Understanding Escape of Water (EoW): why it’s getting more expensive to insure your home against leak damage
Escape of Water (EoW) is one of the most common and costly types of property damage in the UK. From burst pipes in winter to slow, undetected leaks, the financial impact can be devastating. As a result, insurers have steadily raised EoW excesses to manage the associated risks, which has left property owners facing higher out-of-pocket costs. This article delves into the challenges posed by EoW claims and how proactive measures can mitigate these risks for both consumers and businesses.
Understanding Escape of Water Insurance Issues
What is Escape of Water (EoW)?
Escape of Water refers to damage caused by water escaping from plumbing systems, appliances, or heating systems. Basically – it’s a fancy name for a water leak! Common examples include burst pipes, leaking water tanks, and faulty dishwashers. These incidents can cause significant structural damage and require costly repairs.
Why have EoW insurance excesses increased?
EoW claims are expensive and frequent. Between 2014 and 2022, average excesses for EoW claims rose by 50%. Many home insurance policies now have excesses ranging from £500 to £1,000 for EoW claims, compared to standard excesses of £200 or less. The high cost of repairs—including structural work, replacing damaged furnishings, and mitigating mould—has driven insurers to increase excesses to manage their financial exposure.
EoW incidents have become more prevalent, accounting for approximately 30% of all UK insurers’ claims costs.
The financial impact of EoW claims is rising. In 2022, the total value of home and commercial EoW claims reached £987 million, a 15% increase from the previous year. This equates to around £2.7 million in daily EoW losses.
In reality, even these huge numbers mask the true scale of the damage costs associated with water leaks. This is because many people don’t actually have insurance or choose not to claim as they don’t want their premium to increase. We estimate the actual losses in the UK are probably closer to £4 million per day.
Insurers have adjusted excess amounts in response to these trends. For instance, AXA Insurance increased the EoW excess on its home insurance products to £500 in November 2023.
For businesses, the situation is even more severe. Commercial property insurance policies often carry EoW excesses in the tens of thousands of pounds (we’re aware of some companies subjected to excess as high as £150,000 for each claim!). Notable trends in the commercial sector include substantial EoW losses, with some claims exceeding £1 million. Complex water systems and extended periods of unoccupancy – for example in hotels or student accommodation – frequently exacerbate these issues.
Who is affected by rising EoW excesses?
Rising EoW excesses affect both homeowners and businesses in different ways. Homeowners face higher upfront costs when making claims, which can strain household budgets and deter people from addressing smaller leaks. For businesses, the impact is often magnified – high excesses can leave them underinsured for significant losses, particularly in sectors like hospitality or retail, where water damage can disrupt operations and result in expensive repairs.
What happens to my premium after I’ve made a claim?
After making an EoW claim, you may find it harder to secure cost-effective insurance in the future. Both your premium and your EoW excess are likely to increase significantly, as insurers view claimants as higher risk. This makes preventative measures even more crucial to avoid long-term financial consequences.
Preventing EoW Damage
Taking proactive steps to prevent water damage is key to avoiding the disruption and costs associated with EoW claims. Installing smart water management systems, regular maintenance, and monitoring can all help reduce the risk of leaks and bursts.
Can proactive measures help with insurance costs?
Yes. Many insurers recognise the value of preventative measures and offer discounts on premiums for properties equipped with water monitoring and shut-off technology such as Watergate’s Sonic. These discounts can be as much as 10% on EoW premiums. Even if your insurer is unwilling to reduce the premium, they are likely to reduce your excess.
What is the financial impact of investing in preventative technology?
With many EoW excesses now exceeding £800, the cost of proactive technology is often lower than the potential out-of-pocket expense for a single claim. For example, the price of Watergate Sonic (at £299) is far lower than the excess most homeowners would have to pay on a claim. Additionally, avoiding the disruption and stress of water damage can save significant time and money in the long term.
Take Control of Your Property’s Safety
Understanding the risks and costs associated with Escape of Water is essential for both homeowners and business owners. Proactive measures, such as smart water management solutions, can help mitigate these risks and potentially lower your insurance costs. To learn more about how much water you use and what you could save with Watergate installed in your home, check out our free Water Impact Calculator. If you’re a business, our free ROI Calculator will help you understand how you could save on insurance, alongside other costs, by using Watergate.
Gareth is a self-confessed ‘water geek’ and sits on a number of industry water efficiency working groups. He is head of communications at Watergate.