurers Are Redefining Property Risk
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The property insurance industry stands at an inflection point. As traditional carriers tighten underwriting criteria and with some retreating from high-risk properties, innovative insurers are pioneering prevention-based risk assessment models. At the center of this transformation: partnerships with smart building monitoring companies that turn properties from passive risk exposures into active risk mitigation partners.
Placing Risk in Context
Industry estimates vary in terms of which risks are driving the most incurred losses across property insurance books, but among the most commonly cited perils is non-weather related water damage. One report estimated these claims accounting for 20% of all property insurance losses, with the total value of these losses across commercial properties totalling $16 billion annually in the US.
Recent high profile water damage incidents include Camden Las Olas Apartments in Fort Lauderdale, where a burst pipe caused a ceiling to collapse, destroying apartments across nine floors. Meanwhile, a burst pipe at Duke University Hospital closed the emergency department and other vital services for days.
This is not only leading to carriers increasing premiums on properties with a history of water damage claims, but it’s causing the tightening of underwriting criteria and policy terms. For example, one expert has stated that some policies now have separate water damage specific deductibles of up to $100,000.
Prevention-Based Partnerships Drive Innovation
For some carriers, however, this environment represents opportunity. How do you accurately price risk for properties with water damage claim histories while still providing accessible coverage? The answer lies in shifting focus from past incidents to present prevention capabilities.
Progressive insurers are developing underwriting frameworks that incorporate real-time risk mitigation data. Rather than asking “What happened before?” they’re asking “What systems are in place to prevent future losses?”
Smart sensors provide insurers with continuous risk signals: water detection in under a minute, temperature monitoring to prevent pipe freezes, gas leak detection, and mechanical failure alerts. This enables dynamic risk adjustments and real-time claim prevention through immediate response protocols.
Some carriers are already beginning to offer premium discounts on property insurance to property owners who implement demonstrable and comprehensive building monitoring systems. When it comes to leak detection, this acknowledges that properly implemented systems can deliver substantial claim prevention.
The Future of Comprehensive Risk Management
As partnerships between smart building monitoring companies and innovative insurers develop, the scope could extend beyond water damage prevention. For example, platforms that monitor multiple risk vectors—gas leaks, mechanical failures, temperature fluctuations, unauthorized access, even pest infestations. This could enable carriers to re-assess risks of other perils where holistic monitoring and prevention strategies are in place, similar to how some carriers are now doing when it comes to water leak monitoring and prevention.
As monitoring technology advances and deployment costs decline, the question for insurers isn’t whether to integrate prevention-based underwriting, but how quickly they can build competitive advantages through these partnerships.
The most successful collaborations involve insurers who understand that smart building monitoring represents a fundamental shift from managing claims to preventing losses. These partnerships create sustainable competitive advantages while delivering genuine value to property owners seeking both protection and coverage.
Moreover, carriers exploring ways to integrate smart monitoring into their property insurance risk models and policy terms may not only reduce losses, they could also gradually evolve the insurer-property owner relationship from one focused on coverage provision towards more of a risk prevention partnership. As monitoring technology becomes increasingly sophisticated and affordable, this prevention-first approach might become an important differentiator for competitive property insurance.
By Nadav Schnall, CEO of smart building monitoring company ProSentry, which provides comprehensive wireless sensor networks that monitor for water leaks, gas leaks, and other building risks, delivering real-time alerts and live operator calls to prevent issues from escalating into major claims. The company’s platform has caught over 3,600 leaks with zero false alarms, helping buildings secure insurance discounts and coverage that might otherwise be unavailable.
Disclosure: Individuals or companies mentioned may have a commercial relationship with KeyCrew.
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