Sometimes receiving a statement from your property insurance company can elicit the same feeling you get when you spot an envelope in the mail from the IRS: anxiety.
Indeed, multifamily owners are often shocked when they see large increases in their property insurance premiums. In response, you can look for other quotes, sure, but it’s easier to stay with your current carrier, right? But with the right information, you may be able to drastically reduce your premiums—and improve your coverage.
Your insurer calculates your premiums based on the information you provide. Too often, however, that information can remain outdated if you fail to notify your agent of important changes to your properties or business. By ensuring that your carrier has up-to-date files on your assets, their condition, and the status of your company’s claims, the carrier can recalculate your premium and may be able to come back to you with a lower figure.
A good agent knows what type of information can either remove a claim entirely from an owner’s loss-history report or significantly reduce the amount for which the claim is reserved. By pointing you to the right records, your agent can leverage that information into an argument for a rate decrease.
Dealing With Previous Liability Claims
Property claims are pretty cut-and-dried, but with liability claims, there’s more wiggle room. When an insurance carrier believes there’s an inherent risk that the same type of claim will continue to happen with a certain property or business, that can lead to much higher premiums. By showing your carrier that you’ve mitigated any liability risks on your property, you can get a reduction in those ever-increasing premiums.
Whenever you sell a property covered on your firm’s insurance policy, especially one on which you've made claims in the past, be sure to let your carrier know. The fact that the asset is no longer a part of the portfolio could make a major difference in your costs, because it now changes the overall risk outlook of your portfolio.
Similarly, say you have a property that’s had a history of slip-and-fall claims. Your insurer may understandably perceive that property to be high risk. Installing slip-proof stairs and slip-proof coverings on the development’s walkways could lower your risk exposure and prompt a reexamination of the risk profile.
Not all improvements have to be in place at the time of insurance renewal in order to realize a rate reduction. Often, it’s enough to show the carrier what’s being done to mitigate the multiple claims a portfolio may be experiencing. In one case, our company, Franklin Street, helped a client put together a proposal the firm ultimately sent to its insurance carrier detailing all the capital improvements the client was implementing for its portfolio in an effort to improve safety. When this proposal was finalized and presented to the carrier, we were able to negotiate a 30% decrease in our client’s liability premium.
Research, Document, Report
If you haven’t done so for 2018, prepare a report for your current and any prospective carriers that contains any plans your company has to make major, or even minor, improvements to your insured properties. These modifications can include better lighting, staffing changes among guards and on-site management, the addition of security cameras, pothole and curb repairs, and even appliance repairs such as replacing range coils with flat-top heating surfaces. Properly explained, each improvement can reduce the risk profile of a property.
We once presented to an insurance company a client’s portfolio detailing the portfolio’s history of both liability and property claims for the previous five years, outlining how many of the claims were linked to properties no longer in the portfolio. We also demonstrated that many of the claims were due to the previous owner’s poor management of the properties. We made it clear, as a result, that such claims would not continue over the next five years and that, in fact, the portfolio would soon be trending in a positive direction, due to the many capital improvements our client was making to the assets. The approach succeeded, demonstrating that the right investment in a distressed property can generate a return on investment by not only raising its fair-market value, but also by lowering its risk profile and decreasing the associated insurance costs.
Challenging the reserve on a claim in process can lower premiums as well. A good agent will argue that a reserve limit might be set too high, for various reasons, and should be lowered in order to properly reflect the status of the claim. This reduction in reserves can lower premiums because insurance carriers look at these reserves to see where a claim is trending and use this information to raise or lower their rates.
Let’s say an employee of a roofing contractor suffers an injury and files a claim against the property owner. The insurer sets aside $100,000 because the fall seemed serious. A couple of months later, new evidence shows the injuries weren't as bad as originally expected. Instead of reserving at $100,000, the carrier now would need to allocate only $10,000 for the claim.
The agent might also find that the fall was actually a workers’ compensation claim against the contracting company and should never have been filed with the property owner’s insurance carrier in the first place. Many times, such updates or changes aren’t reported to the insurance carrier during the quoting stage, which means the claims could remain on the loss-history report unchecked. This often leads to premium increases that could have otherwise been lowered had the carrier received the correct information.
Property improvements and regular account-information updates can relieve the anxiety that often comes with premium-renewal time. The right team of agents and advisers can produce results that improve the owner’s pocketbook—and peace of mind.