Study Finds Water Claims In The Billions & Counting

The cost of household water damage in California continues to grow at an alarming rate, while the volume of insurance claims being filed for water damage is climbing modestly, a new study has found.

Remediation and construction costs are largely faulted for the $66 million increase in water damage insurance losses from 2001 to 2002, according to the insurance industry survey. The results continue a five-year trend of increased homeowners insurance claims costs for water damage.

By comparison, all other homeowners insurance losses accounted for two-thirds of homeowners’ costs, but increased by $58 million last year, roughly $8 million less than increased water losses.

In its second year of surveying water-related insurance losses, the non-profit Insurance Information Network of California found that insurers have paid more than $2.3 billion in household water claims since 1997.

“The cost of water losses continued to grow unabated in 2002,” said IINC Executive Director Candysse Miller. “Water is absorbing a larger and larger share of California homeowners insurance losses.”

Insurers attributed the increased expenses largely to the price of repair and remediation, costs that have skyrocketed as insurers try to prevent small water claims from turning into large mold losses. Other insurers polled cited the high cost of construction in a market where contractors are in great demand.

IInsurers representing 70 percent of the California homeowners insurance market provided data for the survey.

Though the number of water-related claims – or insurance losses for damage caused by burst hoses and pipes or leaks from washing machines, icemaker connections, lavatories and other household water fittings -- has varied from year-to-year, the cost of water damage has climbed in each of the past five years. Between 2000 and 2002, the annual cost of water claims climbed by more than $120 million.

On average, individual water claims cost surveyed insurers $4,925 in 2002, nearly double the $2,537 average water claim at the beginning of the survey period.

The survey found that water-related claims comprised one-third of all California homeowners insurance claims filed in 2002. You may view a printable PDF copy of the water loss claims survey by clicking here.

Other common homeowners insurance claims include fire, theft, liability, wind, and lightning.

Based on trends of the insurers surveyed, overall industry water losses between 1997 and 2002 could be as high as $3.3 billion – exceeding the cost of many natural disasters.

“Hundreds of millions of dollars are lost each year to water damage in California homes – damage that is often preventable with simple home maintenance,” Miller said. “If we took a few minutes each year to inspect our household fixtures and water pressure, we could prevent much of this damage from occurring.”

IINC has developed a program to encourage homeowners to inspect their homes for water damage regularly and perform simple and inexpensive maintenance that can prevent water damage. For more information on the water damage prevention program, including tips in both video and downloadable brochure format in English and Spanish, click here.

Stopping household water damage depends on two critical components: Knowing how and where to shut off water supplies and checking household water pressure. Homeowners should also replace hoses to washing machines, icemakers, sinks and toilets every five-to-seven years to guard against leaks.