Better discounts for Building and LL insurance

Discussion in 'Property Management' started by Wiz, 27th Oct, 2018.

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  1. Wiz

    Wiz Well-Known Member

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    I'm just wondering why insurance companies don't offer coverage for longer periods of time (e.g. 2 years) that comes with a discount? With most types of insurance I can opt to pay monthly, but will get a discount if I pay yearly instead. So why not offer 2 or even 3-5 year insurance policies on building and LL insurance that comes with a discount for doing so? It would be guaranteed business for the insurance company and a cheaper option for the home owner?

    Does anyone know if there are any companies out there offering something like this?
     
  2. Michael Mitchell

    Michael Mitchell Well-Known Member

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    Terri Scheer is like $1 a day, and I believe EBM and others are even cheaper, and considering the likelihood a Landlord will need to make a claim, that price point has always seemed very cheap to me. Also, when you have 3+ properties with the same insurer you start getting a multipolicy discount which is cheaper again. Also, (don't know about the others) but with TS you can get pro-rated refunds if you need to cancel mid term which is good.
     
  3. Wiz

    Wiz Well-Known Member

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    My Building and LL insurance combined with EBM is over $1300 per year, per property. That is around $3.50 per day. That is why I am wondering if anyone offers a discount for purchasing a policy that is 2 years or longer.
     
  4. aufm

    aufm Member

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    are you talking about just the landlord component without building? My landlord and building package with TS is ~$800 a year, so definitely more than $1 a day
     
  5. Marg4000

    Marg4000 Well-Known Member

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    Probably because properties can change condition over a period of time. When you renew annually, you have an obligation to inform the insurance company of any material change. By renewing without comment, you are basically confirming the risk is unchanged.
    Marg
     
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  6. Wiz

    Wiz Well-Known Member

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    Good point, but the condition of a property could easily change over the course of 1 year too.

    You could also pay for 2 years or more in advance to acquire the discount, but be required to sign an annual document to confirm that the condition is unchanged in order for the coverage to remain current. The insurance company might even make money off the people who fail to sign the document and assume they are still covered.
     
  7. Stoffo

    Stoffo Well-Known Member

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    I like your thinking @Wiz :D
    Particularly for complexes (body corporate situations)
    We recently signed for 5 years on lift maintenance & 3 years on Fire Services, so why should Insurance be any different ? :confused:
    As any changes to the building (BC) could easily be notified to the insurer ;)
    Our current quotes for 12 months are $20k- $28k
    Any discount on a 5 year agreement is going to be a substantial saving o_O

    That said, due to climatic events (floods, cyclones, bushfires, storms) the insurance companies can vary their premiums at 12 month renewal to ensure their profit margins remain intact :eek:
     
  8. Wiz

    Wiz Well-Known Member

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    Another good point, but might this not be offset by the guaranteed income and extra interest accrued as a consequence of the longer pre-paid policies?

    I suspect that people would also be loyal to a company that gives them a discount plus lets them avoid the hassle of renewing every year. This would be good for the insurance company too.
     
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  9. Stoffo

    Stoffo Well-Known Member

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    Thanks for raising this @Wiz
    As our BC insurance is due next month I have this evening emailed our Broker asking the same question :)
    Will provide feed back on the reply we receive ;)
     
  10. Wiz

    Wiz Well-Known Member

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    Actually, the more I think about it the more I wonder why this doesn't apply to all types of insurance. Why can't I pay all of my insurance (car, health etc) in periods of 2 or more years and get a discount. Who decided that 1 year was a thing?
     
  11. housechopper2

    housechopper2 Well-Known Member

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    From an IP perspective, the insurance can be wholly tax deductible if claimed up to 12m in advance. A longer period would need to be apportioned.

    Also companies like to review pricing annually.
     
  12. brettc

    brettc Well-Known Member

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    Premiums are determined by a wide range of factors, many of which can vary at any given time. With landlord insurance for example changing social and legislative factors can make a substantial difference to the level of claims that may be paid out. What needs to be remembered is your premium is not simply rated by factors about your individual property, there is a much wider premium pool across a wide range of properties where premiums need to be collected to “share the risk”. Other factors such as investment rates etc. also affect the premiums an Insurer will charge. So essentially, for an Insurer to remain viable, and to ensure they are able to pay claims when they occur, they need to be able to review the loss-ratio (claims paid compared to premiums collected) on a regular basis and make adjustments to premiums to suit. That’s a very simplistic view, determining premiums is very complicated.
     
  13. Wiz

    Wiz Well-Known Member

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    I appreciate that it is very complicated to work out premiums such that the business remains viable, but I wonder if a 2 year premium would change that too much? Not everyone would pay 2 years in advance, not everyone's renewal would be due at the same time, and insurance companies could still review their pricing annually. Wouldn't having a guaranteed income for a longer period that can be invested to earn more money, combined with greater customer loyalty offset at least some of the negatives?
     
  14. brettc

    brettc Well-Known Member

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    I guess the answer is that one day an Insurer may try to gain a competitive advantage if they find a viable way to do that, and are willing to take the risk, but they would also have to convince the reinsurer's that it was viable as well and that would be even tougher I presume. With the number of factors that go into into a premium I wouldn't see it likely, but happy to be proved wrong if it creates a benefit to loyal customers.
     
  15. Wiz

    Wiz Well-Known Member

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    Do you not think that customers would want to pay 2 years or more in advance to get a discount? I guess it would be a fair chunk of money to pay in one go, but for me personally, I would think it was worth it.

    I can understand if most other people feel differently though.
     
  16. brettc

    brettc Well-Known Member

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    To be honest, unless the discount was very substantial, I doubt it, I feel most people would like to keep their cash on hand and would like the option of looking elsewhere every 12 months anyway. It probably creates a range of complications including taxation, and I don't expect Insurer's would see there being sufficient benefit to them compared to the risk of trying to foresee the future more than 12 months in advance, certainly not to provide a "substantial" discount anyway. But you never know I guess. This of course is only a personal opinion and for all I know Insurer's might be secretly planning such a strategy.
     
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