Living in a hotel or apartment where all of your homeowner worries are someone else's problem is a fun daydream, especially when the air conditioner starts putting out hot air in August or the sidewalk needs shoveling in February. When fire destroys a home, however, or a hurricane tears off a roof, the daydream can become a nightmare.

In the midst of such emotional and physical turmoil, the newly homeless turn to their insurance agents. Standard homeowner policies provide for temporary housing of displaced families, usually for benefit periods of up to one year. Yet, the prospect of finding temporary homes, furnishing them, and negotiating rental fees, deposits, and utilities only adds to policyholders' nightmares.

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

RHS also offers a volume discount program. Carriers are eligible for a monthly floating discount, depending on the volume of placement in each particular month.

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

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

Collection and payment of security deposits is another area of corporate choice. Hackett's company advances deposits and up-front fees, 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 the deposit out of the insured's content portion of the claim,” according to the company's web site. “This way the insured is financially responsible and is more likely to make sure the temporary residence is kept in good condition.”

ExecuStay by Marriott touts its flexibility, stating that it can either forward payments directly to properties on behalf of policyholders and bill carriers for the total amounts, or policyholders can pay deposits directly to properties. CRS “prefers to bill the carrier for the deposit; the carrier then deducts the amount from its policyholder's content portion of the claim,” according to the CRS web site. “This way, the policyholder is financially tied to the security deposit and will be more likely to maintain the condition of the home.”

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

It appears to be fairly standard that temporary housing companies guarantee payment of monthly rents (but not payment for any damages) to landlords. Most companies support credit card or online billing processes to simplify payments.

Online Replaces On-Site

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

When pressed, housing experts said that there are important geographical differences that affect how easy, or hard, their jobs can be. The northeast region of the country is by far the least favorite among the group. High density and a corresponding lack of units, the increased use of realtors in lieu of temporary housing companies, and a tendency to place dislocated policyholders in corporate housing instead of temporary housing are listed on the negative 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 game nationwide, according to Joe Novia, vice president of national sales. “We have 42 people in field operations doing guest service or property specialists and sales in six regional hub offices throughout the U.S.,” he said. “Our goal is to place the insured in a living situation similar to his existing one, typically within four miles of his permanent home. Seventy percent of our database inventory is with individual landlords, 30 percent with apartment communities.”

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

Before the Internet, locating acceptable rental properties meant long hours in the library, poring over phone books and classified ads, followed by more hours on the phone trying to get solid pictures of potential rental properties. Today, that information is just a click away. Companies also use their own web pages to solicit potential rental properties. Housing Headquarters, “gets about five or six properties a day registered from our web site,” said Hackett. Indeed, the Internet may be the single most important technological advance for temporary housing companies. Not only does it allow for 24-hour communication among adjusters and housing staff, it also allows smaller companies to compete with the big boys. Theoretically, a one-office firm located almost anywhere with Internet access can compete effectively with Oakwood's 100 service offices worldwide, at least in terms of building rental databases.

“The Internet has put us on the same access level as large companies,” said Sumners. “Because of our database, we can often be the first company to respond to an adjuster's request for temp housing. 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 adjusters is price shopping. “One of the challenges in our industry is that adjusters think it is in their best interests to contact more than one relocation company or property management company, and instruct them to contact the homeowner,” said CRS's Freid. “The end result is that, instead of helping, there is utter confusion for that poor disaster victim.”

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

“Many carriers use a rotating schedule of approved vendors instead of the shopping,” said DMA's Lisa Ford. “We think that is the 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 for justification for using the service. Getting the insurance industry to use temporary housing companies appears to be more of an education process than a selling process.

The temporary housing industry is trying to help. Many companies offer basic courses on how temporary housing works. Some carriers have signed up for the courses, and programs also are available through the industry's Property Loss Research Bureau. ALE Solutions teaches a course for PLRB on Coverage D, Loss of Use, the entire section in a homeowner policy that deals with temporary residences. Almost all insurance companies belong to PLRB, and ALE presents the course at national and regional meetings. ALE also offers the course to insurance companies, tailored to their specific needs.

In an effort to educate its adjusters, Nationwide Insurance has hired CRS to conduct a training program. “We hold monthly classes for them,” said Freid. “This is very intensive, in-person training, giving the adjusters more insight into the industry. The program is not run by our sales team, this is our training team. We also do it for many other companies.”

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

Carrier Acceptance

Among carriers, the degree of acceptance of this young industry varies widely. As mentioned, Nationwide has an adjusters' training program with a housing company. State Farm, on the other hand, does not have any training or contracts with housing companies, nor does it give its adjusters approved vendor lists. On its web site, under the “If your home is uninhabitable” segment, the carrier tells its policyholders:

Payment for expenses that are beyond your normal living expenses may be available. Find temporary housing for your family (there is no coverage under the flood policy for this expense). We suggest that you not enter into any long-term leases until you talk to a State Farm claim representative. Keep all receipts associated with the temporary housing, meals, and other miscellaneous expenses.

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

“As far as temporary housing companies, we do use them but there is no approved list,” he continued. “The individual claim representative will make that call. The level of satisfaction prior policyholders received is a strong factor in who gets the call.”

Allstate works with approved vendors. “We have a primary and secondary vendor that our adjusters can refer business to,” said Ryan Priest, the company's communication consultant. “These vendors are management companies that seek out housing appropriate for a family's needs. The customer always has the option to seek out other housing if it turns out to be less expensive that what our vendor finds. Our policies pay for temporary housing until a permanent relocation is made, 12 months, or up to 10 percent of the limited liability coverage.”

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

Sumners at RHS said that he has seen some of the larger carriers trying to bring the work in-house. “To some degree that may have been successful, but we do know that several of them are back to calling out for bids,” he said. “Allstate, State Farm, and Farmers all are asking for bids.”

CRS's Freid expressed optimism about carrier acceptance and her competitors' staying power. “This is a pretty tight industry,” she said. “We have really good relationships with each other. That's one of the things I like about it. That, and the fact that we, as an industry, are growing. Three years ago, there maybe were five exhibitors at the Property Loss Research Bureau trade show. This past year there were 14.”

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

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

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

That may mean asking policyholders to handle more relocations themselves, or adding the work to claim adjusters' plates. Neither are options that the temporary housing people want to contemplate.

How Temporary Housing Works

oThe policyholder contacts the insurance company to report the loss.

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 the policyholder.

oThe housing company contacts the policyholder to ascertain his needs (family size, furniture, housewares, pets, special physical requirements, 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 the lodging, 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 the carrier throughout the relocation, handles any problems that arise at 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 is surfacing as a relocation requirement. Proposed lodgings are required to be of like kind and quality to the policyholder's property, 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 stay with family or friends, or at hotels.

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

oInsureds should see the entire rental property before accepting it.

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

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

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