Premium Reductions and Insurance Benefits 

When talking to brokers about sprinkler protection, the one question we are always asked is, “How much we will save on our premiums”. Our analysis indicates that the installation of sprinkler systems can result in insurance premium reductions ranging from 30% to 50%. Businesses and property owners who invest in these systems benefit from lower premiums, and when we factor in that these savings are locked in each year moving forward, this can translate into considerable long-term savings. Additionally, properties with sprinkler systems often experience faster recovery times after a fire, reducing business interruption losses—another key consideration for both insured and insurer. 

The High Capital Cost and Payback Period 

Despite the clear insurance benefits, the cost of installing a sprinkler system remains a major financial hurdle for your clients. Depending on the size and type of property, the installation cost can be substantial, often requiring significant upfront capital investment. Based on our analysis, the payback period for sprinkler installations, when considering insurance premium savings alone, typically falls within the range of 7 to 10 years. Purely as a Capex hurdle for an investment decision, this doesn’t hit the mark for most organisations. This extended payback period means that your clients must weigh the long-term financial advantages against the short-term financial burden. 

Other Benefits 

Beyond insurance savings, there are other compelling reasons to invest in sprinkler protection that need to be factored into this cost benefit. A particular benefit that we always emphasise is the protection of your client’s market share. Protecting a key asset with sprinklers can mean that the operational response to fire events is quick, meaning that interruption of supply to customers is minimised, if not eliminated. Where this is the case your clients will avoid providing competitors with an opportunity to consume their market share. Sprinklers can also enhance property value and attract tenants who prioritize fire safety. For your clients, minimizing fire-related disruptions can preserve reputation and operational continuity, further justifying the investment. 

Conclusion 

While the high capital cost of installing sprinkler systems can make the decision challenging, the long-term benefits—particularly in terms of insurance savings, limiting interruption, protecting market share, and regulatory compliance—make it a worthwhile consideration. For your clients that take a long-term outlook, the investment in sprinkler protection provides not only financial advantages but also enhanced safety and resilience against fire-related losses. Ultimately, understanding both the cost implications and insurance benefits is key to supporting your clients in making an informed decision about fire protection investments. 

For more information and enquiries, please contact us.

According to the Australian Food and Grocery Council “the average food is moved in and out of refrigeration control 14 times before consumption. In one South Australian study, broccoli took 39 steps along the Cold Chain – having as many as 23 operators and 21 stages involved on the way – to reach consumers [1] The Cold Chain is a series of businesses involved in the manufacturing, shipping, storing, retailing and serving of fresh, chilled and frozen foods.”

Food producers and those involved in the supply chain therefore require a robust safety culture and Food Safety Plan. Risk management plans extend to identifying, analysing and prioritising a tailored solution and back up plan to minimise the disruption in the event of a disruption to any part of the supply chain. Insured’s will often only focus on their own business without considering the “what ifs”.

Considerations in the development of a Business Continuity Plan must include:

Key dependencies – critical plant and equipment, spare parts, power, alternate processing / storage capabilities

Contingency plan – documented strategy that can be implemented in the event of a loss or disruption

Customer / supplier dependencies – raw materials, alternate suppliers, alternate customers

In any business one of the key elements is to ensure that record keeping is of the highest standard. This is even more critical in the Cold Chain where products require storage in temperature-controlled environments. Any break in the chain can lead to product alteration, spoilage and, in extreme cases, illness for the consumer. Australians are estimated to be throwing away food worth $5.2 billion a year, including more than $1.1 billion worth of fruit and vegetables and $872.5 million worth of fresh meat and fish. [2] It has been estimated that contaminated food caused approximately 5.4 million cases of gastroenteritis annually in Australia. [3]

Depending on the circumstances, insurance policies may not cover these costs, highlighting the need for a rigorous risk management plan, including supply chain management.

An industry as diverse as food and beverage requires specialist underwriting knowledge and an understanding of the insurance solutions that are right for each circumstance. @Risk Underwriting aim to provide appropriate guidance and coverage to suit your needs.

[1] www.foodprocessing.com.au

[2] What A Waste, David Baker, Josh Fear and Richard Denniss

[3] Estimating foodborne gastroenteritis, Australia. circa 2000 (Hall & Kirk 2005)