Building Insurance Premiums Soar, Causing Financial Hardship for Residents

Increases in insurance premiums are continuing to strain building budgets. That’s especially true at properties with middle- and lower-income residents, and even more so for those that have filed claims and have a black mark on their run loss record. Vik Shingwani, a property manager at First Management Corporation, recently worked with a building that confronted this daunting challenge.

Future shock. The co-op, located in Flushing, suffered a major fire in 2022 that resulted in a vacate order for 14 apartments in the building. “The cost for repairs was about $3.5 million, and the coverage was great,” Shingwani says. “First Management has an insurance coordinator who works with carriers for all our properties and in this case secured advance payment for the entire job, from engineering and architect fees to cleanup and air monitoring.” At the time, the co-op’s insurance policy package was about $150,000, but when it sought to renew a year later, the carrier wanted $750,000 — a whopping 400% increase. “It was a huge hit,” Shingwani says. “It really put the building in a bad place financially.”

Double whammy. In order to raise money to pay for the policy, the co-op imposed an assessment last summer. That was punishing enough for its lower- and middle-income shareholders — many of them elderly and on fixed incomes — but especially brutal for those who were forced to locate elsewhere but still had to pay maintenance. “Some of them still haven’t been able to return to their apartments, so they’re paying rent on top of that,” Shingwani says. “We had a few shareholders who stopped paying, which meant everyone else was carrying the burden to pay for operating expenses.” Shingwani, however, was able to work out a payment plan with most of those individuals in which they would resume paying maintenance only after returning to their homes and gradually make up for the missed payments.

That still left the board grappling with the high cost of renewing its policy. Many insurance carriers declined to even bid because of the building’s loss history. But with the help of the insurance broker Hub International, it found a carrier that was willing to cover the building — and for only $510,000. “And we didn’t shrink our coverage at all,” Shingwani adds. “It’s still a lot higher than what the building used to pay, but the board understands that the fire is going to stay on the co-op’s run loss record for another six or seven years, so it knows what to expect going forward.”

Looking ahead. The board has already started taking preventive measures to keep future premium costs down, including passing a ban on e-bikes. “The only way to keep costs down is to assure carriers that you’ve taken steps to prevent problems from happening, whether it’s fire or trip and falls, and avoiding claims from vendors by collecting certificates of insurance from them,” Shingwani explains. “You can also take them on walk-throughs of your building — an exercise we plan on doing every year for this property. If the co-op goes another year or two with no fires, it’s possible to bring that $510,000 policy further down.”

Another smart strategy is to have your insurance broker start marketing your building 90 days before your policy expires. “Most insurance carriers won’t give you pricing until 30 days before expiration, but it makes sense to start early and work with a broker who has a big reach with as many carriers as possible,” Shingwani says. And when it comes to shareholders, communication is key. While relieved, “the people at this building aren’t exactly rejoicing, because they wanted bigger savings from that first $750,000 quote,” he says. “So whether it be email memos or, even better, town hall meetings where your insurance broker is present, explaining things to them just makes sense. With costs rising this fast, it’s scary.”