Over the past few years, the commercial real estate, hospitality and healthcare sectors have all experienced a significant uptick in insurance claims based on mold and indoor air quality issues. These quiet perils, which often remain undetected until it’s too late, can yield extensive claims, especially when high concentrations of people (for example, in hospitals or hotels) are exposed to the pollutants.
To mitigate their exposure to these perils, some insurance carriers have started to seek higher deductibles and introduce certain coverage limitations. Toby Smith (pictured), president of Ironshore Environmental, explained: “Insureds in certain classes of business, like hospitals and hotels, are being asked to take a greater share of the risk through higher deductibles. This speaks to the need for insureds to have robust protocols around water intrusion and mold detection because they have more skin in the game.
“Some carriers have also introduced coverage restrictions around renovation, which is when a lot of mold claims, especially the larger ones, are arising. Insurers tend to impose restrictions on a case-by-case basis, depending on the insured’s loss history and water and mold detection protocols. It’s very important, especially for insureds with large portfolios, that their protocols are the same for all of their commercial properties so that they’re maintaining a consistent approach to how they deal with water and mold.”
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It can be a hard pill for insureds to swallow when carriers ask them to take on more risk through higher deductibles – but there are ways that insurance brokers can cushion the blow. According to Smith, one of the most important things brokers need to master is storytelling.
“For brokers, telling the insured’s story is really important,” he told Insurance Business. “We sometimes receive very generic submissions, which include a statement of values for a real estate account, and then it’s left to us to figure out the rest. Carriers are engaged in trying to get the best terms in the marketplace because we want to be competitive and win business. I think brokers who tell the insurance story the best will get the best terms in the marketplace.
“That includes explaining the loss experience and explaining the mitigation and response plans insureds have. It’s very important to not only show that insureds have these plans, but also that they’ve implemented them, and they’re being proactive and managing these plans centrally across a portfolio. If they’re doing a good job of it, this should show in their loss history.”
Of course, some events cannot be controlled. The recent increase in natural disasters across the US, including several catastrophic hurricanes and historic inland flooding events, have led to some insureds suffering large losses related to flooding and mold. While brokers and insureds cannot control Mother Nature, they can control the narrative that they share with underwriters. These large losses have a story behind them and should be differentiated in a submission to an underwriter from a peril that could recur.
Smith commented: “We had commercial real estate clients in places like Houston, TX, which was devastated by Hurricane Harvey, and those clients had some significant flooding and mold claims. But their brokers have come to us, emphasized that these are non-recurring losses, and have shown us the mitigation measures the insureds have taken to prevent the same level of flooding from happening again. Telling that story is something we don’t see all the time, but when people do show us how they’re being proactive, how they’re being consistent across their portfolio, and how that has translated to their loss history, I think that’s very important and it makes a big impact.”
Another reason why it’s important for brokers to tell insureds’ stories is that specialty carriers like Ironshore will act upon those stories, not only in policy underwriting but in loss control. As Smith pointed out: “The things that we look for in underwriting are also the things we can help people with.” The insurer has a loss control group that assesses insureds and can help with reviewing, providing or coming up with water intrusion and mold maintenance plans.
