Sorting Through and Solving Renters’ Insurance Loopholes
Renters’ insurance is a standard requirement for apartment dwellers across the country. However, compliance is an enduring pain point for apartment operators, from meeting compliance to optimizing insurance tracking.
While many renters have adequate policies that meet community requirements, a notable number don’t; it’s too easy for residents to fly under the radar without it.
Most operators require documentation upon move-in that proves a resident has coverage should unexpected events occur. But there are loopholes. Sometimes residents cancel a policy after moving in and others forget to renew. Although operators are aware of uninsured residents, it’s historically been incredibly difficult – nearly impossible – to know exactly when a policy is canceled or no longer valid without a full audit.
“Residents can cause a lot of damage,” said Jordan Fishbein, director of insurance for Garden Homes, which manages 45,000 apartment homes. “From kitchen fires and flooding to clogged drains, incidents happen. It’s part of the business. But when a resident is devoid of renters insurance, the claims fall on us.
“Insurance is one of the costliest expenses and we want to keep our insurance clean. To do that, more residents need to enroll in and maintain policies, and we need to leverage comprehensive tracking strategies.”
Technology Helps Boost Insurance Enrollment
Multifamily has remarkably innovated many processes in the past few years. Now, more operators are innovating insurance with technology to increase policy enrollment and create more robust tracking processes.
Third-party insurance technology providers are alleviating the thorn in the industry’s side by offering next-gen solutions to insurance enrollment, certificate of insurance (COI) verification, and automated compliance tracking.
InsurTech providers have made a significant impact on both renters and apartment operators by creating better processes for purchasing, validating, and monitoring compliance while strengthening risk mitigation. One InsurTech provider Get Covered’s most recent investment round, which State Farm Ventures®, Garden Homes and LeFrak participated in, brought the company’s total funding to $14.5 million.
“Prior to partnering with Get Covered, our coverage ratio was around 35 percent,” said Mario Gaztambide, senior managing director of residential properties at LeFrak, which manages more than 18,000 apartments.
“Since launching the platform, renters’ insurance coverage has risen to nearly 100 percent in our communities.”
Embedding Insurance Tracking in Operators’ Processes
The platform ensures that residents are covered with the community’s minimum required policy while tracking insurance policies throughout the lease term.
Embedding insurance tracking within operators’ existing processes, it allows renters to quickly purchase customized insurance policies, and on the backend, equips operators with a policy administration portal to handle COI verification, tracking, and billing.
Operators want their residents and their possessions protected in case something unexpected happens to their home or belongings. The liability coverage afforded by renters insurance helps operators fortify risk mitigation and cover the bottom line in the event of damage caused by a resident. Third-party tracking allows operators to outsource the process while gaining real-time visibility into community compliance.
“In terms of the bottom line, you’re shifting risk,” Fishbein said. “Any time there’s a loss that is a resident’s responsibility and they have proper coverage, your property insurance won’t take the hit. Deductibles can be pretty high, so it’s important to have a recourse to recoup that and pull the claim off of your experience onto the resident’s carrier.”
Overcoming a Perceived Cost Issue
Residents usually understand the importance of renters insurance but are sometimes held back by a perceived cost issue or the time burden of searching for a policy. Operators are also tapping their InsurTech partners to offer residents a convenient and seamless way to purchase customized policies quickly.
“A user-friendly platform enables residents to easily purchase a customized policy from A-rated carriers, and for many, it’s their first time having this protection,” Gaztambide said. “Renters could shop around for other policies, but it takes time. Embedding renters’ insurance purchasing within the lease is a much more streamlined way to purchase policies and we know it’s the proper coverage that meets our community requirements.”