
Since COVID, headlines have appeared regularly about the challenges strata organizations have finding affordable coverage for their property. Some have even called for governments to intervene. We believe that if you understand how insurers look at your property, you can present your business case in a favourable way and obtain insurance at reasonable rates. We have several examples we’d be happy to discuss with you, but for now let’s think like an insurance underwriter.
The insurance industry has been around since 1347. It started with vessel owners pooling their resources to cover the losses of individual ships. (i.e. underwriting) Underwriters are still used to evaluate each “risk” being considered, and decide if it’s insurable, and if so the price of the premium. This is the first level of underwriting.
Without getting too technical, it’s good to know that insurers re-insure their portfolio of risks. For example they may buy “catastrophe” insurance from a reinsurance company to prevent their company from being wiped out by a major incident like a hurricane.
Whenever there’s a lot of uncertainty in the economy, reinsurance tends to become more expensive. Insurance rates, the premiums home owners and others pay, go up, OR underwriters refuse to insure risks that they feel are too high.
It’s not that insurers don’t want to pay claims, though it’s common to blame them. Insurers need to pay claims. That’s their business. They just have to make sure they receive a little more in premiums than they pay in claims.
Underwriters like information.
Some people think they can do better by not sharing some information. They don’t declare an underage driver, for example. In the long term, that never helps.
Underwriters don’t expect perfection. If everything was perfect there would be no need for insurance. They are ok with risk as long as they understand what is involved. This is when a proper Strata Property Predictive Analysis combined with a solid plan to maintain, protect and replace the various components of a building, creates clarity for an underwriter evaluating insuring a strata.
Predictive Analysis is more than the Depreciation report required by strata bylaws. The Depreciation report is actually included in a Predictive Analysis. The Predictive Analysis we deliver to our clients removes uncertainty in the mind of an underwriter. It doesn’t guarantee that a strata will be “insurable” or that it will get a better rate and lower deductibles. But it provides significant clarity and reassurance for an underwriter when they assess your risk and premiums.