In this episode of Sh*t You Wish Your Building Did, we sat down with Jay Scholten, Principal Consultant at JRS Innovative Real Estate LLC (Former VP – Asset Management Product Owner at PGIM Real Estate), and Rob Murchison, CEO of Intelligent Buildings LLC, to explore an angle on smart building ROI that most operators are missing entirely.

What if the technology investments you’re already considering could directly reduce your insurance premiums, unlock access to captive insurance programs, or simply keep your coverage intact in markets where insurers are pulling out?

The Insurance Market Has Structurally Shifted

Around 2017-2019, insurance premiums stopped following the predictable 2-3% annual increases that operators had budgeted for. Instead, costs started doubling, sometimes year after year. The driver? A surge in catastrophic loss events. The US went from fewer than 10 billion-dollar loss events annually to over 20. That’s draining the pool insurers rely on to cover claims, and it’s not refilling fast enough.

The result: insurers are pulling out of certain markets, reducing available capacity, and thinning coverage terms. Many owners are unknowingly taking on more risk through higher deductibles and policy exclusions, effectively self-insuring without realizing it.

Technology as a Negotiating Tool

While there’s no magic button that automatically reduces premiums, building technology can play a meaningful role in insurance negotiations. Systems like leak detection, which automatically shut off water when a sensor is triggered, have been around for years. Some insurers now offer direct premium reductions of 5-10% for buildings with these systems installed.

But the real value emerges at portfolio scale. Owners who can demonstrate, through data and documentation, that their buildings are operationally resilient have successfully avoided significant premium increases.

One example cited: a portfolio facing a 40-50% premium hike was able to negotiate away most of that increase by presenting evidence of risk mitigation measures across its properties.

Cyber Risk Is Part of the Picture

While property insurance and cyber insurance are technically separate policies, they’re increasingly interconnected. The same devices that mitigate physical risks, BMS systems, access control, IoT sensors, can also be vectors for cyber attacks if not properly governed.

A strong cyber posture signals to insurers that a portfolio is well-operated. Conversely, evidence of cyber losses at the building level can negatively impact overall policy renewals. Rob Murchison noted that some Intelligent Buildings customers are justifying managed services costs entirely through the premium savings, or simply by maintaining insurability in markets where coverage is becoming scarce.

Insurance as a Forcing Function for Governance

Both Jay and Rob agreed that insurance pressures are likely to drive more formalized governance around building technology. Just as IT systems are governed under frameworks like SOX in the banking sector, operational technology in buildings will increasingly require similar oversight.

Lenders and insurers are beginning to expect more sophisticated documentation of how buildings are protected and operated. Those who can demonstrate good governance will be better positioned to access favorable terms, or access coverage at all in hardening markets.

First Steps for Owners

1. Start with an internal conversation. Do senior executives understand your current risk posture? Are you leaving value on the table by not getting credit for systems you’ve already deployed?
2. Get visibility into your building technology. You can’t control what you can’t see. Conduct an inventory of your OT environment— routers, HVAC controls, water systems, access control, and the data they generate.
3. Build the story for underwriters. Collect and organize evidence that demonstrates how your buildings are being operated to reduce risk. This becomes your negotiating leverage at renewal time.

The Bottom Line

We can’t control floods, but we can control hacks. And in order to control, you need visibility. The opportunity here isn’t just about reducing premiums, it’s about running buildings more efficiently while simultaneously lowering your risk profile.

Insurance costs aren’t going back to where they were. But owners who take a proactive approach to building technology governance have a real opportunity to differentiate themselves in the eyes of insurers, and protect their NOI in the process.