Automating Your Way to Fewer Renters Insurance Risks
Here’s what property managers must know to reduce the hidden risks in renters insurance platforms.
Many property managers use fully automated renters insurance platforms. These solutions are efficient and effective. They deliver bottomline benefits to both property managers and residents. Most important, they help ensure 100% coverage of all leaseholders, 100% of the time.
When implemented properly, a fully automated program eliminates time-consuming manual tasks for property managers and gives residents access to top-quality renters insurance. But there are several lesser-known factors to consider to ensure that property, residents and the business are each adequately protected. The following scenarios illustrate common real-world issues that, if not addressed, can prove costly.
Scenario #1: Mind the Gaps
After a grease fire damages two units and the hallway, the property manager verifies on the community’s internal system that the unit leaseholder carried renters insurance with adequate liability coverage. But, when the property manager files a claim, the insurance company says the renters insurance had lapsed a week before the fire.
That doesn’t make sense. The property management company worked with a preferred insurance provider and had a gap insurance policy in place as well as third-party tracking to prevent this from happening. Unfortunately, the property manager learned—too late—that policy cancellation notifications can take 10 days or longer to travel through third-party tracking and to the community where the information is manually entered into the internal system. Unaware of the lapse, the property management company hadn’t added the unit to its gap insurance policy and was forced to pay for the repairs. Though the property management company sued the leaseholder for damages, it was unable to recoup the losses.
What this property manager didn’t realize is that there are hidden cracks in most liability insurance tracking systems that leave property management companies vulnerable and exposed. Slow communication is just one of those cracks. The following scenario represents another.
A resident accidentally leaves the bathtub water running to answer a phone call. The overflowing water seeps into the walls and drips through the floor into the apartment below, causing significant damage to both units and the first-floor tenant’s laptop. Internal records confirm the unit was covered for liability; however, the covered leaseholder was out of town when the incident happened.
Although both leaseholders presented insurance verification at move-in, the leaseholder who left the water running canceled her policy after one month. Because the tracking system the community used tracked by unit rather than by leaseholder, the property management company was unaware of the policy cancellation. Once again, the property management company had to cover the cost of repairs. The first-floor unit leaseholder was able to file a claim with his renters insurance company to pay for the damaged laptop, and that insurance company’s subrogation department sued the property management company to recoup its losses.
Most property management companies track coverage by unit rather than by individual leaseholder. A look at a map of the units may show 100% coverage when actual coverage is far less. As one property manager interviewed put it, “If my property had 100% coverage, I don’t even know what that would look like. I would be free to focus on other things like claims incidents and sales.”
Scenario #2: The Devil Is in the Details
A leaseholder’s party gets out of hand, and one of the guests tosses a beer bottle from the balcony, hitting a passerby below. A witness calls 911, and the passerby is taken to the emergency room for medical treatment.
Though the leaseholder had carried the required insurance, she failed to add the community to the policy as an interested party. When her credit card expired, the insurance company canceled the renters insurance. But because the community was not listed on the policy, third-party tracking was unable to notify the community. Once again, the property management company was left to pay the medical costs of the injured passerby, who later sued the property management company for pain and suffering as well as lost wages.
According to one risk management director interviewed, “We have no way to cover gaps in insurance coverage if they don’t add us as an additional interested party. We’re not added on renewals about 45% of the time.”
Scenario #3: To Err Is Human
Jill manually performs a weekly check to match insurance cancellations against the community rent roll, adding canceled units to the gap insurance policy and notifying leaseholders they will be charged a noncompliance fee until they provide proof of coverage. When Jill leaves, a new employee takes over the process but fails to follow through with the next step—adding the units to the gap insurance plan. When something happens in one of the units with lapsed coverage, the property management company is left without coverage.
Unfortunately, any process that relies on people to perform one or more steps quickly and accurately is almost certain to fail at some point. An automated solution can eliminate that problem. And with the right automated solution, a property management company can avoid most coverage lapse problems.
The Ideal Automated System
To protect against the previous scenarios, an automated renters insurance tracking system should provide the following:
- Verification that the community is listed as an interested party on each leaseholder’s renters insurance policy
- Tracking of insurance coverage by individual leaseholder rather than by unit
- Third-party tracking and landlord protection with an automatic endorsement that adds the unit to a gap insurance coverage policy on the date the policy lapses, eliminating lag times and the need for human intervention in the process
Before signing up with a preferred renters insurance program that offers third-party tracking, be sure to ask questions about each of these points:
1) How do you verify that each new policy includes our community as an interested party?
2) Does your third-party tracking system track and record all changes and coverages, and not just the cancellations?
3) Does your policy provide coverage by unit or by individual leaseholder?
4) Do you automatically and immediately add a unit to the gap insurance policy if a policy you wrote is canceled?
5) What do you do when third-party tracking spots a policy cancellation? Walk me through the steps.
6) If you automatically add a unit to a gap coverage policy if a leaseholder cancels or fails to pay for a third-party policy, how long does that process take?
7) Are policy cancellations automatically entered in our community’s system or do we have to do that manually?
8) Do you automatically notify leaseholders of renters insurance cancellations and that they are in noncompliance with the lease terms? If so, how long does that process take and how is it handled?
9) Do you inform leaseholders who fail to carry insurance that a noncompliance fee (to cover gap insurance costs) will be added to the rent statement?
10) Does your process require any manual intervention, or is it fully automated?
Remember, what your community needs is 100% of the leaseholders covered 100% of the time. An unsatisfactory answer to any of the questions above represents a crack in your liability insurance coverage that exposes you to potentially costly risk.
