The underwriting process for commercial property insurance can naturally be quite complex. If you’re a building owner seeking commercial real estate insurance for the first time or if it has been awhile since you’ve had to purchase insurance, you might find yourself somewhat surprised at the massive amount of data that goes into underwriting an insurance policy.
Much of the necessary property underwriting information that goes into preparing a policy is known as COPE data. This stands for Construction, Occupancy, Protection, and Exposure. When you complete a commercial real estate insurance application, you will typically be required to submit most of this information.
Let’s take a look at each element of COPE.
This part of the COPE data actually contains three subcategories. They include construction materials, square footage, and age of the property. There are six construction classifications defined by ISO based on the damageability and combustibility of the materials used in the construction of the property. The more susceptible those materials are to damage, the lower the ISO rating. It should also be noted that the size of the property can influence a number of aspects of the commercial property insurance underwriting process. For instance, the size of the property will play a role in determining the need for a sprinkler system. It also affects the structure’s maximum possible loss compared to probable maximum loss. Finally, the age of the property must be taken into consideration, particularly in regard to the major systems in the building, such as the plumbing, roofing, HVAC, etc. The older the property is, the more likely it is that a major system will experience a problem, leading to a potential claim.
There are also two parts to the occupancy element of COPE: what it is that you do and how you manage the risks associated to your line of business. Regardless of which class of industry you’re in, it has its own unique level of risk. The greater the amount of risk, the greater the potential loss, which ultimately leads to a higher cost of coverage.
Naturally, your property insurer is going to be interested in property protection measures in order to mitigate potential property damage. Such elements of protection might include alarm systems, fire extinguishers, sprinkler systems, fire doors, etc. Depending on your property’s occupancy and construction, you may even be required to have certain protection systems in place.
The final element of COPE is exposure. As part of this aspect, the underwriter will analyze whether the property has any exposure to external hazards. Such hazards could be geographic in nature, such as earthquake exposure, wildfire risk, potential for damaging winds or water, etc.
Developing a solid understanding of COPE can help ensure that you’re as prepared as possible for the underwriting process. If you’re searching for new commercial real estate insurance, Evergreen Insurance & Risk Management can provide a variety of options. Contact one of our representatives today.