Landlord Insurance Claim Trends in South Australia

This information was presented yesterday at the Adelaide Property Network meeting by Brett Leonard - the SA representative of Property Insurance Plus. A specialist landlord insurer, equivalent to EBM and Terri Scheer.

Average Loss of rent Claim $4,000 - $5,000
Average contents damages claim: $1,000 - $3,000
Average building damages claim: $5,000 - $10,000
Increased LOR claims throughout SA - Rent Default & Absconding
Record number of claims lodged in SA for the 2015/2016 period
PIP claim payments over the last 12 months: $2,300,000 +
SA claims payments over the last 12 months: $1,100,000 +

This fits in well with an observation we have been seeing in our agency over the last 12 months too. (Although we have only 200 rentals and statistics are not significant with small numbers - try to run any statistical analysis on a small number - it does not work significantly).

However our "observations" have been confirmed above by the huge number of claims through an insurance company. Also many other agents are experiencing this same trend.

An increased number of absconding and defaulting tenants and we are talking about tenants with no previous defaulting rental history. It is correlated with unemployment in Adelaide, tenants walking out of rentals to get jobs interstate, job loss and also sickness and divorce.

Have a look at total number of claims $2.3 mil across all states and half of that is in SA alone.

He also mentioned Victoria has a 38% default rate and SA has a 70% default rate. That is for every hundred dollars the insurance company receives from total amount of premiums, $70 is paid back to loss of rent claims for SA clients. Insurance companies are running lean and SA tends to be less profitable for the insurer according to these stats.

What are they doing about it?
Un-partnering with certain PMs who are making themselves to be part of the problem. Inadequate screening procedures, not mitigating losses for the insurer (or the landlord) by advertising quickly enough, not obtaining orders for vacant possession for clients, not issuing breach notices on time etc.

Market conditions cause the above to occur and property managers need to be mitigating and handling those losses as best as possible not adding to them.

This insurance company has already refused to insure properties managed by certain SA agents and they are running checks on many more of them.

@sash asked me on the phone today whether the increased claims were associated with specific Adelaide areas. Our speaker last night said NO, there are claims all over Adelaide. He was a very nice and politically correct person.

My own observation from our agency - yes claims all over but we have them mainly concentrated in the outer Northern and outer Southern areas than any other part of Adelaide.

This is only one insurer, but I would suspect other insurance companies have similar stats as economics effects everyone similarly.

 

Hi Xenia...not surprised here....a double whammy of high unemployment and lower socio economic areas.

Thanks for the post.

 

The great thing for landlords is that with the right landlords insurance and good property management, the financial risk to landlords becomes almost zero even with the trending defaulting and absconding tenants we are now seeing.

 

Any other investors in SA notice a trend in absconding tenants and default rates?

 

I have not no... my tenants all pay like clockwork and have only had one tenant across all my portfolio in 3 states abscond requiring an insurance claim.Maybe I am lucky, but I do choose my PM's very carefully.

 

Only had 1 tenant default/abscond and that was one the owner found on gumtree prior to appointing me. Insurance is good, but preventing stuff is better. Maintain good relationships with tenants, have strict systems in place, don't take **** from no one

 

Dave and Dave what is the stats on those properties?

None or one out of how many in SA?

 

I have not had to claim on any insurance in SA on any props.

I have had to claim bond once in SA, due to tenant vacating and leaving a mess (I was expecting and fine with that as I was getting way over market rent and had built up a renovation fund as it was a rundown place and a mess when I bought it)

 

Claimed bond once in 10 years out of 3 properties? 100 properties out of 1000 properties?

I've had 15 defaulting and /or absconding tenants out of 200 properties in last 12 months. According to STATS in SA that's on par!

Some of them have come through from private landlords or other agencies already in default leading to insurance claims later.

This makes no difference, PMs cannot stop tenants absconding but they can contribute to the problem by not handling it correctly when it does occur. Most are just too slow to act on problems.

Previously it had been 2-3 claims per year. There has been an increase in SA.

Saying zero or one out of 5 properties is not useful information.

Other property managers with significant rent rolls are experiencing the same thing.
$1.2 million dollars in default claims paid out to SA investors in last 12 months by only one insurance company. Is that not a significant increase?

 

Between our "core" of adelaide investors (myself, DT, Corey, Waldo) we hold properties equivalent to about 20% of your rent roll. I cant recall any of us having tenants abscond or submitting insurance claims in the past 2 years. Again maybe thats just lucky.

 

tdlr: Ferals are on the rise.

 

One of my Murray Bridge properties attracts "the tenant from hell" on a regular basis.Out of 6 tenants 5 have never got bond back and there has been 4 insurance claims.As we speak,the former tenant who did a runner,leaving most of his beloved belongings strewn around the back yard,doors kicked in,holes in walls,3 weeks rent owing etc etc is contesting the bond,the bond is $1530,the damage around $3000.

And my property at Tenterton Ave Christie Downs has just had the property manager terminated immediately due to gross miss management.Tenant absconding,rent owing,property damage etc etc.It only came out what was going on when their was nil balance on the mid month statement.

 

Yes could have been better communication. Absconding tenants and rent defaults is one thing but property managers who are unable to deal with the situation....

That pm historically has been great, I've heard a lot of good things but that was a few years ago.

 

I agree!! A few years ago things were good.Then they get greedy,take on more than they can cope with, employ juniors to maximise profit with minimal expenses.Its when problems occur the real deals show their wares, this PM failed me,their current clients and most of all they failed themselves.