Living in a hotel or apartment where all of your homeownerworries are someone else's problem is a fun daydream, especiallywhen the air conditioner starts putting out hot air in August orthe sidewalk needs shoveling in February. When fire destroys ahome, however, or a hurricane tears off a roof, the daydream canbecome a nightmare.

In the midst of such emotional and physical turmoil, the newlyhomeless turn to their insurance agents. Standard homeownerpolicies provide for temporary housing of displaced families,usually for benefit periods of up to one year. Yet, the prospect offinding temporary homes, furnishing them, and negotiating rentalfees, deposits, and utilities only adds to policyholders'nightmares.

Enter a relatively new service: temporary housing for theinsurance industry. As with most emerging industries, theprofit-making model tends to vary slightly from company to company.“We get volume discounts on furnishings and housewares, and makeour money on that [through mark-ups],” said Travis Sumners, CEO ofRelocation Housing Specialists in Sacramento, Calif. “We alsonegotiate attractive rents on home and apartment rentals, but we donot mark up the rent itself, only the furnishings and housewares.There are times when a policyholder does not need a completefurnished package; they can use their own items in a temporaryhouse. In those instances, we give the insurance company the optionof handling the relocation themselves or letting us do it for a$200 flat fee.”

RHS also offers a volume discount program. Carriers are eligiblefor a monthly floating discount, depending on the volume ofplacement in each particular month.

CRS Temporary Housing, based in Carlsbad, Calif., uses acombination of rental markups and administration fees. However, the$175-per-claim administration fee is waived when carriers sign upfor the company's Red Carpet Club, an easy, online process.

At Housing Headquarters, in Libertyville, Ill., there is one feefor everything. “We submit a budget and the insurance companyreviews it, approves it,” said Terrance Hackett, sales manager.“The property rental and the furniture/houseware rentals are allincluded in that number.”

Collection and payment of security deposits is another area ofcorporate choice. Hackett's company advances deposits and up-frontfees, and sends a monthly invoice to carriers. Oakwood Worldwide,based in Los Angeles, bills companies directly for the deposits.“Most companies prefer this method, because they can take thedeposit out of the insured's content portion of the claim,”according to the company's web site. “This way the insured isfinancially responsible and is more likely to make sure thetemporary residence is kept in good condition.”

ExecuStay by Marriott touts its flexibility, stating that it caneither forward payments directly to properties on behalf ofpolicyholders and bill carriers for the total amounts, orpolicyholders can pay deposits directly to properties. CRS “prefersto bill the carrier for the deposit; the carrier then deducts theamount from its policyholder's content portion of the claim,”according to the CRS web site. “This way, the policyholder isfinancially tied to the security deposit and will be more likely tomaintain the condition of the home.”

Advancing deposits from content or other appropriate coverageexpedites the housing process and encourages policyholders to takegood care of properties and furnishings, believes ALE Solutions, ofSaint Charles, Ill. The company “bills up-front for the duration ofthe stay; the invoice lists each month as separate line items,”said Rowena Zimmers, president and owner. “Any security deposit isnoted separately, and lease extensions are billed as they areincurred.”

It appears to be fairly standard that temporary housingcompanies guarantee payment of monthly rents (but not payment forany damages) to landlords. Most companies support credit card oronline billing processes to simplify payments.

Online Replaces On-Site

The biggest hurdle in the temporary housing industry may not bepricing or invoicing, but finding it in the first place. None ofthe companies contacted own their own housing stock, so all arecompeting for the same limited pie. Add to the mix the need forimmediate habitation and the short length of most rentals, and thepie gets even smaller.

When pressed, housing experts said that there are importantgeographical differences that affect how easy, or hard, their jobscan be. The northeast region of the country is by far the leastfavorite among the group. High density and a corresponding lack ofunits, the increased use of realtors in lieu of temporary housingcompanies, and a tendency to place dislocated policyholders incorporate housing instead of temporary housing are listed on thenegative side. The displaced homeowners, also, tend to be“pickier.”

At ExecuStay, all of the associates have real estate licenses,which gives them an advantage in the rental leasing gamenationwide, according to Joe Novia, vice president of nationalsales. “We have 42 people in field operations doing guest serviceor property specialists and sales in six regional hub officesthroughout the U.S.,” he said. “Our goal is to place the insured ina living situation similar to his existing one, typically withinfour miles of his permanent home. Seventy percent of our databaseinventory is with individual landlords, 30 percent with apartmentcommunities.”

Novia's company also has access to 3,600 Marriott andnon-Marriott hotels for emergency stays, generally at rates 25percent less than web-site rates. “We have over 400,000 hotel roomsthat we have immediate, direct bill access to,” he said. “But thatis used for emergency hotels only. Then we go to work with theadjuster to place the policyholder in more cost-effectivelodging.”

Before the Internet, locating acceptable rental properties meantlong hours in the library, poring over phone books and classifiedads, followed by more hours on the phone trying to get solidpictures of potential rental properties. Today, that information isjust a click away. Companies also use their own web pages tosolicit potential rental properties. Housing Headquarters, “getsabout five or six properties a day registered from our web site,”said Hackett. Indeed, the Internet may be the single most importanttechnological advance for temporary housing companies. Not onlydoes it allow for 24-hour communication among adjusters and housingstaff, it also allows smaller companies to compete with the bigboys. Theoretically, a one-office firm located almost anywhere withInternet access can compete effectively with Oakwood's 100 serviceoffices worldwide, at least in terms of building rentaldatabases.

“The Internet has put us on the same access level as largecompanies,” said Sumners. “Because of our database, we can often bethe first company to respond to an adjuster's request for temphousing. And we have found that the company that calls back first,gets the job.”

Education and Price Shopping

One sore point between temporary housing companies and adjustersis price shopping. “One of the challenges in our industry is thatadjusters think it is in their best interests to contact more thanone relocation company or property management company, and instructthem to contact the homeowner,” said CRS's Freid. “The end resultis that, instead of helping, there is utter confusion for that poordisaster victim.”

“Some insurance companies have had this idea of getting quotes,and that really does not work,” agreed Heather Dinsmore at DMAInsurance Housing Assistants. “They try to get quotes, as theywould from contractors, but that really does not work here. Thehouse down the street is the house down the street. Everybody iscalling the same landlord; it just drives costs up.”

“Many carriers use a rotating schedule of approved vendorsinstead of the shopping,” said DMA's Lisa Ford. “We think that isthe better way to do it.”

Because of the relative youth of the temporary housing industry,adjusters and carriers are still feeling their ways and looking forjustification for using the service. Getting the insurance industryto use temporary housing companies appears to be more of aneducation process than a selling process.

The temporary housing industry is trying to help. Many companiesoffer basic courses on how temporary housing works. Some carriershave signed up for the courses, and programs also are availablethrough the industry's Property Loss Research Bureau. ALE Solutionsteaches a course for PLRB on Coverage D, Loss of Use, the entiresection in a homeowner policy that deals with temporary residences.Almost all insurance companies belong to PLRB, and ALE presents thecourse at national and regional meetings. ALE also offers thecourse to insurance companies, tailored to their specificneeds.

In an effort to educate its adjusters, Nationwide Insurance hashired CRS to conduct a training program. “We hold monthly classesfor them,” said Freid. “This is very intensive, in-person training,giving the adjusters more insight into the industry. The program isnot run by our sales team, this is our training team. We also do itfor many other companies.”

Sumners, of RHS, has worked both sides of the fence. He was aclaim adjuster before moving into the temporary housing industry.“The perception among many carriers and adjusters is that we aredouble, triple the cost,” he said. “They don't realize that we endup saving them money because we are experts at negotiations. We endup saving them time, allowing the claim adjuster to work the claim,and we offer a huge benefit to the policyholder in terms ofcustomer service. We all are in the service industry. We need totake care of the customer. “

Carrier Acceptance

Among carriers, the degree of acceptance of this young industryvaries widely. As mentioned, Nationwide has an adjusters' trainingprogram with a housing company. State Farm, on the other hand, doesnot have any training or contracts with housing companies, nor doesit give its adjusters approved vendor lists. On its web site, underthe “If your home is uninhabitable” segment, the carrier tells itspolicyholders:

Payment for expenses that are beyond your normal living expensesmay be available. Find temporary housing for your family (there isno coverage under the flood policy for this expense). We suggestthat you not enter into any long-term leases until you talk to aState Farm claim representative. Keep all receipts associated withthe temporary housing, meals, and other miscellaneous expenses.

“We will assist in the placement or will allow the policyholdersto find a place; it is their choice,” said Tom Hagerty, a spokesmanfor State Farm. “If the policyholders are making their ownarrangements, we ask that they provide the details prior to makinga commitment so that we can make certain they are being charged areasonable rate for the accommodations.

“As far as temporary housing companies, we do use them but thereis no approved list,” he continued. “The individual claimrepresentative will make that call. The level of satisfaction priorpolicyholders received is a strong factor in who gets thecall.”

Allstate works with approved vendors. “We have a primary andsecondary vendor that our adjusters can refer business to,” saidRyan Priest, the company's communication consultant. “These vendorsare management companies that seek out housing appropriate for afamily's needs. The customer always has the option to seek outother housing if it turns out to be less expensive that what ourvendor finds. Our policies pay for temporary housing until apermanent relocation is made, 12 months, or up to 10 percent of thelimited liability coverage.”

ExecuStay's Novia reported that Allstate has an electronicbidding process from which it develops its approved vendor list.Insurance companies are starting to narrow those approved vendorlists, and some carriers also are developing fee schedules, notedALE's Zimmers.

Sumners at RHS said that he has seen some of the larger carrierstrying to bring the work in-house. “To some degree that may havebeen successful, but we do know that several of them are back tocalling out for bids,” he said. “Allstate, State Farm, and Farmersall are asking for bids.”

CRS's Freid expressed optimism about carrier acceptance and hercompetitors' staying power. “This is a pretty tight industry,” shesaid. “We have really good relationships with each other. That'sone of the things I like about it. That, and the fact that we, asan industry, are growing. Three years ago, there maybe were fiveexhibitors at the Property Loss Research Bureau trade show. Thispast year there were 14.”

“The barriers to entry into this market are slight, but thecapital requirements drive a lot of people out,” said Hackett.“Normally a temp housing company will put between $6,000 and $7,000into a location the first few days you have it. If you don't havethe capital to advance that money to the landlord, you don't getthe property. Some people may have enough capital to do two orthree relocations, but can't do any more without going to theadjuster and asking for more money.”

Volume is king in this business, said Marriott's Novia. He andhis competitors agree, “This is not a high-margin business. Youhave to drive a lot of volume to make money.”

In conjunction with the volume challenge, some in the industryalso expressed concern over a perceived shift in carrierpriorities. “Insurance companies used to be really focused onpolicyholder retention,” one said. “Now it's all focused on thebottom line. They are looking for ways to cut back.”

That may mean asking policyholders to handle more relocationsthemselves, or adding the work to claim adjusters' plates. Neitherare options that the temporary housing people want tocontemplate.

How Temporary Housing Works

oThe policyholder contacts the insurance company to report theloss.

oThe adjuster contacts the temporary housing company.

oThe adjuster gives the housing company the name, phone number,and address of the policyholder, and authorizes contact with thepolicyholder.

oThe housing company contacts the policyholder to ascertain hisneeds (family size, furniture, housewares, pets, special physicalrequirements, etc.).

oThe housing company helps the insured secure immediate lodging,usually in a nearby hotel or motel.

oThe housing company locates several potential properties(usually, at least three).

oThe policyholder views the properties and selects one.

oThe housing company sends a quote to the adjuster for thelodging, furnishings, and housewares.

oThe adjuster approves the quote.

oThe housing company facilitates the claimant's move.

oThe housing company remains in contact with the insured and thecarrier throughout the relocation, handles any problems that ariseat the relocation property, and facilitates the moving out.

oThe housing company bills the insurance company.

Lodging packages normally include furnishings, housewares,electronics, and appliances. Increasingly, home office equipment issurfacing as a relocation requirement. Proposed lodgings arerequired to be of like kind and quality to the policyholder'sproperty, including such considerations as school districts,proximity to work and permanent residences, handicap accessibility(when necessary), and pet accommodations (when necessary).

Reasons Policyholders May Need to Relocate:

oFire damage

oMold

oFlood or water damage

oEarthquake

oWind

oTornado

Reasons to Use a Temporary Housing Provider:

o Time and cost efficient

oServe policyholders effectively

oEnsure appropriate lease lengths

oReceive accurate, consolidated invoices

oAlleviate workload associated with ALE/LOU

What to Look for in Housing Providers:

o Dedication to excellent service

oInsurance specialization

oEmphasis on adjuster control of ALE/LOU

oFamiliarity with your territory

oKnowledge

oNational coverage

oCompassion

oIntegrity

oFlexibility

oResourcefulness

How to Get the Most from Temporary Housing Providers:

oOutline policy limits or budgets up-front

oDetail information about loss property

oAdvise of any special needs

oDiscuss estimated length of repairs

Information to Impart to Policyholders:

oWhile a temporary home is located, insureds will need to staywith family or friends, or at hotels.

oFor maximum efficiency, policyholders must look at possiblerentals in a timely fashion.

oInsureds should see the entire rental property before acceptingit.

oAll housewares, furniture, and appliances will be moved in andset up for insureds.

oThe only expenses covered are those costs incurred as a directresult of losses.