More stringent underwriting requirements for rental properties
Weather-related losses and high crime has made it difficult or more costly for landlords to be protected.
Lately, insurance carriers have been hemmorrhaging money. In 2022, for example, State Farm had a record loss of $13 billion, while Farmers took a haircut of $10 billion. These losses are in part of costlier auto insurance claims driven by supply-chain disruptions, labor shortages, and costlier replacement parts. With the auto divisions putting a drag on companies, they have to make up the losses somehow.
Even rental property owners who have been claims-free for years are finding that their carrier refuses to renew their policies or the renewal comes with higher prices.
As of this writing, Nationwide announced no new commercial landlord policies as of 4/1/23 and Farmers is no longer writing dwelling fire policies (4 units and under) as of 4-15-23 and any new commercial property business has to be built before 1925. So the commercial property market continues to get tougher.
As carriers assess risk, crime is becoming more of a consideration.
Up until now, social woes have had somewhat of a downstream connection to rental housing providers. We have reminded landlords that even if a crime is not prosecuted, bad actors can be evicted and restraining orders sought, but all the better if there are consequences to wreak havoc in and around rental units.
Now, however, criminal activity is having a direct impact on the bottom line of rental housing providers because carriers are relying on neighborhood crime scores to evaluate their portfolio's exposure to criminal risk. These numeric representations of crime can be filtered down by zip code and even granular sub zip codes.
It's been said that crime doesn't pay, but carriers are being paid more with higher premiums. Landlords are paying the price for operating properties where crime statistics are concerning.
