Chubb’s report on internal water damage offers a case study of a client who owns a beautiful historic home as part of a property portfolio.

On entering the ground floor kitchen, a housekeeper discovered water pouring out of a cupboard, spreading across parquetry flooring in the open plan kitchen and leaking into the lower ground floor and basement.

The leak was caused by a burst connection where a pipe had been plumbed into an appliance, and the final cost for restoration and loss of rental income came to $2.5 million.

The example is at the high end of the market, but Chubb’s Personal Lines Underwriting Manager Australia and New Zealand Michelle O’Dowd tells insuranceNEWS.com.au it is typical of events the company is seeing.

Increasing claim costs linked to internal water damage are an industry-wide problem that has gained greater prominence in the past few years.

Suncorp Acting CEO Steve Johnston last week identified tackling non-hazard water claims as a priority for this financial year, after they contributed to an increase in home claims costs in the past 12 months.

“This has been an issue globally that has impacted a lot of insurance companies,” he told reporters. “One of the factors I would point to is just the nature of house construction these days.”

Such changes include open-plan designs that allow water leaks to spread, the increasing number of bathrooms, plumbed-in fridges and other appliances, the quality of piping and increased use of flexi-hoses.

The other factor pointed to by Suncorp is the importance of handling incidents quickly and efficiently to prevent mould development claims driving a substantial cost increase.

Oliver Threlfall, CEO of recovery company Steamatic, says a key problem for the industry is the way less reputable repairers, who may have been called in by the householder, respond to incidents.

That may include pushing up costs for mould, when it should never have been an issue if properly assessed and handled in the first place.

“There are a lot of independents who don’t really work for insurance companies who are maximising the claims,” he says.

Cheaper appliances and fittings and do-it-yourself trends may also be contributing to the number of incidents, while there is a natural increase from population growth, he says.

Two years ago IAG reported that faulty flexible hoses are the leading cause of household water damage. With a 10-year lifespan and typically being out of sight, they can prove to be a “ticking time bomb”. But an IAG spokesman told insuranceNEWS.com.au the company has seen a decrease in such claims over the past year.

Australia’s overall experience in recent years has seen it following a trend in the US, where there has been a focus on the internal water damage problem for more than a decade.

The frequency of claims causing more than $US500,000 ($736,100) damage has reportedly doubled since 2015, while a Verisk Analytics ISO unit report found that each year from 2013 to 2017 one in 50 homeowners in the US filed a water damage claim.

Chubb Australia says the average size of internal water damage claims jumped 72% to $30,361 last year, from $17,627 in 2014.

Water damage now accounts for 34% of Chubb property-related claims by homeowners, compared to 16% for fire and 9% for burglary, according to the report it released last week titled Get Smart About Water Leaks.

While there has been plenty of focus on external flood and storm damage, or risks from burglary or fire, there is less attention by householders on this danger inside the house.

“Despite water damage being one of the most common property damage-related claims homeowners are not well informed when it comes to preventing water-related losses,” Chubb’s Head of Personal Risk Services Asia-Pacific Greg Hicks says.

Ms O’Dowd says the insurer is highlighting the importance of regular maintenance checks and options such as installing shut-off vales or turning off water at the mains when people go on holiday.

“For those of us living in urban areas, the bushfires or floods that are rightly the centre of attention, are perhaps not the thing we need to worry about,” she says, noting the extent of disruption after a water claim is also often underestimated.

“Quite often the damage can be so extensive that people have to move out of their home while repair work is carried out, and whether that is covered by your insurance policy or not, it is still a huge imposition on people and a huge disruption.”