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Verified Burglar Alarms Reduce Losses

At a recent International Security Conference (ISC) law enforcement seminar, Chief Chris Vinson of the Texas Police Chiefs Association explained why verified burglar alarms work better: “We will give [them] the priority response [they] deserve. We will arrive on the scene in time to make an arrest. And making those arrests [is] what it is all about because when you increase arrests, you reduce the crime rate. When you reduce the crime rate, you are reducing property loss. When you reduce that property loss, it reduces the insurance rate for those property owners. When those insurance rates drop down [and] the crime rates drop down, then the property values go up, which makes our constituents happy.”

The burglar alarms matter so much because, with a video-verified burglar alarm, an operator at a central station can review on video what is happening at the site before calling 911 center. The operator serves as a virtual eyewitness to a crime in progress. And, when police are sure a crime is being committed, they respond faster and make more arrests.

(To see an excerpt from the seminar, click here:  https://www.youtube.com/watch?v=nX3IzynaUUY)

A recent meeting between several of the major alarm companies and Verisk discussed how best to collect and quantify the advantages of professionally monitored video-verified alarm solutions for the insurance industry. Insurers are looking for technology and data to help them contain costs, and law enforcement and alarm response times are a crucial component. In April 2015, the largest police chiefs association in the country passed a resolution endorsing verified alarms and priority response.

The Texas Police Chiefs definition of a verified alarm requires Central Station monitoring with operators specifically trained to review videos and communicate the pertinent information to law enforcement. Home surveillance systems might work as a nanny-cam but lack the protocols and processes for alarm response provided by the central station. (Here is a link to the Texas Police Chiefs resolution on verified alarms:  http://www.ppvar.org/_asset/wfdzry/TPCA-Priority-Response-Resolution-2015.pdf)

Without technology and new policies, property losses will only get worse as the number of officers declines. At the recent ISC conference, officials from Akron, Ohio, and Chula Vista, CA, said their police departments had already shrunk because of budget cuts, forcing them to reconsider response to alarms — responding to false alarms represents between 8% and 15% of total calls for service at the 911 center. Akron adopted a “verified response policy” in 2014, and over the past year burglaries went down 5%, with increasing arrests.

Retired Capt. Gary Ficacci said Chula Vista was policing 260,000 people with 212 police officers, one of the leanest staff/population ratios in the county. The economic downturn caused the city to lose about 40 officers and provided the impetus to change the alarm ordinance to promote a form of verified response. Chula Vista figures it spends more  than $100,000 in officers and staff for every arrest made in response to a burglar alarm, but video verified alarms could cut that number significantly.

How much better can verified burglar alarms actually be? Radius Security in Vancouver, Canada, just completed a short study of its verified alarms compared with the traditional, unverified alarms. For Radius, its verified alarms were 1,000 times more effective. The arrest rate for unverified alarms is between 0.08% and 0.02%, while arrest rates for verified alarms are often in double-digit percentages.

Why? Because law enforcement treat a verified alarm like a crime in progress instead of something highly likely to be a false alarm.

Texas Chief Vinson says, “The calls that truly merit a higher priority response, those get pushed to the top. Those get the response they need to actually make arrests, and that is what we are all going for here, because if you take that guy off the street that is committing the offenses and you’ve solved that crime you have probably solved a handful of crimes that occurred before that he has already committed that he confesses to. And then you prevent all the crimes that he is not going to commit while he is sitting in jail. So, it is a big deal to make arrests on one of these calls, because it makes a difference in the actual crime rate that affects that city.”

(For video on Radius Data, click here:  https://www.youtube.com/watch?v=AlXMGu-lT7g)

‘Smart’ Homes Can Have Stupid Features

Do people want faster response by the police to a burglar alarm, or do they want lights they can control remotely? That is a core question that the alarm industry faces as it undergoes seismic changes. Does the alarm industry sell security, including fast response by police, or does it sell the “connected” home?

Many are leaning toward an emphasis on the connected home. That’s why Google bought Nest, known for its smart thermostats, for $3.2 billion in early 2014 and then announced recently that Nest would buy Dropcam for $555 million. Dropcam uses small cameras to provide security services, though not as the alarm industry is doing. The alarm industry connects cameras to a central station, where feeds are monitored and police notified if there is a break-in. Dropcam uses motion sensors to alert the user to any possible problems; the user then checks the video feed from his phone or computer and, if necessary, contacts the authorities for help.

Whether the alarm industry chooses to emphasize fast police response or follows Google and tries to offer broad home automation solutions, there will be broad ripple effects, including for insurers.

From a risk-management perspective, there are two issues. The first is whether the home automation improves police response and reduces losses. Ultimately, however, the second issue is even more crucial: Do the new home automation services actually introduce new risks and enable high-dollar losses through remote vandalism, including frozen pipes and catastrophic water damage?

Concerning the first issue: At a time when declining budgets are forcing police to reduce the number of officers responding to property crimes, home automation has hijacked a large slice of the alarm industry and is minimizing police response. Catching burglars and reducing property crime has become secondary to lifestyle convenience features and home automation revenue streams.

Increasingly, alarm/security is proposed as just one more feature in home automation. But the new offerings generally use legacy alarm solutions, which have a false alarm rate of 98%. As a result, these alarms are only assigned a priority 3 by law enforcement, so police response is slow, if it happens at all. By contrast, new alarms – based on monitored video feeds, and with break-ins verified — are treated like a crime in progress, a priority 1. Responding officers run hot because they expect to make an arrest.

In an effort to confuse the issue and continue to sell legacy alarms, home automation suppliers sell the ability of the homeowner to remotely view cameras in the home as “video verification.” This claim is exploiting a naïve consumer. Home automation cameras are not monitored by the central station, and they do not provide faster police response. Remote viewing by the owner ends up being a glorified nanny cam.

Unfortunately for insurers, home automation has become the primary message of some of the historical burglar alarm companies, which have reengineered their companies. Security companies are now chasing smartphone thermostats and Wi-Fi-based lighting instead of focus on delivering police response to an alarm.

A joint study by the San Bernardino, CA, sheriff and police departments in 2011 found that the arrest rate for a traditional burglar alarm was only 0.08%. A five-year study completed by Pharmacists Mutual in 2013 found that, when police response was less than five minutes, the officers made arrests 21% of the time. This means that the likelihood of an arrest for monitored, video-verified alarms and priority police response is more than 250 times better.

Video-verified alarm systems monitored by a professional central station represent real loss control tforthe insurer. Video-verified alarms reduce claims. Monitored video alarms actually mitigate losses by delivering faster police response to an actual incident. Police make arrests and prevent the loss itself.

Concerning the second risk-management issue: Home automation introduces new threats for the insurer – catastrophic claims caused by remote vandalism. Imagine the damage to a Minnesota home whose furnace was turned off by malicious hackers while the owners were on a winter vacation. The costs for bursting water pipes and flooding the property for days would make most burglary claims seem paltry in comparison.

The problem is that home automation and the connected home create risks that have not been adequately identified and considered by insurers. Much has been written regarding identity or data theft caused by hackers exploiting weak computer networks for passwords and credit card info. The financial losses from this type of crime have had little impact on traditional property/casualty insurers, but home automation changes the risk exposure because now remote vandals can invade the network and take over the infrastructure and appliances of a homeowner to maximize damage without ever setting foot on the property. Home automation devices become a Trojan horse for vandals, and the more devices are connected, the larger the risk as each device introduces another potential hole.

The press is finally beginning to educate readers about the issue. A July 30, 2014, article in Computerworld headlined “Home Automation Systems Rife with Holes” explains, “A variety of network-controlled home automation devices lack basic security controls, making it possible for attackers to access their sensitive functions, often from the Internet, according to researchers from security firm Trustwave. Some of these devices are used to control door locks, surveillance cameras, alarm systems, lights and other sensitive systems.” Security Today published an article on July 16, 2014, about how hacked light bulbs can reveal a homeowner’s Wi-Fi password and actually give the hackers control over the home automation system itself. This excerpt describes the problem:

“It’s all the new craze: the connected or smart home, where at the touch of a button on your smartphone you can dim your living room lights, close the garage…. But, with sophisticated technology comes risk if you aren’t vigilant in applying the latest security updates to your smart home. In fact, the latest risk involves LED light bulbs that can be hacked to change the lighting and reveal the homeowner’s Wi-Fi Internet password.”

The entire home automation system is only as secure as its weakest link or device – devices that need to be kept updated with security patches as flaws are discovered. Unfortunately, many of these connected home devices are static and not even capable of being updated with new software patches. The connected home is now the Wild West of home security, and property/casualty insurers are likely going to be the ones left paying the bill.

The bottom line is that the home automation industry introduces threats that run counter to the risk mitigation insurers have traditionally found by using discounts to promote monitored alarm systems. In analyzing these risks, David Bryan, Trustwave researcher, states, “Anybody could have turned off my lights, turned on and off my thermostat, changed settings or [done] all sorts of things that I would expect to require some sort of authorization.” The proliferation of devices, protocols, apps and portals mean that the problem is getting more complex instead of calming down.

It is time for insurance companies to review their “alarm discount” and make sure that the discount encourages behavior that actually reduces claims. The alarm industry is promoting home automation to the consumer, but the features and benefits don’t actually reduce risk. Underwriters can reduce risk and minimize losses by encouraging their policy holders to install monitored, video-verified alarm systems that deliver faster police response. Any insurance policy that offers discounts for home automation systems is encouraging new and unexplored risks posed by remote vandalism, and possibly worse.

Video Alarms Go Mainstream

Video is now the most popular “option” on alarm systems, a fundamental change for the alarm business. Viewing cameras on a smartphone, known as “self-surveillance,” became a standard feature for all but the most basic burglar alarms.  Now, video is actually being delivered to the central station during an alarm event.  This is the next logical step in security, letting the central station operator verify the alarm and improve police response to deliver greater security.

Instead of just viewing a video of what actually caused the alarms, the central station operator can use the cameras to attempt to see why there was an alarm.  In 2004, when the industry standard was created, video verification was reserved for specialized applications.  Equipment was expensive and cumbersome to monitor.  Nearly a decade later, technology has changed, and video verification is moving mainstream.

IP cameras and specialized camera/sensor devices are now well under $100 and easy to install.  The last piece of the puzzle to fall into place was driving down central station monitoring costs.  Over the past couple of years, central stations have developed affordable video verification processes that fit the mainstream alarm business model.  These central station processes can be applied to a broad range of hardware, from IP cameras equipped with analytics to specialized sensor/cameras designed specifically for video verification.  Third party central stations are offering dealers video verification for as little as $5 over what they charge to monitor a traditional alarm.

Benefits

Contrary to common perception, video verification’s value is not primarily to reduce false alarms. From the property owner’s perspective, false-alarm reduction is more a side effect that “reduces a negative” rather than creating value with additional security.  Consumers looking to purchase “security” want the best security they can afford, and they typically equate this with fast police response.  Video verification delivers faster police response.  Because of historical issues, traditional alarms typically receive a “Priority 3” response from law enforcement.  In contrast, video verified alarms typically receive a “Priority 1” response and are treated as “in progress” calls by responding officers.  The difference in response times between a 1 and 3 is significant.   In Fairfax County, the affluent area around Washington, DC, a video-verified alarm receives response more than 12 minutes faster than a traditional alarm.  From a property owner’s perspective, a lot can happen in 12 minutes in a commercial burglary or home invasion.

Jurisdiction Video Verified Traditional Alarm Response Differential
Boston, MA 7:38 21:00 13:22
Charlotte, NC 5:10 13:30 8:20
Chula Vista, CA 5:05 19:18 14:13
Watertown, MA 4:00 23:00 19:00
Fairfax County, VA 6:00 18:02 12:02
Salinas, CA 2:54 39:25 36:29
Amarillo, TX 10:06 19:24 9:18
Barrie, ON 8:02 16:02 8:00

With reductions in municipal budgets affecting many jurisdictions across the US and Canada, law enforcement has downgraded response to non-verified alarms in an effort to save money.  Sometimes this means a “broadcast and file” policy, where the alarm is broadcast over the police radio and officers can respond if they have nothing more important to do.  Sometimes, police refuse to respond to non-verified alarms at all.  But these same financially stressed jurisdictions all continue to respond to video verified alarms.

The benefits of video verification extend beyond priority response.  A well-publicized court case recently sent shock waves through the alarm business when an industry icon was forced to pay a multimillion-dollar judgment to a woman who was assaulted after she entered her home.  The alarm system had worked.  The motion detector triggered at 10:00 AM, and the central station, after failing to reach the owner, dispatched the police. They found nothing amiss.   Throughout the day, the motion sensor sent in four additional alarms, but the central station was unable to reach the owner on these, as well.  After this rash of alarms, police told the central station that they would stop responding unless the keyholder met them at the home.  That evening, when the owner returned home after work, she was assaulted by an intruder who had been inside her home throughout the day.  This horrific incident simply would not have happened if the central station had been able to see the intruder who triggered the alarms.  Video verification means greater security because the central station operator becomes a remote eyewitness to the alarm event.

Monitoring

VideoWhen the industry standard for video verification was created in 2004, self-surveillance on smartphones was not even on the radar. Apple’s first iPhone did not even hit the market until 2007.  The early video verification process required the central station operator to manually access a camera/DVR when an alarm triggered and download the video for review.  This often required working with static IP addresses, firewalls and video management systems that were isolated from the central station automation software that ran the business.   All of this required specialized operators who were trained to manage video and operate multiple video systems remotely.  Technology changed all this.  Video verification is now done by the typical operator in the central station.  Central station automation like MAStermind, Bold, Dice, MicroKey, SIMS, and others have integrated video verification into their standard alarm processes.  In addition, there are third party solutions like I-View Now that enable any central station to do video verification without changing their automation software.  These central station solutions work with a wide variety of hardware, from IP cameras to specialized camera/sensors devices designed specifically for video verification.  Just as smartphones and mobile apps changed the lives of consumers, the central station solutions for video verification have made monitoring video alarms simple and inexpensive for the typical alarm dealer.

Market Penetration

Self-surveillance and home automation have created a paradigm shift in the alarm business affecting even the most basic alarm offering.  Declining video hardware and monitoring costs mean that video verification now fits the competitive business model of $99 down and a multi-year contract that finances the hardware/installation.  Commercial applications have been the first to embrace video verification.  The newest generations of hardware and monitoring services have finally reached the pricing level necessary to move into the competitive residential market.

Partners

Grand Prairie PoliceThe alarm business is built upon a partnership with insurance industry and law enforcement.  The insurers encourage their policy holders to install alarm systems to reduce claims and prevent loss.  The alarm industry depends upon law enforcement to respond to their alarms and protect their customers in the event of a burglary or intrusion.  Video verification is already strengthening this partnership. The insurance industry has taken notice of priority response and what it means to them in terms of reduced losses.  In January 2013, Pharmacists Mutual Insurance published the results of a five-year study that linked arrest rates and losses experienced to police response times.  Other major insurance companies like Hanover, CNA, Allstate, and State Farm are working on updating policies to encourage their policy holders to move to video verification.  While this is a slow process, the insurance industry has begun to turn the rudder, and the ship is in motion.

In the past decade, video technology has fundamentally changed law enforcement with cameras in patrol cars and on highways and even portable cameras worn by officers.  Law enforcement depends upon video, and video verified alarms are another step in this direction.  While law enforcement understands video verification means fewer false alarms, they also know that video verified alarms mean more arrests.   Officers have always been motivated to “catch the bad guys,” and video verification helps make this happen.

As Chief Steve Dye of Grand Prairie, TX, explained to the IACP committee on Community Policing in a recent presentation, “From our perspective, we see no difference between an eyewitness calling to report a crime and a central station operator calling to report a crime they have seen on video.  In fact, the fact that a video exists of the actual event could mean the central station call could even be considered stronger.”  Chief Dye is promoting priority response to encourage his citizens to install video verified alarms to help him in the battle against property crime.  It is making a difference. Currently, the response time for a video verified alarm in Grand Prairie, TX is less than two minutes.

Copper Theft Solution Reduces Claims For Construction Sites

Copper theft presents a significant challenge for loss control.

Unlike other property crimes where “recovery” goes a long way toward mitigating the loss, such as the recovery of a stolen car in an auto theft, the recovery of the stolen copper seldom impacts the size of the claim.

Copper theft is different because the damage done to a building stealing a few hundred dollars' worth of copper can cost insurers tens of thousands of dollars to repair. The typical copper theft claim involves the damage done ripping wires and plumbing out of walls or the coils from a rooftop HVAC system. In vacant buildings, thieves target water lines and sprinkler systems as well as the electrical wiring. Once a vacant property has been hit, thousands of dollars must be spent to bring it back up to code before it can be occupied. It is this “collateral damage” that makes copper theft claims so expensive to an insurance company.

The key to reducing copper theft claims is prompt police response. The faster law enforcement arrives, the less time thieves have to damage the property. Faster police response is what wireless video alarms deliver and why they are a valuable tool for loss control against copper theft.

Copper theft has impacted insurance companies across North America, becoming a mainstream problem covered by television news. The following reports from television news underscore much of what this article is attempting to communicate — a new paradigm to mitigate risk and reduce claims impacting the real world from Virginia to Arizona.

Construction crime is a close cousin to copper theft and has been a black hole for risk management with few affordable solutions. The nature of construction risk is temporary and this means that wired surveillance cameras and alarm systems are simply too expensive and cumbersome to install to make them cost-effective.

The technology challenges are significant: in addition to limited budgets there is often no power, no phone lines, and no easy access to internet. Policy holders do not want to spend large amounts of money for temporary infrastructure that has no value after the job is done. For construction, human guarding is the most obvious approach, but it is beyond the budgets of many job sites. With guarding cost prohibitive, from a loss control perspective there have been very few affordable options for mainstream policy holders to protect their projects. Construction remains a problem child for many insurers who are forced to raise deductibles and implement exclusions to make construction profitable.

The following newscast from Buffalo, New York describes the challenges of securing a construction site and successes found with wireless video alarm systems.

While human guards have become too expensive and unreliable for many sites, technology is improving and loss control has a new tool to secure construction sites. Portable wireless video alarms give loss control professionals an affordable tool to deliver police response to a job site before the damage occurs. These new wireless camera/detectors (called MotionViewers) sense an intruder and send a short video clip of the incident over the cell network to a central monitoring station for immediate review and police dispatch and priority police response.

The immediate review/response with a monitored video alarm has proven more effective than human guards as the sensor/cameras are installed in multiple points across the job site to detect and report any activity. The crucial factor in reducing claims for copper theft is immediate police response, and video verified alarms make all the difference — the monitoring central station operator is a virtual eyewitness to the crime.

Police treat a video verified alarm as a crime-in-progress — they respond faster and they make arrests. Case studies on video verified alarms have arrest rates of over 50%. One construction site in Arizona had 40 arrests over four months on a single site. Arrests make a difference because one arrest prevents an additional 30 crimes — copper theft is typically done by habitual thieves who target construction sites or vacant property.

To be affordable and effective, the camera/sensors must be easy to install, without the cost of trenching cables and running wires. Power is a challenge as many construction sites have only temporary power provided by generators during working hours. Many vacant building have no power at all.

The wireless Videofied alarm systems need no infrastructure to secure a site. They operate for months or even years on batteries, communicating over the cell network to the central station. These portable MotionViewers are more effective than fixed cameras because they can be moved to protect the assets on a job site as the project evolves. Portability is important because construction theft is often an inside job by a subcontractor familiar with the delivery and location of expensive materials or assets — and they know the locations of fixed cameras and how to avoid them. In contrast, magnetic mounts on the wireless MotionViewers enable the job supervisor to move the cameras, placing them on steel studs and tool cribs at the end of the day to protect what is most at risk.

Wireless video verified alarms for outdoor applications mean that loss control professionals have an effective tool to fight copper theft that is affordable enough for implementation by their policy holders. For more information visit www.videofied.com.