Dive Brief:
- Apartment owners across the country are dealing with rising insurance costs, brought on in part by the increased frequency and severity of weather-related issues such as hurricanes, flooding and wildfires.
- In fact, respondents to a recent NMHC survey said their property insurance costs have gone up an average of 26% in the past year, with some reporting increases as high as 120% year over year.
- The top types of claims that apartment firms filed in the past year reflect the kinds of natural disasters that have most affected the industry. Water damage was the No. 1 issue, cited by 70% of respondents. Fire damage was third, mentioned by just over half of respondents, after liability claims.
Dive Insight:
These insurance claims were the result of a range of incidents, including the deep freeze that hit Texas and other southern states last year, hurricanes, tornadoes and lightning strikes, according to the report, which was based on a February survey of 160 apartment firms of varying portfolio sizes and property types across the country.
The NMHC study noted that property coverage has become much more expensive in recent years, leading policyholders to raise deductibles and insurers to limit coverage amounts and include new policy limitations.
Multifamily operators’ top insurance claims 2022
| Type of claim | Percent of respondents |
|---|---|
| Water damage | 70.2% |
| Liability | 53% |
| Fire damage | 52.3% |
| Wind-driven damage | 28.5% |
| Workers comp | 24.5% |
| Employment practices | 4.6% |
| Crime | 4.0% |
| Environmental | 3.3% |
Despite the high costs, there are steps owners can take to try to mitigate rising insurance expenses. By shopping for better deals, working with brokers, managing risk and even self-insuring, apartment owners can at least feel more in control of their expenses.
When an owner has a provider locked in, the NMHC advises them to begin policy renewals early, get firm expectations from their brokers and explore how they can improve results. They must work closely with their insurance providers and advisors to understand their loss projection models and determine what they need to buy from a risk management perspective.
The higher prices have led some owners to change insurance companies. King of Prussia, Pennsylvania-based Morgan Properties, the No. 3 owner in the country, recently changed brokers, according to Amanda Crosby, director of risk management for the company.
“We recently moved to a smaller broker who specializes in real estate,” Crosby said. “The level of service we are receiving is excellent, and they were able to really re-evaluate our coverage and to test different deductible options in the market.”
