If you are a policyholder in the Commercial Property Multifamily Dwelling space (Habitational space), you could be in for a rough ride at your next property insurance renewal.
Rates are going up, underwriting standards have tightened considerably, and some carriers have reduced their capacity (ie the amount of risk they are willing to take on) or even exited the market altogether.
Also, it doesn’t help the situation that only a handful of players serve this segment to begin with.
And while these conditions are beyond the control of any property manager, apartment building owner, condo association or cooperative board, prioritizing property maintenance and repairs will help to position your account for the best renewal outcome possible.
What does this entail? Although what follows is not an all-inclusive list, it certainly touches on areas I’ve seen impact renewals most frequently…
- Roofs– older roofs, or those showing wear, increase the likelihood of leaks and create a significant water damage exposure. Be sure to have them maintained and inspected regularly, and have repairs done in a timely manner when leaks appear
- Electrical-faulty or outdated electrical systems can pose a significant fire hazard which could mean not just damage to your building, but life safety risk as well. Electrical systems should be inspected by a qualified electrical contractor regularly. Also, be mindful of the following:
- Fuses– many older buildings use fuses for circuit protection, however from an underwriting perspective, they are viewed as less reliable and safe than circuit breakers. Consider replacing fuses with circuit breakers. Although there likely will be a larger up-front cost to do this, over time this investment pays for itself in the form of access to more carrier options and lower property and liability insurance rates
- Federal Pacific Electric (FPE) Stab-Lok circuit breaker load centers– if you have these, they should be replaced immediately. FPE ‘s are known to be defective and not compliant with Underwriters Laboratories (UL) guidelines. Their presence on-site most likely will mean higher rates or could be even be a deal breaker with the carrier
- Zinsko electrical panels– As with FPE’s above, these electrical panels have been found to be defective and not in compliance with UL guidelines. If you have them, replace them
- Plumbing– plumbing systems should be inspected and maintained regularly to prevent leaks and subsequent water damage claims
- Heating– Heating systems should be inspected/maintained regularly, to prevent pipe-freezing, which can lead to water damage
- Fire extinguishers– make sure all all extinguishers are serviced annually, with a durable tag attached which shows the date of service to ensure they are functional
- Sprinkler systems- inspected regularly. If your building is sprinklered, the system should be inspected annually, with an updated tag each year
One final word about maintenance/repairs- make sure that such issues are handled and resolved in a timely manner.
Some states (New York, for example), show open complaints and violations in an online database which is accessible to the public. This includes underwriters-who look at this information as part of their overall assessment of how well a potential (or current) policyholder maintains their property. Excessive numbers of open/unresolved complaints or violations can result in an adverse underwriting decision-something I’ve seen many times.
Dressing up your property’s risk profile for the market is more important than ever, so do not wait. It is not an exaggeration to say that the likelihood of securing a policy renewal at anything resembling an affordable cost is slim to none without it.
About the Author:
Mike Smith, Rue Insurance, provides insurance brokerage and risk management guidance to commercial properties all across the New York Metropolitan area.
Drawing on over 27 years of experience in the business, as well as Rue’s extensive resources, Mike takes a thorough and consultative approach to his clients’ commercial property/casualty insurance needs- with the overall aim of ensuring the broadest protection at the most competitive cost.
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