"Beware the stereotype, my son!
The assumptions that bite,
the judgments that trash!
Beware the prejudices, and shun
the baseless Balderdash!"
You may have heard that a recent Independent Insurance Agents & Brokers of America Trusted Choice consumer study found that nearly 25 million U.S. families who rent homes lack adequate property and liability insurance. About two-thirds of all renters have little or no rental coverage. "Among those respondents who said they don't have renters' insurance," according to the study, "26% felt that the coverage is too expensive, and another 17% said they didn't know they needed it. Another 8% had never heard of renters' insurance." Many seemed to feel that insuring renters' losses was the landlord's problem. IIABA also found that 89% of all renters "own one or more valuable electronic devices, such as digital recording devices, desktop and laptop computers, digital and video cameras and home theater systems." More than 50% have pets, and 5% admit to operating in-home businesses.
Do you see a pattern here? Any particular insurance issues jump out at you?
To get a better handle on renter statistics, I went to www.nmhc.org, a Web site run by the National Multi Housing Council (NMHC) and cited in the IIABA study. There, I discovered additional interesting facts: Nearly 31% of all U.S. households are renters. While the largest number of renting households dwell in apartments, nearly 31% live in single-family homes; and 35% of all apartment renters have average annual incomes exceeding $36,000 (as compared with 57% of all U.S. households).
OK, so much for the data. Tons of other statistics are available, but let's go back to the key insurance question the study raises: Why are so many renters either uninsured or underinsured? Clearly the reason can't be minimal exposure to loss. As the study indicates, renters and homeowners share many of the same property and liability loss exposures. To paraphrase the immortal bard, if a renter's dog bites, do you not bleed?
Some may suggest that renters lack the resources to purchase appropriate insurance. For these folks, the term "renter" suggests a less-than-ideal prospect: too young, too old, too broke or too unsettled. While there is no doubt some truth to those assumptions, beware the stereotype, my friend. People in all segments of society exhibit those same attributes. For example, in the area where I live, just outside of Washington, D.C., the until-recently-scalding-hot housing market found many renters staying in apartments longer than some homeowners remained in their homes. I know more than one highly educated, affluent middle-aged couple that has "traded up" at least three times in the last seven years, living in one home only long enough to meet the two-year tax-break deadline and then cash out. I'd bet that any number of agents and carriers have salivated over their business, including a current agent who no doubt has flagged them as an "A-level" client. Yet the folks who quietly pass their days in rental homes or apartments instead of flipping houses are flying under the radar, ignored by most and valued by few.
So if the demographics suggest there's a lot of gold in them thar renters, and they clearly need our products and services as much as, if not more than, homeowners, why the seeming lack of market penetration?
May I suggest two possible explanations?
Perhaps the main reason is related to the fact that the vast majority of homeowners do not purchase homeowners policies to "protect their stuff" or, as some of my students have explained the need for liability, "to cover their assets." No, the No. 1 reason homebuyers purchase insurance is because they must--the bank won't close on the mortgage otherwise. Sure, homeowners may appreciate the security that coverage affords, but most insureds also say they appreciate the benefits of flood insurance, and we all know how that game is played. Nearly all flood insurance is written not because folks love and appreciate it, but because they are required to buy it. When the requirement disappears, the resulting high lapse ratio proves that insureds really want the house or the loan, not the insurance.
A second reason is the one the IIABA study no doubt intended to address: Many carriers, and far too many agents, apparently think renters present no market or sales opportunity.
Beware the stereotype, my son!
If third parties did not require residents to cover their houses, IIABA undoubtedly would conduct a study to find out why the majority of homeowners are uninsured/underinsured.
Oh, wait, they are! Articles in this and other trade publications have derided underestimates of property values, the insufficiency of liability coverage to cover recent claims, and coverage gaps created by the failure to insure home-based businesses and increasingly expensive possessions. Gosh, sounds a lot like the findings of the IIABA renter study, doesn't it?
Clearly, renters present opportunities of mammoth proportions. And we don't even have to come up with some great technological innovation, idea, mousetrap or gizmo. No, we can simply reach into our existing coverage treasure chest, pull out the tried-and-true HO-4 and its various endorsements, and set sail for the nearest archipelago of renters. Naturally, underwriting rules must be followed and credit scores ascertained, but that's the case with any group of insureds. Oh, and if you don't think a renters policy generates enough premium to merit your trouble (another stereotype, assuming adequate coverage is written), I have two more pieces of good news.
First, if the premium truly is lower, so will be the renter's resistance to paying it. Ask any Florida agent trying to place homeowners coverage along the coast about high prices and insureds' gratitude.
And for those of you who believe, as I do, in total account selling, NMHC data indicates that 74% of all renters own more than one auto. I'll bet a bit of life, umbrella and watercraft business lurks in the shadows as well.
You know your products and services. Now you know where the fields are white unto harvest with new prospects. If stereotypes, assumptions, judgments, prejudices or just plain balderdash have held you back, 'tis time to unleash.
If you'll permit me one more modification from "Jabberwocky":
"And, has thou slain the stereotype?
Come to my arms, my beamish boy!
O frabjous day! Callooh! Callay!"
He chortled in his joy.
So stop wondering about renters insurance and start selling it. And may you chortle in your joy--all the way to the bank.
