Smart Design Elements Can Help Keep Insurance Premiums Down

7 min read

Design can help play an important role in mitigating rising affordable housing insurance premiums, attendees of a recent National Housing & Rehabilitation Association town hall heard.

Jake Darcy, senior consultant, Philadelphia Insurance Companies, Boston, told an NH&RA “Unmute the Mic” session that slips, trips and falls are the leading risk exposure that affordable housing owners face by frequency.

Radiant heating options for exterior walking surfaces, for example, can be incorporated into design plans. “Having radiant heat is an excellent way to ensure that you’re not going to have ice formation on those stairways,” he said.

Window control opening devices are another risk mitigator, Darcy said. These are built into newer windows so putting them into designs will help prevent falls from windows by children. (They can also be purchased separately if not already in the design of the building.)

“Any time I look at habitational buildings, I always want to make sure they are addressing this exposure,” Darcy said.

“HUD’s stance has always been they would rather see these devices in place to protect children than taking a hard stance in terms of the egressing component.”

As far as mitigating water damage, infrared cameras are good components for identifying freeze-prone areas and water infiltration.

The Infrared Spectrum
“An infrared camera can detect moisture in a wall or a ceiling if you are concerned there may be some leaks. If it’s a really cold day, you can utilize an infrared camera to see where the drafts in your building are, or where there are places that potentially have missing insulation and could lead to a pipe freeze.”

For security, guards and local police can be augmented by equipment, such as access control, lighting, CCTV cameras and burglar alarms. Resident suspicious activity hotlines and mass notification systems also demonstrate security awareness that can help keep down insurance premiums.

Other good devices to have are water flow monitoring and shutoff devices, and low temperature and leak detection devices, the executive said.

Water flow monitoring devices are good ways to be alerted to overflows from toilets or bathtubs “and a great way to further protect those areas of the building,” Darcy said.

While slips and falls are the biggest risk by frequency, fires are the biggest risk by severity, he told the town hall. Cooking, electrical and smoking are the biggest causes of fires.

Cooking fires “continue to be the main element of exposure,” Darcy said, but there are many devices that can be employed to lessen the risk. Smart burners that replace the heating element on an electric stovetop can limit the temperature of that heating element, so cooking oil can’t achieve a high enough temperature to cause flames, while knob controls can limit temperatures and also prevent child activation. Automatic shutoff devices can regulate time and temperature and even have motion-sensing capabilities.

Auto-out fire stop cans are another device that can be easily installed above cooking surfaces. They activate before sprinklers do and have a six-year product life, Darcy said. They are activated when a fire ignites a wick on the cans.

In the behavioral area, posters, flyers and meetings can educate residents in the proper mitigation of fire risks.

Electrical Fire Hazards
For electrical fires, “Federal Pacific Electric (FPE) breakers and aluminum breakers are always red flags for underwriters, so those are definitely things worth addressing,” he said.

On smoking, communicating policy to residents is key, as well as monitoring and enforcement of the policy. Residue testing kits can also come in handy in dissuading tenants from smoking.

A second speaker at the panel was Geoffrey Green, vice president for administration, Preservation Management, South Portland, ME, which manages about 100 properties in 20 states with 450 employees.

“For us it really starts with building a top to bottom focus on safety and risk management. It has to involve everybody,” he said.

The way Preservation does that is by having a corporate safety steering committee of leaders from across the organization that meets every month and reviews incident reports, workplace injuries and root cause analysis reports and recommendations.

“That enables them to really drive that focus on safety and risk mitigation,” he said.

There is also a monthly safety meeting for all employees that features a safety topic of the month and provides a forum for employees to identify any risks that they see in the worksite.

Like Darcy, Green went over safety procedures around preventing fires and slips and falls at properties.

When Fire Stops Walk Away
“We do have fire stops installed at all our properties,” he said. There is an overhead expense with them, though, and they need managing, as they can “walk away” or be tampered with, “and they do have expiration dates,” Green noted. Preservation does quarterly unit inspections and checks the expiration dates in case new ones need to be budgeted for the next year.

No smoking policies are included in virtually all of their properties, as lease addendums. “We’re finding that non-smokers increasingly are sensitive to people smoking where they’re not supposed to be, so we get lots of reports,” he said.

One of the things Preservation has just started doing is a certification that is reviewed and signed by every resident when they move in and each year at their recertification. It deals primarily with cooking safety. “Its basic guidelines: ‘Stay in the kitchen when you’re frying or broiling or baking or even boiling water. Never leave the apartment when you’re cooking. Don’t cook while you’re sleepy or have consumed alcohol.” Green said. “There is a notice that failure to comply would be a safety hazard and be regarded as a serious lease issue.”

Preservation also prohibits supplemental heat sources in its units, he said.

In terms of slips and falls, “We do have the temperature signage Jake referred to,” he said. Officials also do a daily walkaround, as well as formal monthly inspections.

Snow and ice removal policies are getting more focus, Green said. “It’s important to be clear what the property’s responsibility may be and what the resident’s responsibility may be.”

Many slips and falls happen when residents clear snow, he pointed out.

Guarding Properties 24/7
For crime prevention, Preservation is making increased use of electronic surveillance in addition to security guards, he said.

“We find it’s a good deterrent because the surveillance is there looking at the property 24/7. It does help to deter criminal activity.”

A recent major focus has been rules around firearms and weapons, Green said. The rules prohibit carrying firearms in any common area of the property, and they apply to guests, as well as residents.

Violations result in terminations of leases, Green emphasized.

Contractual risk mitigation “is an increasing challenge for all of us,” Green said, with insurance requirements in management agreements. “Our owners all carry liability insurance, and that insurance is primary. We have contingent liability coverage. We have contractor indemnification language and insurance requirements.” That includes when contractors want to use their own forms.

“Contractors are getting very good at transferring risk. I’ve seen incredible things” in these contractor forms, Green said. “We’ve seen contracts where the indemnity says we’re responsible for anything we do, we’re responsible for anything they do, and we’re responsible for anything anyone else does.”

He remembered one contract that limited the contractor’s own liability to $2,000.

It’s wise to review the actual insurance policies as well, he said.

“Continuous improvement” is “by far the most important thing we’re doing,” he said. It starts with a robust incident reporting system and includes a root cause analysis of all casualty events, no matter how minor. Some lessons to be learned here include the need to inspect placement of the fire stops, the need to formalize snow removal policies, and the need to revise snow removal contracts to include responsibility for removing ice.

Owen Callaghan, executive vice president and practice leader, property and casualty, Hays Companies, Arlington, MA, served as moderator for the session.

Mark Fogarty has covered housing and mortgages for more than 30 years. A former editor at National Mortgage News, he has written extensively about tax credits.