Offsetting the Rising Costs of Multi-Family Insurance

Offsetting the Rising Costs of Multi-Family Insurance

Rising insurance rates continue to burden multifamily operators. Uncertainty is often insufficient for business, but lingering pandemic fears and increased natural disaster repair costs are putting pressure on owners in ways they’ve never felt before.

Due to a hard market, carriers limit coverage in new and potentially challenging ways. A market hardens when coverage shrinks and prices go up. One area that merits your attention when purchasing coverage is the Assault and Battery (A&B) exclusion. Before we provide guidance on what you can do to protect yourself, here’s some helpful background information from our team of multifamily experts:

  • A&B Exclusions expose policyholders to lawsuits, claiming negligence for not taking the proper precautions to protect tenants. Recent juries have awarded plaintiffs with multimillion-dollar settlements.
  • Carriers and underwriters have started to implement the use of crime scores. Underwriters can now analyze the probability of crime in any given area using historical data of past claims and predictive indexes.
  • If your multifamily property has a crime score that exceeds their threshold, they will deny coverage, reduce limits, or require a significant deductible.

Here’s what to keep in mind:

  • Prior to purchasing or acquiring new assets, it is crucial to understand the underwriter’s position and proactively run crime scores early in the due diligence process.
  • Develop a plan to rebut crime scores that are not an accurate representation of actual property characteristics.
  • Consider separating some properties off the master policy to get better rates and terms on your less risky assets versus the riskier ones.
  • Document a plan for mitigating future A&B claims and have your broker share a narrative in the carrier RFP to paint the whole picture.
  • Consider implementing controls to reduce exposures. This could include improving site security, key fobs, video surveillance, and guest validation. Document tenant pre-screenings reports and complaints.

Think this change won’t impact your team? Many owners have already told us that this update caught them completely off guard. Partner with a broker who keeps you in the know before your left without coverage.

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This document is intended for general information purposes only and should not be construed as advice or opinions on any specific facts or circumstances. The content of this document is made available on an “as is” basis, without warranty of any kind. Baldwin Risk Partners, LLC (“BRP”), its affiliates, and subsidiaries do not guarantee that this information is, or can be relied on for, compliance with any law or regulation, assurance against preventable losses, or freedom from legal liability. This publication is not intended to be legal, underwriting, or any other type of professional advice. BRP does not guarantee any particular outcome and makes no commitment to update any information herein or remove any items that are no longer accurate or complete. Furthermore, BRP does not assume any liability to any person or organization for loss or damage caused by or resulting from any reliance placed on that content. Persons requiring advice should always consult an independent adviser.

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