What Is COPE Information & What Is COPE Information Used For?
Every industry has it’s fair share of acronyms, abbreviations and short forms. The insurance industry is no exception and insurance professionals are specifically trained to learn the meaning of certain terms and use them regularly them communicating with other insurance professionals as a form of short form. Unfortunately, many insurance professionals fall into this habit and continue to use acronyms like, COPE Information, when they are communicating with clients who rightfully have no idea what they are referring to or mean. The commercial insurance brokers at the Canadian insurance brokerage ALIGNED do their best to explain things like what is COPE information & what is COPE information used for? to their customers and other without using jargon as helping others better understand insurance is part of the value our business insurance brokers bring.
So…What Is COPE Information?
COPE is a term that is used for commercial property insurance to explain the aspects of a building that are key to determining commercial property insurance rates. COPE stands for the following:
- Construction – The C stands for construction and specifically is referring to the materials used to construct the building. More specifically is the frame of the building built with wood or steel and is the exterior of the building made of bricks, stucco, cinder block, siding etc.
- Occupancy – this refers to what is the building use for because a commercial building that manufacturers plastics or wood products is a very different risk profile than a commercial building used of warehousing metal parts.
- Protection – What is protecting the building from common insurance perils like fire, flood, theft etc. This includes having a functioning sprinkler system, third party monitored alarms etc.
- Exposure – are there any buildings or hazards that could potentially cause damage to the insured building.
What Is COPE Information Used For?
Once COPE information is gathered, what is COPE information used for? COPE information is used by underwriters to evaluate the riskiness of a building being damaged by events that are covered by insurance. More specifically a building with a wood frame, that is used as cabinet manufacturer that doesn’t have a sprinkler system and is next door to 3 vacant wood frame abandoned warehouses is a different risk than a steel frame, brick exterior, warehouse with full sprinkler, water and intrusion detection. Both locations will have very different rates and ultimately very different premiums if both buildings had the same replacement cost.
1. What are the characteristics of COPE?
COPE is an acronym that stands for the construction, occupancy, protection and exposure characteristics of a property. It’s a shorthand used in property insurance that refers to information that’s needed, and therefore gathered, by a person applying for some type of property insurance and their broker about the property they wish to insure.
2. What is COPE information used for?
COPE information is one of the many tools used by insurance brokers and underwriters in helping them assess the potential risks of a property.
The information for each COPE characteristic when combined with the rest helps insurance underwriters get a holistic view of the risks that a property is exposed to and is combined with further information (such as the insurance history of the owner of the property) to determine if the property is eligible for insurance coverage and how much the premium will be.
While COPE information is used for all property insurance applications, it plays a significant role in applications for higher-risk and harder-to-insure properties and industries (for commercial and industrial properties; more information below).
3. What does construction mean in COPE information and how is it assessed in insurance?
The construction characteristic of a property refers to the square footage of the property, the age of any buildings on the property and the materials that were used in building any structures on the property.
The square footage of a property tells a broker or underwriter the maximum possible losses of a property as well as the likelihood the entire property will be destroyed in one event. Basically, the bigger a property and/or building, the higher the maximum loss but the lower the chance that the entire property or structure will be destroyed in a single event.
The age of a building and the materials used in constructing the buildings on a property have a direct impact on the potential damage that can be caused during a peril like a fire, windstorm, lightning strike, earthquake, etc. In some cases, the age of a building and/or the building materials themselves can be contributing factors to the amount of damage done and possibly even be the cause of a fire or other disastrous event.
4. What does occupancy mean in COPE information and how is it assessed in insurance?
A property’s occupancy characteristic simply means what the property is being used for or who will be using it and what they do to help reduce their risks. COPE information is used for all types of property whether it’s residential, commercial, industrial, owner-occupied, renter-occupied, etc.
Obviously, the occupancy of a property plays a significant role in the insurability of a property and the price for that coverage. Generally speaking, a manufacturer who works with dangerous materials has more potential property risks than an accounting firm and a rooming house has more potential property risks than an owner-occupied home. And, as stated above, how the property owner and/or business operator deals with the risks of their operations and the steps they take to mitigate them also play a role in how the occupancy aspect of their COPE information is assessed.
5. What does protection mean in COPE information and how is it assessed in insurance?
The protection characteristic in the COPE acronym refers to the measures available to protect the property from destruction. In particular, your insurance company is looking at things like sprinkler systems, fire extinguishers, alarm systems, fire doors and fire walls, the level of experience of the responding fire service (e.g. paid vs volunteer), the capability of the water pressure and water supply in the area, distance to the nearest fire station and the distances and quality of surrounding fire hydrants, among other factors.
6. What does exposure mean in COPE information and how is it assessed in insurance?
Finally, in COPE information, the characteristic of exposure means the potential for losses that can come from the area surrounding the property. In other words, the insurance company wants to know about the neighbouring properties and if there are any threats or hazards to the property in question.
So far, all the COPE characteristics have dealt with internal factors and the risks they pose to a property. The exposure of a property causes the broker and underwriter to assess the external factors that can also impact the risks to a property. If the property is next to a steel mill, for example, the possibility of a fire increases compared to if the property is located next to a library. External exposures can also include geographic or environmental factors such as the potential for earthquakes, wildfires and flooding.