From the Summit: Strategies for Insurance Savings & Deposit Alternatives
Ask anyone who works in multifamily about the challenges facing the industry, and you won’t have to wait long for the topic of soaring property insurance costs to come up.
For Jay Stoltz, Regional Vice President at Entrata, the importance of the issue is impossible to overstate. “This is probably the number-one concern that our industry should have right now,” he said. “It keeps me up at night. This one is not going away.”
Stoltz’s comments came during the From Inflation to Innovation: Strategies for Insurance Savings and Navigating Deposit Alternatives session at the 2023 Entrata Summit.
Moderator Nia Gray, Regional Vice President at Entrata,, cited a recent NMHC survey in which multifamily operators reported how much their commercial insurance premiums have grown over the past 12 months. “The answers spanned a huge range, from 26% all the way up to 120%,” she said.
Don’t Wait to Mitigate
Operators can work to reduce these rising costs, the panelists noted.
According to Stoltz, the key is to be proactive. Apartment owners and operators should plan for their commercial insurance policy renewal as early as possible. While renewals typically occur in the first six months of a year, operators need to begin preparing for them well ahead of that timeframe.
As part of that preparation, owners and operators should build a strong relationship with their insurance brokers. “Get a good, established rapport,” Stoltz urged. “Get to know them very well, and let them know what’s transpired in the last six months to a year with your company.”
In addition, according to Stoltz, apartment companies should ask their insurance providers the following question: What strategies, programs and capital expenditures can we implement leading up to our renewal to reduce our premiums?
“Put the ball back in [the providers’] court,” he said. “Tell them, ‘We’re going to be proactive, and we’re going to do things. It’s up to you to help us achieve that and get there.’”
The panelists also highlighted the important role that renters insurance can play in containing property insurance costs. K.O. Orsak, Director of Investments, Software and Systems at Passco, said her company’s “commercial premiums have come down just a little bit only because we require renters insurance.”
Orsak and Nikki Chambers, Director of Systems and Training at Hanover Co., emphasized the efficiencies and operational benefits that operators can experience by taking the management of renters insurance out of the hands of leasing teams.
For example, Hanover uses a global services team based in India that oversees compliance with the company’s renters insurance requirements. Since employing the team, compliance has increased from 81% to 90% across the company’s portfolio, despite a 47% increase in the company’s unit count over the last year and a half. “That’s pretty great,” Chambers said.
Orsak touted the benefits of using services like Entrata’s Insurance Verification to ensure compliance. “We don’t want manual processes for our teams,” she said. “They’re not licensed insurance agents. We want to take all that off their plate.”
An Alternate Approach
The session also examined another risk-management issue: security deposit alternatives.
Hanover had long been skeptical of deposit alternatives, Chambers noted, but the company began piloting one at its communities in Atlanta because of a Georgia requirement that apartment communities offer a deposit alternative. The alternative that Hanover is piloting requires residents to pay a one-time, non-refundable fee equal to 25% of one month’s rent.
The pilot has been a success, according to Chambers, in part because residents who might have refused to pay or been unable to afford a traditional security deposit now have a much lower barrier to move-in.
“We’re seeing a 17% increase in lease conversions,” she said. “Seventeen percent more people are converting to leases that previously would have turned us down because we’re able to say, ‘Well, you can do this instead.’”
Passco is in the process of evaluating potential deposit alternatives, Owen noted.
She urged other operators going through the same process to exercise caution. “You will hear their sales teams say, ‘This is a great product. It’s going to work. It’s perfect. It’s integrated.’
“And then you go in, and it’s not integrated. It doesn’t work right. So, please, if you’re out there looking at deposit alternatives, ask those questions. Get a demo. Have them show you what it will do in Entrata. Because our goal is to make it efficient for our onsite teams.”