Finding cost-saving insurance alternatives for rental investors

Finding cost-saving insurance alternatives for rental investors | Insurance Business America

Insurance News

Finding cost-saving insurance alternatives for rental investors

How can a contractor get a better rebuild insurance rate on a property?

Insurance News

By
Desmond Devoy

This article was produced in partnership with REInsurePro.

Desmond Devoy, of Insurance Business America, sat down with Shawn Woedl, CEO of REInsurePro, to discuss insurance solutions for real estate agents and their investor clients.

With a hard property market, it is important to provide alternative solutions for agents and their real estate investor clients.

For Shawn Woedl, CEO of REInsurePro, the current environment underlines the “importance of working with a specialist”.

There has been no shortage of bad news stories that have made being in the real estate space more difficult of late – wildfires in California, hurricanes in Florida, tornadoes in the Mid-West, as well as flooding, even in places like New York City, and the ever present danger of earthquakes.

More frequent and more severe weather events can drastically hinder the insurance industry in finding cost-effective options for clients, and a single major hurricane, like Hurricane Ian in Florida, can send the market into fluctuation.

Meanwhile, supply chain issues, skilled labor shortages, and the inflation impact are all piling on the pressure.

At a minimum, the industry could be looking at another 24 to 36 months before it starts to see any kind of relief at all in the space, according to Woedl. In the residential real estate investment market, the effects of tightening started to be felt around 12 to 18 months ago.

“We’re usually the last part of the commercial real estate market to see these increases,” Woedl said. “You can see the handwriting on the wall, you see it coming.”

So how can agents set their real estate investment clients up with the coverage they need as pressures and challenges mount in this underserved area of the market? For Woedl, the answer is simple: partner with a tech-savvy specialist like REInsurePro.

“We understand and recognize that it’s a very underserved part of the market. It’s not for every carrier, not for every MGA or program manager. It’s high touch, high transaction, for not the largest of premiums,” he said.

By harnessing technology, the business has been able to make the process “minimal touch” for agents, with the system doing much of the work for them.

“This allows them to be more aggressive in growing their agency and their book of business because they are cutting the amount of time they’re spending on each opportunity,” Woedl said.

In tough times, it’s critical that agents and program businesses get “creative with your solutions and your options for your client base,” according to Woedl.

Back to normal

REInsurePro’s program was built specifically for retail agents that have a focus on the residential real estate investment property market, in particular schedules or properties with one-to-four family rental dwellings, though they can go up to 20 units per location. Around 18 carriers are on board, and it covers all phases of occupancy, from tenant-occupied to vacant to under renovation.

“Collectively, we house those locations on a single schedule for their investor clients,” Woedl explained.

It’s also possible to pay month-to-month, which can be harder to find.

An investor, through their agent, can log into REInsurePro’s portal, make changes month-to-month for their coverages, and then get billed for that month of coverage.

“It certainly helps with cash flow for these investors that may be experiencing increases in premiums,” Woedl said.

It can also help not to have to pay for a year upfront on properties that range from apartments to vacation rentals, mobile and modular homes.

“We do a lot of work behind the scenes to ensure we stay ahead of the curve,” Woedl said.

Knowing your client

An added benefit is that specialist knowledge can pay dividends, particularly when it’s held by a firm that can be more flexible when the client might know values and costs best.

“Our retail agent partners and their investors often times have a better idea of what it would cost to rebuild their property, whether a partial or total loss, than what their insurance company might,” Woedl said.

Armed with their own local knowledge, investors “are often very savvy,” Woedl said. For example, a local investor may know better than a national carrier how to rebuild a single-family dwelling in Kansas City.

Many investors are contractors themselves and if they need to rebuild a property or renovate, they’re unlikely to be paying retail costs for labour or materials and may have a crew.

Say an investor was buying a 1,000 square foot home. If you were to run that number through a rebuilding cost estimator, “it’s going to tell you that you need…anywhere from $180,000 to half a million dollars of coverage,” Woedl said.

This is where REInsurePro’s ear-to-the-ground expertise comes in.

The investor can come in and tell their agent and Woedl and his team: “I’m a general contractor myself. I understand that if this thing burns to the ground, I can rebuild it for $80,000.”

“Why not give them the option to be able to insure it for $80,000? Within reason, right?” Woedl queried.

“Obviously, there’s got to be benchmarks, and it’s got to have stopgaps in there, but there needs to be some flexibility within the market, which is what we provide,” he said.

Investors do need to know the risks though. While REInsurePro can provide flexibility, some investors would rather take the risk and save the money up front “knowing they are limited to what that payout would be or that replacement cost value, and they’re okay with that, according to Woedl.

“It’s just a better way, in our eyes, to serve,” he said. “We want to be very flexible and cast the broadest net to be able to help as many people as we can.”

Advantages to partnering with REInsurePro

REInsurePro is selective about who it partners with.

“This is our baby,” Woedl said. “We try to work with retail agents that have the same values as we do, and we have a desire to leave our market better than the way we found it.”