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Related Topics Organizing for CompliancePerformance TrackingYear 15
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Insurance Cost Survey Results
In June, 2002 the Bay Area LISC Asset Manager Network began gathering cost information to compare what different nonprofit housing organizations are paying for property and liability insurance and which companies offered the best pricing. The results of that survey of twelve Bay Area nonprofit portfolios ranging from 578 to 4,573 units are now available at Survey Results. RESULTS OF THE SURVEY: The results show a significant range between the lowest and highest premiums paid, with the lowest rates generally going to the larger, well-established portfolios with many suburban low-risk properties. The carriers who are providing the lowest-cost coverage are not necessarily taking any new business at this time, and we have decided not to publish the names of specific carriers matched up with the rates. Instead we have provided a listing of the carriers and brokers now providing coverage to the survey group and assigned a code letter to each carrier on the spreadsheet. To compare your costs with those in the survey you need to get out your 2002 renewal package and your premium invoices. Add up the "Property Coverage" premiums including fire, flood, business interruption etc., but do not include earthquake coverage. The best property rates in the survey are at $7 per unit per month (PUPM) for low-rise suburban newer properties. On the liability side, add up the premiums for basic liability (slip and fall claims) and excess liability ("umbrella coverage"), but not Directors and Officers Liability coverage. The best liability rates in the survey are at $4 PUPM, again primarily for low-rise suburban properties. Some package policies do not break out premiums for liability and property coverage. The best rates overall in the survey are $12 and $16 PUPM. The highest average cost in the survey is $38 PUPM for a mixed portfolio placed with different carriers. If your costs are at the high end of the range and you want to do some shopping, give your current broker a copy of the survey and see if he can interest any of the lower-price companies in your portfolio. You can also contact the brokers listed on Sheet 2 of the survey spreadsheet and ask if they can do any better than your current rates. Beware, however of a general policy of insurance companies to not quote on a property from one broker if they have turned it down for another broker.
There are a number of factors contributing to the increase in premiums and fewer carriers interest in the apartment business. The balance sheets of the insurance companies were hit hard by the stock market decline. The September 11 claims are the largest hit by far that the industry has ever had to deal with and the cost of resolving injury claims related to toxic mold has been much higher than anticipated. It will take some time for the market to stabilize and for premiums to again become competitive. One promising development is the recent creation of a Commercial Lines group within the National Insurance Task Force of NeighborWorks. Their information can be found at National Insurance Task Force. It may be an opportunity for affordable housing and insurance industry people to develop a national strategy which can provide the needed coverage for the more difficult to insure properties and a more stable cost environment. For further reading on this subject we have included a dowloadable Discussion Paper Insurance Cost Discussion Paper. If you have any questions or comments please contact Phil Ritter, CPA at philr@sonic.net.
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