Increasing Risk Awareness

By John Fees, Next Generation Insurance Group (NGI)

Housing providers have made considerable progress in their knowledge of sophisticated insurance products and programs to improve education about resident safety. But among student housing leaders especially, important opportunities to reduce property damage losses and lessen their residents’ financial exposure still remain.

The “2011 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 place an unnecessary financial burden on student housing providers for property damages.

As Bill Suneson, co-founder of Next Generation Insurance Group, which operates College RentersInsurance.com, notes, “government data confirms that fire and theft are significant risk factors in student housing.” In fact, the most recent data 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, resulting in an average of five deaths, 50 injuries and $26 million in property loss. Between 2007 and 2009, roughly 28,000 burglaries were reported on campuses each year, with an excess of 14,000 occurring in the residence halls.

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’ homeowners insurance will protect them and assume that obtaining renters’ insurance and liability protection won’t be necessary. The reality is that homeowners insurance can contain high deductibles or eligibility requirements that may exclude certain claims, making it inadequate for students and their 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 renters’ insurance protection. The study, conducted by research consultant Ben L. Hoglund, CPM, 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:

■ The percentage of survey respondents that strongly recommend that residents obtain personal property insurance (57 percent) was much higher than the percentage that strongly recommends liability coverage (26 percent), and 21 percent had no policy with regard to renters’ liability coverage.

■ 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.

■ Thirty percent of respondents experienced more than $50,000 in property damage losses in 2010-2011 due to fire, flood or other incident.

■ 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.

An Apartments.com survey found that 20 percent of the communities polled require residents to carry renters’ liability insurance for the
duration of their tenancy. Those that don’t
require coverage generally provide written notification to residents of their financial liabilities and recommendation that they obtain renters’
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 promotions during the on-boarding process that will improve awareness of renter’s insurance features, especially regarding personal liability protection; and

■ Having stronger policies by apartment owners and management companies that require “proof-of-insurance” at the time of rental.

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.”

John Fees is co-founder and CEO of Next Generation Insurance Group (NGI). Follow him on Twitter @johntfees and @nextgenins.