Commercial Real Estate, Capital, Insurance, Leasing & Management

Crime-free program can turn housing communities with insurance woes

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Owners and managers of affordable housing communities often face crime incidents that harm the tenants and the property. A proactive, public-private program that reduces risk will improve the residents’ quality of life and can reduce liability exposure and insurance costs.

Owners and managers of affordable housing communities often face crime incidents that harm the tenants and the property. A proactive, public-private program that reduces risk will improve the residents’ quality of life and can reduce liability exposure and insurance costs.

Too often, property owners and managers react to crime. They call the police, hire a security company or evict troublesome tenants. None of those actions prevent problems from reoccurring, reduce liability or help residents. When violent acts in a community become regular fodder for TV news, the property is perceived as a place where criminals live. Its value, income and insurability are all affected.

Programs to keep crime away

Police and safety consultants have recognized this type of situation and developed programs that keep trouble from starting. Landlords and property owners who commit time and resources to these programs can see results from adopting their practices.
If you sell property insurance, these 10 terms are foundational to the work you do.
The International Crime Free Association, a non-profit organization dedicated to those whose mission is related to the goal and purpose of the Crime Free Programs, and other private firms offer assistance with policies that:

• Identify the types of crime in the community
• Screen for offenders before they sign leases
• Develop and execute a plan for improved security
• Engage residents through communication and participation in crime prevention

While the particulars vary according to the property and plan, the goal is essentially the same: to keep crime away from the community.

Property owner liability concerns

A property owner has many good reasons to invest time and money in engaging the police and security consultants, to upgrade the property’s security. The most obvious is liability; a jury can hold a property owner or manager liable for damages if they knew there were dangerous people on the property and that the property owner or manager did not take reasonable security measures to prevent a criminal act.

 
If you sell property insurance, these 10 terms are foundational to the work you do. 

Insurance companies set rates and decide whether to renew policies for apartment communities based largely on payouts and the response of the property owner and manager to recurring problems. When claims are extensive, the annual liability insurance premium could jump 40% to 100% at renewal versus the more typical 8% to 10%. If a property becomes known as dangerous, it could become uninsurable, even if the policyholder offers terms at a six-figure deductible.

A much less-expensive and more-effective solution is to partner with police and private firms on a crime prevention plan. In Hillsborough County, Florida, more and more property owners and managers work with local police implementing a program known as Crime Prevention Through Environmental Design. They coach the property management company on improvements ranging from lighting and security cameras to door, window, lock standards and landscape design and maintenance. The police walk the property to see that changes are made and track progress through the number of police calls and arrests.

Once the police certify a property as crime-free, the owner can advertise that fact to tenants and prospective residents. Just as important, the property manager can tap into a database shared with other crime-free properties of offenders worthy of tracking, including people arrested or involved in crimes. The list can be used to screen applicants and evict residents.

The database gets a boost from the Crime Free Lease Addendum that the International Crime Free Association developed. Once modified to meet state law, it gives the landlord a quick way to evict a tenant regardless of whether the individual has been convicted of a crime.

Crime-reduction plans

Private firms can play a role, also. Consultants, many who are former police officers specializing in community problems, create and implement crime-reduction plans. They also make sure that calls for police assistance are promptly answered and that the authorities take note of the improvements.

Our clients in the Tampa Bay area say crime prevention programs are working well. Programs in other metro areas that have a longer track record proves that they work. Those that implement these type of programs, report less vandalism, fewer personal injuries and fewer police calls.

The most direct measure of a program can be the insurance premium. Our research shows that the liability rate per door for multifamily properties is 30% to 60% lower for properties with a clean loss experience versus one with a poor loss experience.
Insurance companies won’t immediately slash premiums based on the short-term success of a crime-free program. They look at three-to-five years of data when setting rates. However, they do look at year-over-year claim figures when determining whether to renew policies and by how much to increase or, in the present soft market, decrease premiums.

The benefits of a crime-free program benefit everyone. Tenants enjoy a better life, one free of fear from crime. This in turn, changes a property’s reputation, which can raise occupancy rates and rents and in time, insurers will see the positive changes and reflect them in their rates. 

Tom Kersting is president of Franklin Street Insurance Services in Tampa, which provides coverage to multifamily and other commercial properties. He may be reached at tom.kersting@franklinst.com.

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