The Evolution of Renters Insurance
June 20, 2023
Written By Eric Narcisco
Working with multifamily property owners and operators regarding their renters insurance options for over two decades is akin to getting a degree in calculated risk that even Elon Musk would be proud of. Owners are constantly fighting headwinds that require sophisticated use of their large balance sheets to drive a successful result. In that fight they use many arrows in the quiver of which renters insurance is one.
What I find most curious is how that arrow has changed over time and has yielded us the solutions used today by millions of apartments. Below is the timeline of innovation, what has transpired to date, and what the future may hold.
2007 to 2012
Renters insurance rose to fame as a significant benefit to residents and owners but was nearly absent from the landscape. Simply put, owners did not require renters insurance, and residents did not have an easy way to get it, nor were they aware of its benefits.
Over the next few years, systems were built that would allow owners to offer renters insurance and see which ones did not purchase insurance or provide a copy of an insurance certificate at move-in.
Eventually, insurance requirements became commonplace in leases. Despite the notices, emails, and letters posted on doors, 25% of residents refused to get renters insurance with limited repercussions. Placing the burden of managing renters insurance requirements on leasing staff.
In 2012 LeaseTrack became the first renters insurance provider focused on integrating with property management software system’s resident ledger data instead of the renters insurance module. This allowed us to add a charge to each resident’s rent who did not maintain insurance.
As time passed, research took place to help determine what more could be done to close that 25% gap. It was found that 30% of renters insurance policies cancel within the first 100 days. The failure of renters insurance to respond after a loss, because the policy had been cancelled, demanded a solution.
2019 to Present
The focus on centralizing and outsourcing compliance efforts associated with renters insurance to outside providers started in 2019. It accelerated with the onset of the pandemic, where leasing agents were once able to “track” insurance. However, their removal from the leasing office made outside resources for tracking a necessity.
The problem we are trying to solve in 2023 is the painful reaction to the exorbitant insurance cost increase. Owners are facing a perfect storm of rising interest rates, flattening rent growth, and a significant increase in the cost of commercial insurance. While there is little we can do about the former, there is an opportunity for innovation around commercial insurance costs. Owners are taking larger deductibles than ever, and a complete assessment of their renters insurance program is happening to offset the increased deductibles and maximize revenue opportunities.
The keyword for the future is optimized. We are seeing clients manage the increasing risk costs of insurance by optimizing on all fronts, reviewing previous decisions that seemed perfectly fine three years ago, and assessing to make sure they are still making decisions that benefit the firm.
While the future is uncertain, one thing we know for sure is that AI is going to make a huge impact on technology. LeaseTrack is pioneering the way for the marriage of AI and renters insurance, but the question is, how much will AI impact the success of renters insurance?