I attended the Neighborhood Associations Institute (CAI) Annual Convention this week carrying two hats. One was as a lawyer who has spent a profession representing policyholders. The opposite was because the president of my condominium affiliation. That second hat made the chance administration assembly and dialogue hit somewhat nearer to house.
The dialogue was candid. Insurance coverage brokers, provider representatives, threat managers, group affiliation managers, and others overtly mentioned what many condominium boards are actually studying the onerous approach. The previous insurance coverage underwriting world is gone. The times when a condominium affiliation may submit an utility, present loss runs, reply a couple of routine questions, and anticipate renewal phrases are fading quick.
In the present day’s condominium underwriting is turning into a knowledge hunt. Synthetic intelligence is now a part of underwriting. Applications are being designed to tug as a lot info as doable about condominium properties from public and semi-public sources. Constructing division information. Allow histories. Roof information. Hearth safety info. Flood info. Aerial imagery. Claims historical past. Development information. Occupancy info. Safety methods. Publicity information. The underwriter’s file is not simply what the board, supervisor, or dealer sends in. It could embrace what the provider’s expertise can discover with out asking.
Affiliation boards and managers typically deal with insurance coverage renewal as a dealer’s annual chore. Collect the loss runs. Replace the values. Fill out the applying. That method is outdated.
Underwriters need extra full, present, and credible info. Loss runs nonetheless matter, however they’re just one a part of the story. Underwriters more and more need to know the age and situation of the roof, plumbing, electrical methods, HVAC methods, life security methods, sprinklers, alarms, and different infrastructure. They need to know whether or not growing older methods have been changed or merely patched. They need to know whether or not a condominium affiliation has a plan or is simply hoping nothing breaks earlier than the subsequent annual assembly.
A condominium constructing shouldn’t be merely a group of items stacked vertically. It’s a residing bodily asset. Pipes corrode. Electrical methods age. Roofs deteriorate. Concrete spalls. Waterproofing fails. Elevators want modernization. Hearth methods require upkeep. Deferred upkeep could lower your expenses for one board’s finances cycle, however it may change into an underwriting purple flag for the subsequent one.
That is the place insurance coverage, threat administration, and board governance collide. A board that refuses to confront growing older infrastructure might imagine it’s avoiding a political battle with homeowners. In actuality, it might be making a a lot bigger monetary downside. If underwriters view the property as poorly maintained, outdated, or missing credible info, the affiliation could face larger premiums, bigger deductibles, lowered limits, exclusions, or fewer carriers prepared to cite in any respect.
CAI has warned that group associations, particularly condominiums and housing cooperatives, are going through rising premiums, cancellations, larger deductibles, and diminishing protection choices. The insurance coverage market is asking more durable questions. An important query for boards is not, “What did our loss runs present?” The higher query is, “What story does our property inform an underwriter?”
If the story is that the board has present reserve research, credible upkeep information, documented repairs, latest inspections, allow histories, roof studies, plumbing updates, electrical upgrades, fireplace system testing, and a plan for capital enhancements, that could be a higher story. It doesn’t assure low cost insurance coverage. But it surely offers the insurance coverage dealer one thing to promote apart from hope. If the story is that no person is aware of the age of the pipes, {the electrical} panels are unique, the roof information are lacking, the board has postponed repairs for years, and the applying accommodates obscure solutions, acquiring reasonably priced insurance coverage will probably be an issue.
The rise of synthetic intelligence in underwriting makes this much more necessary. AI is a instrument that may quickly gather, examine, and flag property info. If an affiliation says one factor on an utility and public information counsel one other, there could also be questions. If constructing permits present incomplete work, repeated water harm repairs, roof points, or outdated methods, these info could change into a part of the underwriting evaluation. If aerial imagery suggests roof deterioration or surrounding publicity issues, that issues. If flood information, wildfire maps, crime information, building info, or different exterior sources point out elevated threat, these elements will affect pricing and availability.
A condominium affiliation mustn’t wait till sixty days earlier than renewal to start enthusiastic about insurance coverage. That’s like ready till the boat is taking up water earlier than in search of the bilge pump. Boards ought to deal with insurance coverage renewal as a year-round governance perform. Managers ought to keep organized information. Brokers ought to be introduced into the dialogue early. Engineers, contractors, reserve specialists, and threat managers ought to be a part of the story earlier than the applying goes to market.
My takeaway lesson from the CAI dialogue is that underwriting has change into extra investigative. Boards should change into extra proactive.
I’ve mentioned for years that insurance coverage is a promise. For condominium associations, the insurance coverage market is telling associations that if you’d like the promise at an inexpensive value, you should be ready to show the chance. This implies documenting upkeep, updating previous methods, conserving correct information, correcting hazards, confronting constructing circumstances, and funding reserves.
For these on this matter, I counsel studying “How the Neighborhood Affiliation Insurance coverage Renewal Course of Has Modified — and What Managers Must Know.”
Thought For The Day
“An oz of prevention is price a pound of remedy.”
Benjamin Franklin