Study 4: Underwriting the Risk: Property - Summary (Part 1)

Question 1

COPE

Answer 1

• Construction
• Occupancy
• Protection
• Exposure

Question 1

Construction

(COPE)

Answer 1

• Six categories of building construction: frame, joisted masonry, non-combustible, masonry non-combustible, modified fire resistive, and fire resistive
• Materials used in the walls, roof, and floor, and their fire rating
• May also include the size of building, its age, the number of stories, and info on the heating system

Question 2

Occupancy

(COPE)

Answer 2

• Refers to the use of the building
• In a home, it’s important to know if the building is owner occupied or rented. Also if the owner works from home, and if so, what do they do
• For a commercial property, the type of business is the main consideration. If more than one business in the building, the other occupancies are also relevant (ex. the risk may be a shoe store but it could share a building with a woodworking shop)

Question 3

Protection

(COPE)

Answer 3

• Refers to both public and private protection
• Public: availaibility of fire departments, the distance from the closest responding department, and fire hydrants.
• Private: sprinkler systems, fire extinguishers, whether there is a fire alarm (if so, is it capable of calling out to a fire department automatically) or a burglar alarm

Question 4

Exposure

(COPE)

Answer 4

• Refers to the possibility of loss caused by an insured peril in a neighbouring building or the general characterstics of the area in which the risk is located
• Sharing a building with other occupancies can result in damage if the other occupancies suffer a loss (i.e. fire)
• Residential areas have regulations regarding distance between homes to reduce fire exposure

Question 5

Items to review in regards to the construction of a building

Answer 5

• Size of dwelling
• Type of construction
• Type of heating
• Age of dwelling
• Under construction or renovation
• Concealed spaces

Question 6

Size of dwelling

(Construction)

Answer 6

• An unusually large house may encourage a closer look at the applicant’s finances
• Size may also be relevant to the physical risk (ex. larger houses have greater exposure to loss from adjacent house fires by being closer)
• If larger than other homes in the area, could indicate that additional construction or renovation has been completed

Question 7

Type of construction

(Construction)

Answer 7

• Standard construction: brick, brick veneer, or wood-frame walls with wood-joist roof decks
• Unusual would be homes with new or emerging construction types (ex. old automobile tires to build an environmentally friendly home)

Question 8

Type of heating

(Construction)

Answer 8

• High hazard types of heating and others with little loss experience, such as outdoor furnaces
• Non-standard fuels (ex. wood or corn pellets) might increase fire hazard
• If heated by oil, are the tanks above ground or below? Do they leak?

Question 9

Age of dwelling

(Construction)

Answer 9

• The older the dwelling, the drier and more flammable the wood used in construction
• Older dwellings have a higher risk of faulty wiring (ex. knob and tube wiring used in the 40s and 50s)
• Plumbing system in older homes could be a concern (ex. lead or galvanized pipes may corrode; tree root systems can damage drains)

Question 10

Under construction or renovation

(Construction)

Answer 10

• Risk of fire is greater for dwellings under construction or renovation
• Most homeowners policies exclude loss caused by such work. Additional premium may be charged while such work is underway
• The work itself may change the nature of the risk, so the underwriter will want to review (ex. home is now larger, higher value, etc.)

Question 11

Concealed spaces

(Construction)

Answer 11

• In older homes, changes in room layout or design may result in concealed spaces (ex. closets cut off from their rooms)
• Fires may start in these spaces due to old wiring and may burn out of control before being noticed

Question 12

Items to review in regards to the occupancy of a building

Answer 12

• Number of people in dwelling
• Number of kitchens
• Long- or short-term lease
• Tenants insurance
• Owner visits
• Home-based business
• Condition of the dwelling
• Vacant or unoccupied
• Common or special hazards

Question 13

Number of people in dwelling

(Occupancy)

Answer 13

The more people, the greater the amount of activity that could lead to a fire or other insured loss. Owner-occupied buildings are generally lower risk than tenant-occupied dwellings, since the owner has more of an interest in protecting the location.

Question 14

Number of kitchens

(Occupancy)

Answer 14

Indicates the number of families the dwelling is designed to accomodate, and thus can be compared to the actual number of families in the dwelling. Also indicates higher fire exposure since they tend to start in kitchens.

Question 15

Long- or short-term lease

(Occupancy)

Answer 15

Allows the underwriter to assess the stability of the tenant. Tenants with longer leases are generally more reliable and will display some care or sense of responsibility for accomodations.

Question 16

Tenants insurance

(Occupancy)

Answer 16

Existence of tenants insurance makes it more likely the owner’s insurer can subrogate against the tenant if the tenant is responsible for a fire at the building.

Question 17

Owner visits

(Occupancy)

Answer 17

The more often an owner visits, the more likely they are to notice any behaviour of the tenants or problems with the building that could lead to loss (ex. an illegal grow operation)

Question 18

Home-based business

(Occupancy)

Answer 18

Business activities and property are normally not covered by homeowner’s policies. The presence of a business may lead to a greater number of people at the dwelling, and some businesses may use hazardous materials in the course of their operations.

Question 19

Condition of the dwelling

(Occupancy)

Answer 19

Fire may be more likely if a dwelling is not well kept or maintained (ex. if the home is filled with papers, animals, junk, or hoarding, there are more sources of ignition and more fuel for the fire). Risk of personal injury is also greater due to increased hazards.

Question 20

Vacant or unoccupied

(Occupancy)

Answer 20

A loss may be more likely in a dwelling that is vacant or unoccupied. The loss is also likely to be more severe than if the occupants were there to mitigate it or call for help. A vacant or unoccupied dwelling may also be the target of vandals or be occupied by vagrants.

Question 21

Common or special hazards

(Occupancy)

Answer 21

• Common hazards: for a single-family dwelling, this would include wiring, heating, plumbing, and related concerns
• Special hazards: more often a concern for commercial risks (ex. flammable liquids, welding equipment, carpenter’s equipment and stock, etc.)

Question 22

Items to review in regards to the protection of a building

Answer 22

• Protected location
• Sprinklers
• Fire alarms

Question 23

Protected location

(Protection)

Answer 23

Some municipalities have larger and better water supplies, systems of fire hydrants, firefighting departments, etc. Is the fire department volunteer or professional? How far is the nearest fire station? How far is the nearest hydrant?

Question 24

Sprinklers

(Protection)

Answer 24

Sprinklers are becoming more common in large high-value homes. More common in multi-unit dwellings and condominiums as they may be required by the building code.

Question 25

Fire alarms

(Protection)

Answer 25

Proper fire alarms (i.e. those in apartment buildings and condominiums) are becoming more common in detached homes. Underwriter will want to know if they are local or centrally monitored. If central, which service monitors it and how reputable are they?

Question 26

Items to review in regards to the exposure of a building

Answer 26

• Detached or not
• Location
• Flood plain
• Sewer backup

Question 27

Detached or not

(Exposure)

Answer 27

Whether a dwelling is detached affects how likely that it will affect other dwellings close by, or be affected by them. Risk of fire spreading is higher if dwelling is attached to its neighbour.

Question 28

Location

(Exposure)

Answer 28

Different parts of Canada are characteristically prone to different natural hazards (ex. parts of BC and Quebec are prone to earthquakes, Ontario and Alberta are exposed to tornadoes, Manitoba has spring floods, etc.)

Question 29

Flood plain

(Exposure)

Answer 29

Most jurisdiction have laws preventing buildings from being built on flood plains, but this has not always been so. Many homes still built on flood plains (ex. 2013 major flood in Calgary)

Question 30

Sewer backup

(Exposure)

Answer 30

May be covered as a seperate endorsement depending on the state of sewer systems in given municipalities. Some companies may require the home to have a sump pump or backwater valve.