Chubb Aims to Ward Off Insurance Claims

CHUBB GROUP of lnsurance Companies has joined a growing trend amongresidential insurers employing damage-control inspectionson luxury homes that are typically used on commercial properties. The insurance industry expects the move to preventcostly damage.

Warren-based Chubb, which targets high

net-worth individuals around the world through its personal insurance division, this month began offering free to existing policyholders a scanning service that can detect moisture and electrical hot spots behind walls and in between floors of their homes. The work is done with infrared-or thermal-cameras used regularly by the military and fire departments to assess risk and curtail their costliest claims, according to experts.

Chubb expects about a 13 percent return-on-investment on the service, called Masterpiece Homescan, which uses 11 infrared cameras made by Oregon-based Flir Systems that cost $10,000 each, says Mark Schussel, spokesman for Chubb. The biggest costs associated with the service lie in training appraisers on how to use the equipment and evaluate the results, he says.

Chubb bas been providing a similar service to commercial customers for about a decade and has tested Masterpiece Homescan in the homes of about 400 high net-worth policyholders since January, says Schussel. The company says it has no plans to charge homeowners for the service in the future and, in fact, sees it as a selling point for retaining and attracting new customers.

Still, Chubb is jumping on the bandwagon later than competitor AIG of New York City. Stephen Poux, vice president of loss prevention for AIG's private client group, says AIG has been providing free thermal scans for policy-holders in homes valued at greater than $10 million since 2004.

"These are homes that start to get commercial in nature. A lot of the systems you would see [in homes valued at $10 million and above! are commercial-significant electronic systems used in smart houses, complex plumbing because of a dozen bathrooms," he says. "The potential for catastrophic loss from a simple failure of a device is significant."

AIG uses one thermal camera that cost $30,000, Poux says. Infrared imaging is part of the company's engineering inspection program that has averted several millions of dollars of losses during the last two years, says Poux.

AIG's decision to use the technology in million-dollar homes has already paid off.

The infrared technology detected moisture-mold's precursor- in a policyholder's home that was caused by a slow leak in bathroom plumbing. Poux says the discovery saved AIG from paying out huge sums of money.

Water damage and freezing, a category that includes mold, and destruction caused by fire and lightning accounted for almost 40 percent of home-insurance losses in 2004, according to the Insurance Information Institute, a research group based in New York City.

The insured contents inside high-end homes are also a concern, says AIG's Poux.

"If we're talking about art collections and fine furnishings that are really subject to controlled humidity levels and temperature, it's really important that heating and ventilation and air conditioning systems work as they are supposed to," says Poux.

Chubb is hoping its foray into such inspections produces the same cost savings.

Christie Alderman, client services manager of Chubb's appraisal department, says the infrared inspections will "reduce the possibility of expensive claims by catching them earlier in the process and help avoid losses altogether" in the homes of people who request them.

Any object that is warmer than its immediate environment will show up as black or red on an infrared camera's viewfinder, depending on the color palate being used. A scan could take hours to complete depending on the size of the home, says Alderman.

When Chubb appraisers see a problem through the cameras, they recommend that policyholders have it fixed by one of the 1,600 home repair and security companies across the country that make up the insurer's preferred network of service providers.

Getting some of that business may be companies specializing in mold remediation. Infrared imaging "is a perfect technology for detecting the energy that mold gives off, Mold claims are huge right now," says Mary Ann Cook, director of curriculum at the American Institute for Chartered Property Casually Underwriters and Insurance Institute of America, a Malvern, Pa.-based nonprofit group that offers educational programs and professional certification.

Insurance companies like Chubb and AIG have been using thermal cameras for years to inspect their commercial customers' structures, but the devices are a fairly new phenomenon in personal insurance, says Craig Weber, a senior analyst with Celent, a Boston-based research and consulting firm.

Weber says bringing the cameras into the homes of high net-worth individuals "might be a gray area. If [insurers] can position it as something where they can break even and offer it as a value-added service for the client, that might make it worth doing. The problem is rationalizing the predictive value of the tool versus its cost."

He adds that insurers will eventually offer infrared inspections to customers who can't afford luxury homes. "I 'm not sure where the floor is now but eventually the costs will come down enough to make the technology applicable beyond the high net-worth category," he says.