In an effort to decrease rising operational expenses and create new and sustainable Ancillary income sources we have decided to follow proven industry best practices and implement a
Mandatory Renters Liability Insurance program for our residents.
Mandatory Resident Insurance Programs have been successfully executed across the country in millions of apartment units, in a wide range of market conditions and portfolio demographics. Other operators all agree the success of these programs has been one of the most efficient and profitable operational initiatives implemented. In fact the requirement has had no negative impact on occupancy or rental rates as the residents clearly see the benefits to themselves and their community.
Renters Insurance by definition is the combination of Liability and Content Coverage. In most markets, an owner can only require a resident to carry Liability coverage which essentially covers damage to the asset. Annual premiums are typically less than $9-$10 a month to the Resident. When partnering with a Preferred Provider, residents will be “pre-approved” and can obtain coverage quickly and easily. Residents have the options to add content coverage to protect their personal belongings in the event of such things such as theft, fire, flood, etc. Generally the property will be able to file property related claims on the resident’s behalf.
Loss Recovery: With a mandatory liability program, your asset is now better protected by the resident’s liability policy and will have an opportunity to recover losses from the renter’s insurance company in the event of an accident or incident. This requirement adds a new and valuable layer of risk protection for the property owner. Average loss recoveries on most portfolios can exceed $25/unit per year. Owners and managers who have implemented mandatory liability programs have often been surprised that the recoveries from the resident’s insurance carriers far exceeded their expectations. Many recovered losses were formerly being charged to repair and maintenance, concessions or were under the property deductible and therefore were not being reimbursed prior to the liability requirement.
Reduced Property/Casualty Insurance Rates: Often times properties have been able to reduce the costs of property insurance coverage by raising deductibles. In addition, mandatory liability coverage has been seen to reduce claims and losses at properties and this improved loss ratio has also led to lower insurance costs. Some carriers may also offer a substantial discount on premiums when a property implements a mandatory program.
Ancillary Income: Properties can be paid marketing and administrative fees in return for performing marketing duties related to the insurance program. A successful Preferred Provider model could average 60% penetration and portfolios could expect an average of $15 / a unit annually.
Protected Residents/Community: Many Industry studies are showing that residents actually prefer communities that have an insurance requirement and may be more likely to rent. Operators across the country all agree that despite some initial hesitation from the management companies, implementing a Mandatory Program does not have a negative effect on occupancy, rents or the competitive position of the property. In fact, it is likely many of your competitors and “market comps” already enforce this requirement.
Increased Asset Values – The increased income and decreased uninsured losses will increase NOI. In addition, a lower likelihood of incurring insured losses (due to a higher % of insured residents) will also increase the value of the real estate asset.
By working with a preferred provider, the key to uninsured loss recovery is threefold:
- A high Policy Capture Rare – increasing the odds that a resident is insured, this is obtained through proven implementation, onsite account management and integration through your property management software and lease documents.
- Achieving a high number of preferred policies will ensure that residents have coverage and that the claim will be handled quickly and efficiently by the “preferred underwriter” which is guaranteed to give you and your residents fair and fast service, as well as higher rates of Ancillary Income to the property.
- A managed and monitored claims process. A partner should provide expert 3rd party claims assistance to your sites which will generate more claims and ensure a quick process and a higher likelihood of payment on valid claims, as well as improved loss history for your property and casualty policies.
Contributed by Melissa Foley, Vice President National Sales Multi Family Insurance Partners. You can reach Melissa at firstname.lastname@example.org.