As we look back at 2023, we saw double digit premium increases, higher deductibles and coverage restrictions. Will 2024 be more favorable? Predictions reflect that we may not see any rate relief until 2025. Factors that have influenced the property insurance market include years of inflation, severe weather and litigation claims that continue to hit all-time highs. The insurance industry is still seeing record underwriting losses, natural disasters, economic challenges and increasing claims payouts due to supply chain issues that make claims more expensive than expected.
The property insurance market remains challenging. Property valuations will continue to be an important underwriting factor in 2024 and will be critical to maintain values with the cost of inflation. https://www.insurance-financial.net/association-building-property-insurance/
We have seen substantial underwriting guideline changes that are driven by the reinsurance market. These changes and limitations involve coastal properties, properties built prior to 1990, high value properties (over $10M or 15M), roofs older than 15-20 years, and per unit deductibles. Insurance carriers consider claims history when deciding to underwrite a new policy. Today, the insurance carriers are declining to write those accounts with adverse claims history. Take steps to address any underlying issues that may lead to a claim. Once your insurance is cancelled or non-renewed, you may be placed in the Lloyd’s of London market, with higher rates, limited coverage, and higher deductibles.
In addition to regular maintenance, your community will need to be proactive to prevent future claims. Some suggestions:
- Fire Safety to install fire extinguishers, smoke detectors and carbon monoxide detectors.
- Research water alarm home kits for each unit and install devices in areas subject to water damage.
- Implement a hot water heat replacement program.
- Implement a washing machine hose replacement program.
- Install a security system.
- Clean out clothes dryer vents on a regular basis.
- Issue reminders for owners to maintain heat in their unit at 55 degrees.
- Inspect your roofs regularly for damage.
- Schedule routine inspections of your sprinkler system
- Prevent slip and fall hazards with regular inspections.
- Walk your property and secure loose objects against weather-related damage.
- Check for overgrown trees and limbs that need to be trimmed to prevent damage to your property during storms.
- Review contracts for proper hold harmless and indemnification clauses.
- Obtain proper certificates of insurance naming the property management firm and the association as addition insured.
- Consider making your community a non-smoking community.
- Check for grills and make sure they are a safe distance from any structure.
Implementing these proactive measures can significantly reduce the likelihood of property insurance claims and create a safer environment for your community.
It is also critical that you make sure your premium payments are made on time. In the past carriers have been open to reinstating your policy, if there is a cancellation notice. We are finding carriers that are not willing to do so any longer, especially for older structures or policies that have claims.
As we work through the future for our insurance, it is very important that you do regular renewal and coverage reviews. Your insurance agent should bring value to your insurance program with recommendations, coverage changes and options for the board to consider. It is important to note that the insurance market is cyclical and will transition between the hard and soft markets. While it is challenging to predict when the current hard market will end, maybe we will see an end to the hard market by 2025.
By
Connie E Phillips, CIC, EBP, CIRMS
Certified Insurance Counselor (CIC)
National Community Association Institute Educated Business Partner (EBP)
Community Insurance and Risk Management Specialist (CIRMS)
888-439-0479