Texas High-Rise Insurance – Navigating the Tricky Terrain
VP of Insurance at FirstService Financial, Jamie George, sat down with Regional Director of High-Rise at FirstService Residential, Shawn Bell, to address common concerns about the rising insurance rates for high-rise communities. Jamie shares her insider take on how trends among carriers have shifted over the years and what it means for your association.
The good news: Your association can mitigate rising insurance rates while ensuring proper coverage for your high-rise.
Learn more in the video below:
Highlights from the video and more:
Why have annual premiums increased so much over the past 5-6 years?
Following the recovery efforts from Hurricane Harvey, 2017 and 2018 were two of the largest pay-out years in insurance history.* The worldwide impact is a major reason we see insurance rates increase so much. Even if you do not live in a hurricane zone, your premiums are still affected because carriers now look at them on a global basis.
Another reason for rising insurance rates is inflation. Costs of goods and labor have spiked over the last 24 months, which also drives up the price of premiums.
*According to the Hurricane Harvey Data Report by the Texas Department of Insurance, the total insurance pay-out for residential dwellings alone was over $1.2 billion. The average claim for residential property insurance (which usually does not cover flood damage) was $13,000; for flood insurance, the average was $121,000.
How often should high-rise associations get appraisals?
Due to current market conditions, it’s best to get an appraisal every 24 months. It’s important to know both the total value and total insurable value of your high-rise building. Carriers look very closely at these values to ensure they align.
What can boards do to mitigate changes in their premiums?
Being proactive is the first step to mitigating rising insurance rates. Making your high-rise safer by adding more technology and automation does not mean you won’t see insurance rates increase, but experts are optimistic that we will eventually get there. In the meantime, your association should continue implementing security devices that can support your building’s emergency-response plan.
Can COAs get a discount on policy premiums if they install more safety features in their high-rises?
Installing more safety features may not translate into a discount on your insurance, but it may cut costs in the long run. For example, incorporating technology that decreases water loss will be favored by carriers because they will see the difference in the loss history and claim history. The building will benefit from this because COAs can devote more deductible money toward prevention efforts.
“[When I was a high-rise general manager], we rolled out a product that wirelessly monitors up to 600 points throughout the building. If any sensor detects any moisture, it sends out a text blast and an email to the manager and front desk, [which had] a response team ready. When we were renewing insurance at that property, [the carrier] was glowing, seeing that in action in a live test we performed. I don’t know if that translated into any favorable drops in our premiums there, but at least they liked what they were seeing.”
--Shawn Bell, Regional Director of High-Rise Division at FirstService Residential Texas
What if board members need clarification on what their policy covers?
A good starting point is the Texas Uniform Condominium Act. The default is “bare walls” coverage, which means the association’s insurance covers the basic structure of the building. The association’s governing documents should specify whether the insurance covers just the original builder grade or if it also covers any upgrades that have been added since the initial build.
High-rise insurance is complex, especially in Texas, because of the increased demand for luxury living. It is best to have a broker who can produce a letter at each renewal that outlines in black and white exactly what your association’s policy covers. The insurance documents and declarations must be easy to understand, especially if the COA needs to file a claim.
“High-rise insurance was a totally different animal 20 years ago. It wasn’t as difficult to obtain, and we certainly didn’t have [the same] deductibles and coverage that we’re seeing today.”
--Jamie George, Vice President of Insurance at FirstService Financial, Inc.
High-rises tend to have more luxurious finishes. How can COAs ensure the evaluations are accurate?
Partner with a broker who has expertise in high-rise buildings and is well-informed on rising insurance rates. He/she should practice due diligence, thoroughly studying your association’s documentation.
Go on sight walks with your broker. To ensure proper coverage, point out unique finishes like artwork. For example, a painting on a lobby wall may be worth more than the standard limitation on an insurance policy. He/she should already be catching these things, but ensuring you’re on the same page never hurts.
What are the limitations of umbrella insurance?
As a rule of thumb, umbrella insurance does not always equal true “umbrella” coverage anymore. It is more of an excess liability insurance. This can be a pain point for associations – policies no longer offer the broader coverage we used to see in a typical umbrella market.
Umbrella policies have drastically changed because of the influx of claims carriers have received on the liability side (third party), not the property side (first party). This includes slip-and-falls, injuries, and similar cases that have increased attorney involvement. Unfortunately, this leads to higher pay-outs in defense or settlement costs.
Approximately five years ago, associations experienced a much easier umbrella market. COAs could obtain a $100 million umbrella policy for an affordable rate. Today, they are lucky to find a reasonable $25 million policy.
Claims affecting the umbrella market have surged in the last 24-36 months alone (yet another reason for rising insurance rates). Though experts do not forecast a sunnier umbrella market any time soon, associations can weather the storm. Preparation is key. Board members who know what to look out for can better prepare for their next renewal and avoid any surprises.
Still have questions?
Thank you for joining us for a conversation about navigating the tricky terrain of high-rise insurance. To learn more about handling changes in your premiums, contact Jamie at the information below.
We want to thank our experts:
Jamie George
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You can also Contact FirstService Residential Texas today. We’re happy to help point you in the right direction.