Here's why an increase in Gen Y renters is good for broker business

Recent research shows that apartment rents in the multi-family industry is on the rise – a presenting a growth market for niche insurers.

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Recent news from MPF Research and RealPage Inc. shows that apartment rents in the multi-family industry is on the rise – a presenting a growth market for niche insurers.

The April numbers show that the increase grew more quickly in that month than in any other month since the recovery from the financial crisis.

Indications seem to show that Generation Y – or Millennials – are indeed entering the housing market as they go off to work and form their own households. This is not only good news for the multi-family industry but also for insurance professionals specializing in this niche.

Fulcrum Insurance Programs – which specializes in habitational insurance – feels this is an exciting time for the multi-family housing segment and for those of us providing insurance in this specialty.

“The habitational marketplace has definitely heated up over the last 6-12 months. The fact that rents are on the rise and new locations are coming on board does make things exciting,” says Jack Madsen, sales executive with Fulcrum Insurance Programs in Bellevue, Wash. “Rising rents mean higher business income levels which in turn can represent higher premiums.  New locations, means new builder’s risk policies and then the property, premise liability and umbrella coverage for once it is finished and occupied.”

All of this leads to growth for carriers, agents and niche program companies such as Fulcrum, Madsen told Insurance Business.

“Growth is exciting and Fulcrum has lots of it going too; but,” cautions Madsen, “several carriers are exiting the space and many others are changing requirements. We have seen carriers just last year that were asking for primary GL hab submissions change their tune to this year asking for more than double the expiring premium on a loss free account.”

Companies that offered guaranteed costs are now pushing deductibles.  Large carriers like ACE have been pushing for $2 million/$4 million primary GL limits to attach their umbrella to on hab, adds Madsen.

“That makes for a challenging renewal process for many agents,” he says. “Especially with many apartment owners/managers being very premium savings focused on renewals.  So yes it is exciting and growth is good, but agents need to be well ahead of the marketing process as changes are both good and bad.”

Whether this will continue and serve to help absorb all the new construction taking place – more than 240,000 institutional-quality apartments scheduled to open in 2015 – will depend on certain issues particularly if Millennials continue to leave the nest to live on their own.

The long-term demographic trends also tell a positive story for apartments.

Large numbers of young people are entering the housing market while immigration has recovered from the lows of the recession (immigrants are significantly more likely to rent). The numbers of single-person households and single parents are also growing.

“Over the longer term, demographics play a key role in apartment demand,” Mark Obrinsky, chief economist for the National Multifamily Housing Council, told NREI Online, “and we think the key trends are still in place.”

Insurance for Multi-Family Industry
As both construction demand for more multi-unit housing and rents increase, property owners and developers will look to the experts to help them safeguard their investment and assets.

Insurance and risk management play a critical role in providing sound solutions in mitigating and transferring exposures. Having the right partner is essential in securing the best insurance program customized for this habitational niche segment.

When reviewing the insurance protection for a multi-family unit, be sure the following key coverages along with enhancements and features are contemplated:
  • Property & Equipment Breakdown insurance that also includes Business Income, Newly Acquired Construction or Building, Newly Acquired Locations Business Income & Extra Expense, Outdoor Property, Ordinance or Law Coverage, Mercantile & Office Tenants Move Back Expenses, Lessor’s Leasehold Interest for Tenants, Pollution Cleanup and Removal and much more
  • General Liability insurance including Products & Completed Operations, Damage to Premises Rented to You, Tenant’s Property Legal Liability and more
  • Automobile & Physical Damage insurance including Garage Liability
  • Umbrella Liability insurance with high limits along with coverage for crisis response, discrimination and humiliation and professional services
  • Crime insurance along with risk management services to help stem employee dishonesty losses
  • Cyber Liability insurance including first- and third-party protection

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