Using IR Surveys in Personal Insurance Pre-Loss Inspections

InfraMation 2013 Application Paper Submission

Austin Tucker 

Fireman's Fund Insurance Company

INTRODUCTION

In the world of homeowners insurance, the inevitable cost of doing business is claims and the subsequent  claims payment. The insurance industry has partnered with municipal services like fire and police  departments to mitigate losses with tools like smoke detectors and the introduction of personal property  inventories, “Take, Lock, Hide” programs, and the installation of burglar alarms. The rising numbers of  water losses, however, have yet to be addressed with public education outside Federal Flood programs. 

While most programs that aim to develop awareness about water damage mitigation in the public sector  are struggling to get out of their infancy, some insurance companies are taking steps to catch water  damage before it can become an issue with an individual homeowner or business. These pre-loss steps  include preventative measures such as alarm moisture sensors around appliances to more proactive  approaches such as the use of infrared cameras to find leaks before they are visible. While the thermal  imagining approach is slow and methodical, the results speak for themselves on its effectiveness. This  paper shows that thermal imaging to avoid water losses already demonstrates positive effects for both cost savings and customer service. Furthermore, the potential of the application has just begun to be  explored. 

The use of infrared scanning is a relatively new phenomenon in homeowners insurance and, in particular,  Fireman’s Fund. This paper examines the early results of infrared camera use among Risk Services  Consultants trained as Level 1 thermographers and analyzes the cost/benefit from the program by looking  at completed thermographic scans from homes with possible water anomalies in the past year. Also  presented are selected case studies from Risk Service personnel in the field along with an exploration of potential future applications for this technology in the industry.  

WHO IS FIREMAN’S FUND AND THEIR RISK SERVICE ADVISOR?

Fireman’s Fund Insurance Company was founded in 1863 in San Francisco. Named for an arrangement  to pay 10% of company profits to provide support for the windows and orphans of firefighters, the  company continues this tradition today with its Heritage Program. This program provides support to fire  departments around the country through grants and “volunteer support to local fire departments, national  firefighter departments, national firefighter associations and burn prevention programs at non-profit  organizations.” Today Fireman’s Fund specializes in providing insurance needs to both affluent clients as  well as to business, the movie industry, and farm and ranch services.  

Within Fireman's Fund Insurance Company, the first contact for insured clients is usually a Personal Lines  Risk Advisor who provides an accurate replacement cost on property as well as offering advice on-site for mitigation of potential risks. These risks may include, but are not limited to heat and smoke detector  placement, home maintenance issues that may pose a danger to the homeowner and/or guests, and  water damage mitigation. The consultant also locates home credits for the insured that may have gone  unnoticed during the policy writing period.

REASONS AND ASSUMPTIONS FOR THE STUDY

As stated earlier, using thermal imaging devices in the field is a relatively new in this field, particularly for  the personal side of the business. Although data is still being collected and correlated for more elaborate cost-benefit analysis theorems and charts, this paper will concentrate on the straightforward cost saving  potential provided by a thermography program. To accomplish this task, the following assumptions have  been made to round out the data for analysis: 

• The data for the calendar year of 2013 will not be complete as of paper’s submission in July.  Therefore, some information is duplicated in order to “round out” data. 
• Data obtained begins in the middle of 2012, so a “rolling” 12 month year is used.  
• Like a traditional calendar year, this “rolling” year has 4 quarters (3 months each), but they  are not typical quarters given the months that they fall in. 
• The third and fourth quarter results are an average of the first two quarters results. ((Q1R +  Q2R)/ 2 = Result used for Q3 and Q4). 
• Average Fireman’s Fund Insurance deductible is $3,000. 
• Average National Homeowner’s insurance deductible is $500. 
• The average water loss for a Fireman’s Fund insured is assumed to be $25,000. 

THE STUDY

The thermal imaging program at Fireman’s Fund began in August of 2012 with an initial group of  consultants who piloted the program to its second rollout of training at which point in January of 2013,  several more consultants were added. This puts the current thermal imaging team level at just under one third of all Risk Services Personal Lines personal. With data gathered from nearly a year of thermal  imaging, the sample size has been deemed sufficient to examine the benefit of the program. Preventative  infrared imaging to detect possible water anomalies with FLIR cameras was performed on-site by a  Fireman's Fund Risk Service thermographer. 

In order to gain a useable model for the purpose of this paper, a look at twelve (12) months of data was  done. Eighteen average thermal scans are performed during inspections each month, with an assumed  54 inspections per quarter, and 216 a year. At our current staffing level, we can project that around 10%  

of these inspections turn up water anomalies, giving a result of 1.8 anomalies per month. The yearly cost  savings can be assumed at around $180,000 with this data.  

It should be noted that no claims were filed for any of these surveys in which an anomaly was found. This  data alone demonstrates the potential cost savings for the Fireman’s Fund insuree: definitely less than  the average $2,500 deductible and, possibly, below the national average deductible of $500. By addressing the needed repair before significant water damage actually occurred, the home owner can be  assumed to have saved around $2,000 re deductible costs as well as immeasurable amounts of  inconvenience and hassle in the repairs. 

The benefits of this program are extending to the agency side of the insurance business. These agents can easily see how thermal imaging cannot only potentially reducing loss exposures, but can be used to  demonstrate that Fireman’s Fund is taking steps to ensure a strong customer service experience with its  Risk Management program. 

The question of “How measurable is this data?” can only be answered by comparing it to previous data  from before cameras were used. This could conceivably result in the limited set of data presented here  being “picked apart.” To avoid this issue, what is needed, of course, is both a larger sample size from a  larger data pool, and, even more importantly, time. With that in mind, we can postulate that as the sample  

size increases, the claim average of $25,000 will decrease due to the number of these inspections being  done and catching anomalies early on, thus decreasing the size and impact of the savings. 

CASE STUDIES

While the numbers can give a good broad overview of the impact of the thermography program with  Fireman’s Fund Risk Services group, case studies can best demonstrate the program’s effectiveness in  the field. While this program is still taking off and the learning curve is still steep, the anomalies seen in  these examples show how far this program has come in its short existence. 

All of the following examples are from actual inspections done by Fireman's Fund Risk Services Advisor - Personal Lines employees who are certified Level 1 thermographers in the normal course of their duties  in inspecting a home.  

CASE STUDY #1

A Fireman's Fund Risk Advisor was preforming a thermal scan of a newly built residence. During this  scan, a large cold spot was noticed on the first floor in the game room area of the home. The camera  showed a large cool area on the ceiling of a room indicating a water leak that was not yet visible to the  naked eye.

The consultant went upstairs to the room above the water leak to investigate further and found a wet bar  in the upstairs room. A scan of the bar showed that a water leak was coming from the area around the ice  maker. 

The consultant informed the homeowner about the discovery who then immediately told the building  contractor about the issue. The contractor came out and pulled out the ice maker to discover that the leak  was emanating from the back of the ice machine where an over-tightened plastic clip had cracked during  its installation. The contractor replaced the part and dried the sheetrock areas where moisture was  originally seen by Risk Consultant.  

The loss savings on this early detection have been estimated at around $250,000. With early detection, the leak was repaired quickly for only $50. While the scale of this find is not typical, it is a good example  of how useful and powerful the camera is to the not only Fireman’s Fund, but to the homeowner as well.

CASE STUDY #2

1. In this example, the thermal camera reveals a water anomaly resulting from an ice damming along a roof  line. Ice damming occurs when excessive heat in the attic causes snowmelt on the roof via heat loss in  the attic. The snow runs down the roof slope and refreezes in an area where the heat is not as excessive.  Once there, the newly formed ice dam blocks any water from draining off the roof. The excessive water  then leaks through the roof into the attic, insulation, and drywall causing damage. 

2.  
3. 
4.  
5.  

6. This particular incidence of ice damming was found in a home Michigan where the water behind the dam  had begun to seep through the home’s insulation and into the kitchen area.

7.  
8. 
9.  

10.  

    While these pictures do show water damage, there may also be an underlying issue of heat loss in the  attic that caused the ice damming to occur. Both the water damage and area of heat loss will need to be  addressed when repairs are made (which are still ongoing at time of this paper). 

CASE STUDY #3

The thermal imaging camera is often used to find cool spots, caused by water leaks, that show up in  sheetrock or plaster in stark contrast to the warm walls and ceilings that are being surveyed. However, when the leak occurs in pipes and tubing carrying hot water to a variety of appliances and areas the  subsequent anomaly is not seen as a cool spot, but rather a spot (or area) that shows hotter than the average room temperature.

CONCLUSIONS AND POSSIBLE FUTURE OF IR IN PERSONAL LINES

The future of thermography for insurers and insurees in water loss mitigation and associated cost savings is bright. Added applications such as locating hot breakers in residential breaker boxes and finding  missing insulation in homes for energy-saving purposes along with a multitude of as-yet-undiscovered  uses will make thermal imaging an invaluable tool to Risk Advisors in the course of doing their job.  

Whether mitigating potential losses (water damage prevention) or providing better customer service (energy conservation), infrared technology provides significant benefits to all involved. As Fireman’s  Funds’ IR inspection program rolls onward and begin to show its full benefit for water mitigation, new  avenues will naturally show themselves and create the need for additional certified IR professionals camera. 

ACKNOWLEDGEMENTS

The authors wish to thank all the staff of Fireman’s Fund Insurance Company that assisted in the  collection of data that made this paper possible.

ABOUT THE AUTHOR 

Austin Tucker is a Level 1 thermographer with over 10 years of experience in the personal insurance  industry.