Times are changing for the self-storage business in Canada as it becomes more sophisticated and consumer-savvy. Thirty years ago, making an insurance product available to your tenants was probably not on your radar but it may be likely today. Self-storage tenants expect a storage facility to provide more than just space. Insurance, like packing materials and locks, may be on their list of needs and expectations.
Many storage facility owners do not fully understand the complexity of insurance and the problems that can arise from a poorly designed insurance program. So how does one navigate the insurance mine field? The following points can help guide a storage owner into selecting the best program to fit his needs.
Choosing the Right Company
Select an experienced insurance broker you trust and who understands the self-storage industry. Insurance brokers are not unlike other professionals in that some specialize in servicing specific industries and have programs developed to meet the unique needs of a given industry. An industry program may include specialty coverage, competitive pricing, knowledgeable claims adjusting, fewer potential gaps and generally makes the decision process easier. You might also consider requesting references from clients of that broker, preferably with some claims experience.
Make sure the insurance company you select is financially stable, able to meet its commitments and in for the long-haul. Like any other business, insurance companies can fail. In fact, there have been several failures in recent Canadian history. Failure of an insurance company may result in unpaid claims, reduced claims payments and even lost premiums. They should also be committed to the industry to ensure they will be supportive during the good and bad times.
Define the Insurance Terms
Make sure the tenant’s insurance coverage is not linked to your storage contract. Insurance companies and insurance brokers are heavily regulated, and the rules and requirements for doing business in a given province or territory are well defined. At a very basic level, insurance for your tenants must be in the form of a contract between the tenant and the insurance company. The tenant agreement cannot legally contain the promise to pay an insurance claim to the tenant, as the self-storage facility is not an insurance company.
There is also the issue of an insurance company pulling the plug and retreating from a class of business. This situation could leave a storage facility holding the bag forcing it to honor the terms of the tenant agreement. The result could spell financial disaster in the event of a significant claim.
Make sure that your customers are not sharing a policy or single limit of insurance. If a policy or limit of insurance is being shared, this is your first clue that this method is likely not in compliance with those regulatory bodies that govern the sale of insurance products.
Put Tenants First
Aside from the compliance issue, the total limit of insurance may not be adequate to properly compensate all tenants for their damage or stolen goods. This is a dangerous gamble that could have dire financial consequences for many including the storage facility.
The insurance offering should be considered a value-add that attracts new tenants and/or builds loyalty with existing tenants. With this mind, find the most comprehensive coverage, at a competitive rate that will respond by paying a covered claim if something goes wrong.
Make sure that the process is easy for your tenants and, as previously stated, make sure they are dealing with a solid insurance company and broker with an established reputation. After all, if the insurance doesn’t work, your tenant may point the finger at you.
The Broker Bond
The support of your broker is vital to offering adequate tenant insurance. Be sure the administration of the tenants insurance is efficient with solid insurance broker support. An efficient system will likely use technology, create a unique insurance contract for each tenant and provide a searchable database available to the facility. The administrative system will be tailored to meet those regulations that govern the distribution of insurance in a given province or territory. Lastly, you need an insurance broker available and equipped to field insurance questions from your valued tenants.
So how have times changed? There are some tried, tested and true insurance providers still around as well as a number of new entries to the self-storage insurance arena. If you consider these earlier points, you will likely make the right decision for you and your tenants.
When all is said and done, the old adage applies, “If it sounds too good to be true, then it probably is.” But these guidelines will help you make an informed decision.
Tobias "Toby" Struewing is a commercial account executive for Cowan Insurance Brokers Ltd., a provider of insurance and risk management products and services for the Canadian market. For information, call 866.912.6926; e-mail toby.struewing@cowangroup.ca; visit www.cowangroup.ca.
