Multifamily property owners have faced unprecedented unpredictability in the last few years, and soaring insurance costs are making a challenging time even harder. In 2019, prior to the pandemic, property insurance rates went up 10% to 40% in multifamily because of big property and liability losses in the industry. A similar increase in 2020 has just compounded the problem.
While premiums for the multifamily sector have increased more than any other real estate market, insurance carriers are also asking apartment owners to carry more of the financial risk by increasing deductibles and self-insurance limits. And giant deductibles require larger capital reserves just in case there is a lawsuit – this hurts owners’ ability to secure financing for new property acquisitions and in some cases, may force them to sell a property to owners with more cash on hand.
There are three prevalent issues at play that can be helped with an effective loss prevention strategy – slips and falls resulting in serious injury, swimming pool deaths, and assault and battery. Here are a few tips for adopting a loss prevention strategy at your company:
- Create a safety committee/internal risk management group. It starts at the top, but create a committee (and include your insurance broker) that focuses on loss prevention, inspections, ongoing health and safety standards, and procedures related to different issues: reporting crimes, dealing with angry tenants, and being diligent with swimming pool safety.
- If you have a claim, work with your broker and their team to get it closed out quickly. And document what measures you’ve put in place to prevent that type of loss from happening again.
- Work with your broker to find out how underwriters are assessing exposure and provide easily accessible and complete data to secure the best rates.
- Develop consistent guidance for onsite staff including inspections, maintenance, and other tasks to help manage operational risk. For example, develop weekly lighting inspections and make sure they’re documented and easily accessible for underwriters to review.
- Let technology help you here: Best Property Management Software
- Depending on the geographic area, hire a security company and work closely with them, using your loss prevention strategy as a guide.
- Install security cameras and signage warning against crimes. Although it may seem like you’re advertising that you have crime in your building, signs like these have proven to decrease its frequency.
- In addition to the tips above, owners with substantial multifamily property holdings should ask their broker about captive insurance programs, which are established to insure the risks of its owner and affiliated company. It’s a more efficient method to self insure and can even serve as a revenue generator.