Multi-Housing Industry Is Paying More Attention to Resident Insurance, But Still Not Enough

Housing providers have made considerable progress when it comes to their knowledge of sophisticated insurance products anJohn Fees, Co-founder and CEO of Next Generation Insurance Groupd programs to improve education around resident safety issues. But among student housing leaders especially, important opportunities to reduce property damage losses and lessen their residents’ financial exposure still remain.

A recently conducted survey of chief college and university housing officers, the 2012 Campus Housing Risk Mitigation Research Study, revealed that college students are often unaware of their exposure to property and financial losses due to fire, theft and vandalism in on- and off-campus housing. This lack of awareness, and the inadequate liability protection resulting from it, places an unnecessary financial burden on student housing providers for property damages caused by resident carelessness and negligence.

Bill Suneson, co-founder of Next Generation Insurance Group, which operates CollegeRentersInsurance.com stated “government data confirms that fire and theft are significant risk factors in student housing.” In fact, the most recent data available from the U.S. Fire Administration National Fire Data Center indicates that on average, an estimated 3,800 university housing fires occur in the United States every year. These fires resulted in an average of approximately five deaths, 50 injuries and $26 million in property loss each year. Over the 2007-2009 data period, roughly 28,000 burglaries were reported on campuses each year, with in excess of 14,000 per year occurring in the residence halls. (2007-2009 ed.gov safety statistics).

There is an easy explanation for college students’ lack of risk awareness. When students leave their parents’ home for the first time they often – mistakenly – believe that their parents’ homeowner’s insurance will protect them, and consequently assume that obtaining renter’s insurance and liability protection won’t be necessary. College Parents of America, a membership organization that assists parents with their college investment, offers insights on the value of renters insurance and limitation of homeowners insurance at http://www.collegeparents.org/renters-insurance. In short, the reality is that homeowner’s insurance can contain high deductibles or eligibility requirements that may exclude certain claims, ultimately making it insufficient or inadequate for college students and their prospective risks.

Resolving this issue is important for mitigating financial loss. A key study finding is that more than half of the housing providers surveyed strongly recommend educating residents on the importance of adequate renter’s insurance protection. The study, conducted by research consultant Ben L. Hoglund, CPM and a multifamily housing operations specialist, explored the types, causes and monetary impact of property damage occurring on college campuses across the United States. It also addressed student and housing provider awareness of available insurance products to mitigate these risks. The study’s findings show that:

• 64 percent of respondents passively recommend that residents obtain renter’s property insurance, with 16 percent indicating that the university does nothing to address property risk of residents. Surprisingly only 6 percent strongly recommend that residents obtain renter’s liability insurance. Those that require resident reimbursement for significant property damage often find it difficult to collect damages owed: 38 percent reported collection rates below 61 percent.

• A majority of respondents estimated that less than 60 percent of their student residents are aware that they can be held financially responsible for damage to university property for which they are at fault.

• Nearly 25 percent of respondents experienced more than $50,000 in property damage losses in 2011-2012 due to fire, flood or other incident in residential units.

• Vandalism, bicycle theft and electronics theft are the most reported personal property losses by campus residents. Due to higher insurance deductibles and low collection rates on resident damages, private sector housing providers have become proactive in their efforts to mitigate property financial losses caused by resident carelessness and negligence. In fact, the National Multi Housing Council’s 2011 Apartment Cost of Risk Survey reports that 62 percent of apartment firms require residents to have renters’ insurance with the most common limit required at $100,000.

Those that don’t require coverage generally provide written notification to residents of their financial liabilities and recommendation that they obtain renter’s liability insurance. The survey indicates, however, that there is more still to be done in the student-housing sector. Student housing providers and multi-housing owners-operators can mitigate financial losses by:

• Requiring proof of insurance by residents or recommending they obtain personal property insurance as well as personal liability coverage.

• Integrating enrollment within the on-boarding process that require students to decline coverage and acknowledge resident liability.

According to Hoglund, “investors and property managers must evaluate their own resident policies and look for opportunities to reduce their risk by requiring proof of insurance. Increasing awareness of the unique needs and risks college students and first-time renters face is necessary but not sufficient.” Property managers must now look to formalize how they mitigate these risks while also providing greater protection for their residents.

— John Fees, co-founder & CEO, Next Generation Insurance Group (NGI). You can follow Fees on Twitter @johntfees and @nextgenins.