Water damage has overtaken burglary as the most common claim for US small businesses, underscoring a growing gap between risk awareness and real-world prevention even as smart technology becomes more widely available.
According to new claims analysis from The Hartford, water leaks and freezing-related losses now account for roughly one in five small business claims, a sharp increase from a decade ago.
Chris Jones (pictured), head of small business at The Hartford, said the trend reflects a convergence of weather volatility, aging infrastructure, and operational realities that many small business owners and their brokers continue to grapple with.
“Small business owners juggle a lot,” Jones told Insurance Business America. “They’re managing inventory, accounting, staffing and training. When a loss happens, whether it’s water damage or an injury, it’s incredibly disruptive.”
One of the most significant drivers behind the rise in water claims is the growing frequency and severity of freezing events in parts of the country historically unaccustomed to prolonged cold.
The Hartford’s data shows that when deep freezes hit southern states, water and freezing damage jumps to the top of the frequency list. Practices that are second nature in northern climates (e.g., dripping faucets, opening sink cabinets or maintaining heat overnight and on weekends) are often less common in warmer regions.
“In many of these areas, building codes simply aren’t tuned for cold weather,” Jones said. “We see uninsulated water lines running through unheated attics, which becomes a recipe for significant losses when temperatures drop.”
Compounding the issue is aging municipal infrastructure. In older cities where storm and sanitary sewers are interconnected, heavier rainfall can overwhelm systems and force water back into buildings through sewer lines. Jones noted that these events are effectively flooding losses, and they are becoming more frequent as intense rain events increase.
“There are steps business owners can take, like installing backflow preventers, but many don’t realize they’re exposed until after a loss,” he said.
While water losses are rising in frequency, they are also becoming more expensive. Inflation in building materials and skilled labor has pushed up the cost of repairs across all property perils, including fire and wind to water damage. The Hartford’s analysis shows that water and freezing damage now ranks as the fourth most expensive small-business claim, averaging roughly $35,000 per loss. Fire remains the costliest peril, with average losses approaching $80,000.
Despite broader adoption of smart technology, Jones said losses continue to escalate largely because detection often comes too late. “The longer a water loss goes undetected, the more severe it becomes,” he said. “A small leak can turn into a major claim, especially if it happens when a business is closed or in a remote part of the building.”
This challenge is particularly acute for tenants. Many small businesses lease their space and lack direct control over building systems where leaks originate. In those cases, real-time monitoring can mean the difference between minor damage and a full-scale shutdown.
The Hartford has increasingly partnered with sensor providers to support connected policies that enable real-time alerts for leaks or temperature changes. While these tools may not eliminate losses entirely, Jones said they significantly reduce severity by accelerating response.
Jones emphasized that brokers play a critical role in closing the gap between risk education and actual prevention. While technology is improving, adoption and proper use still lag behind more mature areas, such as theft prevention.
“Ten years ago, burglary was the number one claim. Now it’s number two,” he said. “That tells us technology like cameras and alarms has been effective. Water prevention is catching up, but it’s still behind.”
Slip-and-fall and other customer injury claims have also climbed, rising from fifth to third in both frequency and cost over the past decade. The Hartford attributes part of that increase to litigation trends, but also to higher foot traffic risks and weather-related exposures such as pooling water and ice.
At the same time, video monitoring, Jones said, serves a dual purpose: reducing incidents through better oversight and providing critical evidence when claims occur.
Looking ahead, The Hartford leader believes progress will depend on a combination of smarter technology, stronger insurer engagement and better-informed building practices. While there’s no single silver bullet, educating customers on the causes of loss, recommending practical prevention tools such as water sensors and cameras, and ensuring coverage keeps pace with rising costs will be crucial to protecting small commercial clients as weather patterns shift and losses grow more severe.
“When you put all those pieces together,” Jones said, “that’s how we deliver real peace of mind to small business owners in a changing risk landscape.”
