Claims frequency can be a problem for many developments but, with proactive and hands-on support from your managing agent, residents can prevent claims occurring and avoid the inevitable inflation in the cost of cover. Ian Hollins of Clear Building Management offers advice to leaseholders and RMC directors struggling with spiralling insurance costs.
We all understand the insurance cost model: the more claims you make, the higher the premium. Or, to put it a more positive way, by minimising the amount of claims you make, you can help to keep a lid on the annual insurance premium.
Flat dwellers like all home owners need to insure their properties. Unlike an owner of a freehold property however, a flat dweller has less control over the choice of insurer as this is done on a block basis. And this can create fertile ground for disputes – particularly if you are unlucky enough to have a managing agent that still takes a commission just for arranging the insurances…
The promise to pay
Leaseholders of course want the lowest cost and the best possible experience if there’s a claim. As managing agents, we know it’s about value for money and the “promise to pay” - and we have first-hand knowledge of which insurers are helpful and supportive in a claims scenario – and which to avoid!
As a managing agent, there’s the obvious element of handling the issues and dealing with claims to ensure they are resolved swiftly and no one is left out of pocket. But your managing agent can also help to prevent claims occurring and work with residents to resolve potential claims without the need to claim on the policy.
Preventing claims – good risk management
Claims drive up the cost of insurance; it’s a simple formula. Insurers reward the prudent and the careful and punish the poorly maintained building and a cavalier approach to minimising damage.
By far and away the most common cause of claims is water leakage, or to use insurance terms ‘water ingress’ or ‘escape of water’. Some of these are within the managing agent’s remit, such as a leaky roof or windows, but many are under the control of the individual resident. Leaking washing machines, overflowing baths (oops), poorly maintained kitchen sink or bathroom units are all regular contributors to the list of block management insurance claims and a seemingly small leak can add up to thousands in repairs.
Now, your bathing habits are entirely your own business but, if they lead, to a flood in the apartment below... it all becomes rather communal. Your managing agent should of course be following an impeccable maintenance programme to ensure that the leaky roof is avoided. We would also highlight the value in working with residents to help prevent the types of domestic incidents that can lead to claims.
The best approach is to implement a building-wide proactive water management plan – there are tools on the market that can monitor water usage and report when a suspected leak occurs (often hidden away behind bath panels or kitchen cupboards), but a simple bi-annual maintenance programme encouraging all leaseholders to replace sealant around sinks, baths and showers, check for cracked tiles or grouting and to look behind appliances can pay huge dividends and avoid the steady drip, drip of water damage.
To claim or not to claim?
Agree a sensible excess – often many insurers are now imposing higher excesses for certain types of claims (water being a prime example). The excess needs to be set at a sensible figure to ensure that small incidents are paid from communal funds or by the claimant, without adversely affecting the block’s claims frequency and doesn’t punish those who need to claim (the topic of who pays the excess is a conversation for another time!).
Act swiftly if an incident does occur – your agent should move quickly to mitigate losses and reduce further damage to the building and get early indicative pricing from the emergency contractor. This way, an informed decision can be made as to whether to make the claim (and suffer the excess) or simply pay the cost directly.
Not all claims can be avoided – that is the whole point of insurance – but, by reducing claims frequency, your managing agent can help you to both save on your insurance premium and develop a good relationship with the insurer when you do need to make a claim.