The Wall Street Journal: American Homeowners and Their Insurers Face a Flooding Crisis From Within

Data show claims for water damage from inside leaks have surged while other types of claims have fallen

By Leslie Scism 

More American homes are flooding from the inside.

Old pipes and valves, worn-out hoses on second-story washing machines and faulty connections for a proliferation of water-using appliances are causing a surge in increasingly expensive damage reported to insurers. The increase has occurred even as many other types of claims—including fire—have declined in frequency, according to industry figures.

One in 50 homeowners filed a water-damage claim each year between 2013 and 2017, the latest data analyzed by Verisk Analytics ’ ISO insurance-analytics unit. It crunches industry data on a five-year rolling basis. The 2.05% frequency rate is up from 1.44% annually between 2005 and 2009.

The bottom line is a $13 billion water-damage bill for homeowners’ insurance companies in 2017. Claims average about $10,000, ISO says.

“Wildfires, hurricanes and tornadoes catch headlines, but the reality is that the No. 1 kind of risk that the everyday consumer has is a water claim,” said Jon-Michael Kowall, an executive in the property-insurance business of USAA, one of the nation’s biggest home insurers.

“It is lurking in the house,” he said.

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To tackle the problem, Texas-based USAA has 6,000 policyholders testing water-detecting sensors in a multiyear pilot project. This type of experimentation, where devices are installed to spot potential water damage, has morphed into one of the hottest corners of InsureTech, innovation focused on the insurance sector.

Insurance giant Chubb Ltd. , one of the biggest insurers of high-end homes, says the number of annual water claims costing more than $500,000 has doubled since 2015, and those over $1 million have tripled.

Industry executives said there are myriad factors driving the costs higher.

The increase in overall claims is due partly to aging homes. A postwar building boom in the 1950s gave way to other booms, meaning much of America lives in houses that are decades old and become likelier candidates for plumbing failures. Even homes built during the real-estate bubble of the early 2000s can generate claims as they often have far more appliances with water connections, boosting leak possibilities.

In addition, more homeowners today want their laundry room on an upstairs floor.

“In the old days, if the washing machine had a leak, you’d get a mop” and scrub a concrete floor and be done with it, said Chubb Executive Vice President Paul Krump.

The damage can be particularly stunning in expensive homes.

Developer George Fermanian had always been more concerned about the ocean potentially damaging his two-decade-old oceanfront property in southern California. The property even has a 12-foot sea wall.

But last year, a second-story toilet tank cracked and spilled water in the house for an unknown, extended period when he was away. Oak floors, walls, artwork, electronics gear and seats in a home theater all were damaged.

“Walls are gypsum, wood absorbs water, insulation absorbs water, your cabinets absorb water,” said Mr. Fermanian.

Repairs on his property took eight months and cost Chubb just over $1 million.

Chubb also paid for installation of a water-shutoff system that detects unusual flows of water through the plumbing system, and can be set to shut off within a minute of such activity, Mr. Fermanian said.

In luxury homes, wet bars, water-filtration systems, hot- and cold-water taps, extra bathrooms and other features create typical 40 points of connection into the plumbing system, said Stephen Poux, a senior executive at American International Group Inc.

“That’s a lot of opportunity for a valve or a connection … to spring a leak,” he said.

Mr. Poux regularly meets InsureTech entrepreneurs and tests problem-detecting products. “I’ve personally piloted several devices,” he said. “They don’t always work.”

AIG and some other insurers offer premium credits for policyholders’ use of technology deemed effective.

Though insurers’ payments are growing, it doesn’t mean they pay every water claim that comes their way. Since the 1960s, standard homeowners policies have excluded storm surge and river flooding. And in general, homeowners’ policies cover “sudden and accidental” damage, not routine maintenance.

So homeowners who neglect an obvious slow leak for months before serious damage occurs could end up in a coverage dispute, insurance executives and lawyers said.

Unfortunately, said Kathy Thaut, general manager of At Your Service Plumbing in Tacoma, Wash., many homeowners take the view: “I bought this house, and I just get to forget about plumbing.”

While that attitude is good for business, it has created a staffing challenge. She is working with a trade group to encourage young people to enter the field.

“There are not enough certified  plumbers to handle the workload of homeowners,” she said.

Among participants in USAA’s pilot project is Mark Fredriksen, who placed sensors near the water heater and washing machine, and under kitchen and bathroom sinks, in his family’s 20-year-old home in Smithtown, N.Y.

So far, they have averted two potentially costly claims, he said. One sensor detected dripping from an old bathroom valve. One another occasion, as he was putting his children to bed upstairs, the kitchen sensor chirped. Water was spitting out from a dishwasher hose.

Without the sensor, the damage “would have been happening directly under our noses and we wouldn’t have noticed until the next morning,” he said.

Write to Leslie Scism at leslie.scism@wsj.com

7 Reasons We’re Facing a Global Water Crisis

What are they up against this year? Here’s a quick rundown on the growing global water crisis.

1) We’re Changing the Climate, Making Dry Areas Drier and Precipitation More Variable and Extreme.

Climate change is warming the planet, making the world’s hottest geographies even more scorching. At the same time, clouds are moving away from the equator toward the poles, due to a climate-change driven phenomenon called Hadley Cell expansion. This deprives equatorial regions like sub-Saharan Africa, the Middle East and Central America of life-giving rainwater.

Paradoxically, climate change is also increasing precipitation in other areas, and people who live near rivers and streams have the most to lose. Currently, at least 21 million people worldwide are at risk of river flooding each year. That number could increase to 54 million by 2030. All countries with the greatest exposure to river floods are least developed or developing countries – which makes them even more vulnerable to climate change and natural disasters. This summer, extreme flooding submerged over a third of Bangladesh, claiming over 115 lives and affecting 5.7 million citizens.

2) More People + More Money = More Water Demand.

It’s a simple equation: As populations increase and incomes grow, so does water demand. The world’s population, now at 7.5 billion, is projected to add 2.3 billion more people by 2050. How can the planet satisfy their thirst? Growing incomes also exacerbate the water problem, because of the water-intensive products—like meatand energy from fossil fuels—that richer populations demand.

3) Groundwater Is Being Depleted.

About 30 percent of Earth’s fresh water lies deep underground in aquifers. And it’s extracted daily for farming, drinking and industrial processes – often at dangerously unsustainable rates. Nowhere is this more evident than India, which guzzles more groundwater than any other country. 54 percent of India’s groundwater wells are decreasing, meaning that water is used faster than it’s replenished. Unless patterns shift, in 20 years, 60 percent of India’s aquifers will be in critical condition.

Unlike an incoming hurricane or a drained lake, the naked eye cannot see when groundwater reserves in aquifers are declining. Global water supplies are susceptible to this hidden and growing threat.

4) Water Infrastructure Is in a Dismal State of Disrepair.

Having enough water to go around is only the beginning. That water also needs to be transported, treated, and discharged. Around the world, water infrastructure―treatment plants, pipes, and sewer systems―is in a state of disrepair. In the United States, 6 billion gallons of treated water are lost per dayfrom leaky pipes alone. Built infrastructure is notoriously expensive to install and repair, meaning that many localities ignore growing infrastructure issues until disaster strikes, as it did in California earlier this year.

5) And Natural Infrastructure Is Being Ignored.

<p>Heavy machinery removing trees in Ecuador. Flickr/CIFOR</p> Heavy machinery removing trees in Ecuador. Flickr/CIFOR

Healthy ecosystems are ” natural infrastructure” and vital to clean, plentiful water. They filter pollutants, buffer against floods and storms, and regulate water supply. Plants and trees are essential for replenishing groundwater; without them, rainfall will slide across dry land, instead of seeping into the soil. Loss of vegetation from deforestation, overgrazing and urbanization is limiting our natural infrastructure and the benefits that it provides. Forested watersheds around the world are under threat: watersheds have lost up to 22 percent of their forests in the past 14 years.

6) Water Is Wasted.

Although it’s true that water is a renewable resource, it’s often wasted. Inefficient practices like flood irrigation and water-intensive wet cooling at thermal power plants use more water than necessary. What’s more, as we pollute our available water at an alarming rate, we also fail to treat it. About 80 percent of the world’s wastewater is discharged back into nature without further treatment or reuse. In many countries, it’s cheaper to receive clean drinking water than to treat and dispose of wastewater, which encourages water waste. This brings us to the next issue:

7) The Price Is Wrong.

Globally, water is seriously undervalued. Its price does not reflect the true, total cost of service, from its transport via infrastructure to its treatment and disposal. This has led to misallocation of water, and a lack of investments in infrastructure and new water technologies that use water more efficiently. After all, why would a company or government invest in expensive water-saving technologies, when water is cheaper than the technology in question? When the price of receiving clean water is closer to its actual service cost, efficient water use will be incentivized. And on the flip side, the poor often end up paying disproportionately high prices for water, stunting development.

It’s Not Too Late

Amidst these seven deadly water sins, there is good news: governments, businesses, universities and citizens around the world are waking up to water challenges, and beginning to take action. Each year brings more solutions – like using wastewater for energy, using restoration to bring water back to dry topographies, and monitoring groundwater levels more closely. However, even the best solutions will not implement themselves. Along with fresh water, political will and public pressure are critical resources in ensuring a sustainable future for all.

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Research casts doubt on EPA drinking water standard

More than 5 million Americans get their drinking water from public water systems that could contain hazardous levels of a chemical called nitrate, which is linked to public health risks — including cancer and birth defects. And the concentrations found in the vast majority of that drinking water would be deemed safe by the Environmental Protection Agency, according to a study published this month in the journal Environmental Health.

Nitrate occurs naturally in soil, water, and food. But when it is ingested, it can react with organic compounds in the body to form carcinogens.

A team of researchers at environmental health advocacy groups looked into nearly 40,000 public water systems that between 2010 and 2014 served 70 percent of Americans. They found that more than 1,600 of the systems they reviewed had average nitrate concentrations of at least 5 parts per million.

While that amount is just one-half of the level that the Environmental Protection Agency deems safe to drink, the lead study author told Grist that there is evidence that the federal standards may be outdated.

“The EPA is very slow in updating drinking water standards,” said lead author Laurel Schaider, a research scientist at the Silent Spring Institute, a non-profit research group in Massachusetts that studies the effects of chemicals on women’s health. In fact, just this week, Politico reported that the EPA won’t place federal limits on two chemicals associated with cancer and other health issues in drinking water — despite lawmakers on both sides of the aisle pressuring Andrew Wheeler, the agency’s acting administrator, to take action.

The EPA established 10 parts per million as its regulatory standard for nitrate in 1991 primarily to protect infants from “blue baby syndrome.” The syndrome, which can impact infants who are fed formula mixed with nitrate-contaminated water, causes a drop in in the amount of hemoglobin in the blood, which cuts the babies’ oxygen intake.

It’s unclear whether the EPA is considering revising its safety standard. In a December 2016 review of drinking water standards, it designated nitrate as “not appropriate for review at this time.” But in September 2017, the agency released a draft plan to reassess the health effects of nitrate, noting that health studies published since 1991 had called into question whether the EPA’s current maximum nitrate contaminant levels “provide adequate health protection for the general population.” The EPA declined to provide a comment to Grist.

Several studies have documented increased health risks — ranging from colorectal cancer, thyroid disease, and birth defects affecting the brain, spine, or spinal cord — stemming from elevated nitrate levels, even at concentrations below current federal regulatory limits. For example, a 2013 study of more than 4,000 mothers found that women who consumed water with levels well below the EPA limit were roughly twice as likely to deliver babies with birth defects. And a 2010 study of more than 21,000 women in Iowa documented an increased risk of thyroid cancer for people exposed to nitrate levels in public water supplies that were greater than 5 ppm for five or more years.

Although 99 percent of water systems surveyed in the Silent Spring Institute’s analysis showed nitrate levels below the EPA’s 10-ppm standard, 129 community water systems serving 144,000 Americans had an average nitrate concentration surpassing that upper limit. Private drinking wells weren’t included in this study, but are often located in rural and agricultural areas, where that study shows there tends to be more nitrates that can seep into the groundwater.

The biggest culprit for nitrate contamination is runoff from fertilizers or manure. That could point to why states in the West and Midwest, home to eight of the top 10 agriculture-producing states, had higher levels. The increased use of fertilizers, more prominent fossil-fuel combustion, and the growing popularity of nitrogen-fixing crops like soybeans have led to a doubling of the natural rate at which nitrogen is deposited into land since the 1920s.

Schaider’s team also found that water systems that served populations with a larger proportion of Hispanic people tended to have higher levels of nitrates. The researchers hypothesized that the correlation was due to the group’s association with agricultural work. But Hispanic residents didn’t appear to have high exposure to nitrates in the Midwest, suggesting a different explanation for the community’s outsized link to nitrates in their water.

Mary Ward, a senior investigator at the Occupational and Environmental Epidemiology Branch at the National Cancer Institute and a leading expert on nitrates, lauded the new research, which relied on publicly available data collected by EPA under the Safe Drinking Water Act, as the first assessment of the U.S. population’s potential exposure to nitrates through their public tap water.

Since most health studies on nitrate to date have focused on populations using public water supplies, a majority of the findings are for exposures below the EPA’s maximum contaminant level, said Ward. After all, public water utilities are mandated to provide drinking water that meets EPA safe-drinking standards.

Ward adds a note of caution when it comes to raising the alarm on nitrate levels below that current standard: “We need additional studies,” she wrote to Grist in an email. “The number of well-designed studies of these health outcomes are still too few to draw firm conclusions about risk.”

The study authors write that the issue merits further study, since nitrate has also been found to occur alongside other pollutants present in drinking water, including arsenic, pesticides, and other chemicals used to filter water. Robust monitoring of nitrate, the say, could be one way to improve water quality overall.

by Justine Calma | Jan 29, 2019

This Simple Box Serves Up Running Water And Clean Electricity In Remote Locations

Off Grid Box, an Italian startup, was founded to bring clean water and renewable energy to the millions of the people in the world who still live without. The box itself is a simple container, measuring six by six by six feet. With solar panels on top and water treatment inside, it can help remote communities with both off-grid energy and easily accessible filtered water. Founder and CEO Emiliano Cecchini has sold a few of the units, but he worries he’s not yet found the formula to take his invention to scale.

After three years on the market, Off Grid Box is a trusted enough product that 28 individuals and organizations have bought the container at $15,000 and up. Half the units went to nonprofits in Madagascar, Nigeria, Rwanda, Colombia, and elsewhere; another half to “cool guys that had a camper in the middle of nowhere, who want to be green, cool, resilient,” says Cecchini. One washed away to the Pacific Ocean: a unit that sat on the shore of Bantayan Island, in the Philippines, until it was caught by a 2014 typhoon.

“It’s not easy to find the right financing strategy, mentors, and accelerator programs.” [Photo: Off Grid Box]

But Cecchini, who is Italian, doesn’t feel the startup is yet at a point where it can ramp up sales and production, and get itself on stable financial footing. Selling one unit at a time isn’t particularly profitable (including after-sales) and it doesn’t get enough Off Grid Boxes out there in the world. “We’re looking for the next system to scale,” he says. “The idea came three years ago and, yeah, we’re kind of struggling to make it bigger. Back in Italy, it’s not easy to find the right financing strategy, mentors, and accelerator programs.”

Off Grid Box was recently selected for the 2017 cohort of the Mass Challenge accelerator program, in Boston, where Cecchini will hone a new business model. Instead of selling units to cool guys and NGOs, it now plans to install them where they are needed and then charge end-customers for access. For a few cents a day, people will able access clean water and clean power at a station continually attended by local people. “The new model is pay-as-you-go micro-payments, local contractors, and local empowerment,” Cecchini says.

The new business model is getting a thorough test in Rwanda, where the startup plans to install units in 18 villages. The government has commissioned 14 contractors to work on rural electrification, and Off Grid Box is partnered with three of them so far, Cecchini says. By 2020, it hopes to be serving 420,000 end-customers.
“The new model is pay-as-you-go micro-payments, local contractors, and local empowerment.” [Image: Off Grid Box]

Inside the container is a five-stage micro-filtration tank that takes in dirty water and produces an odorless, transparent, bacteria-free drinkable water, Cecchini says. A family of four pays 12 U.S. cents (100 Rwandan Francs) to fill up with enough water for the day. At the same time, each unit has solar panels sufficient to allow 300 families battery packs subsidized by the startup. These hold enough power to run three LED lights for four hours and to charge two mobile phones.While in the U.S., Cecchini is signing up impact investors and donors, who can monitor their projects remotely and online. Each installation costs about $15,000–which comes out of a joint financing pool. He thinks the units can generate 10% profitability and that there will be further revenue opportunities to grow the business in the future. Ideally, the boxes will become community hubs, with Wi-Fi and associated commercial activity. “Once we add connectivity and we have people attending all day, we have a strong financial business model. The Wi-Fi opens up services that could be backed by venture capital.”