Members of the insurance industry do not agree on much, but if they agree on one thing it's that
insurance can seem like a very complex subject. For board members, there is one clear objective regarding insurance: to secure the lowest possible, yet financially responsible premium.
It is a well-known fact that buildings with poor histories from numerous claims pay more in premiums than buildings with spotless pasts. Prior losses, liability lawsuits, windstorm damage, building vacancies and workmen's compensation payments are only some of the factors that can affect insurance premiums. A co-op board can take pro-active measures to keep insurance bills as low as possible, while also assuring that the carrier will continue to insure the building after the current policy has expired.
Attempting to control insurance costs by alleviating situations that could lead to liability is called M-risk management.' Insurance companies and some brokers perform risk management duties as part of their loss control and loss prevention department.
Risk management is a critical element to any building that is insured,'' says Stuart Oberman, president of the Oberman Companies, a full-service insurance agency in New York City and Scarsdale, N.Y. It's the job of the broker and the insurance producer to assess risks and make recommendations to make certain that the insurance costs are the most economical.''
You should maintain the building properly, says Stuart Badler, president of Buckingham/Badler Associates, a Brooklyn-based insurance agency. Check the windows, concrete work and keep all courtyards free of debris. Also, the more security you have, the lower risk you have on the building.
It is in the best interest of all parties involved to keep liability risks as low as possible. Most insurance companies and brokers have assessors who evaluate the building's risk possibilities. We send out a loss prevention team to evaluate the building every time we write a policy,'' says a vice president of a New York-based insurance company specializing in co-ops and condos. We will evaluate whether or not to write that policy based on the risk; is it a good investment for us?''
The company also sends its loss prevention team to buildings after the policies have been issued. They might look to see that the snow is cleared in a reasonable amount of time, or that the tread on the stairs aren't slick,'' says the insurance company vice president. All of those things ultimately affect the risk acceptability of the building.'' Suggestions for safety precautions are given to the managing agent of the building.
Most carriers are not giving credit because you put in emergency lighting, says Barbara Strauss, senior vice president of the Owens Group, an insurance brokerage firm. The companies that I work with consider it mandatory. However, if the building's installation of special lighting prevents accidents, they will benefit by their low claims history.
Buy As a Group
Versatile Insurance Programs, an insurance agency located in Roslyn, New York, offers a risk management program to members of its risk purchasing groupa collection of buildings that band together for mass purchased insurance coverage. The company hired an outside firm, Ten County Risk Managers, to operate the program. When a building joins our group, ffb this is one of the services we provide,'' says Karen Skoler, director of real estate operations at Versatile. You don't have to specifically ask for it. It's one of the caveats of our risk purchasing group.''
Skoler says the goal of the program is to keep the risk exposures of member buildings to a minimum. The risk manager will do a site audit for potential hazards, checking the physical up-keep of the building and the insurance proof of commercial tenants. The risk manager will then make recommendations to the board on how to lower risks.
The risk purchasing group offered by Versatile Insurance Programs is called the Realty Advisory and Management Associates. According to Skoler, more members make for more negotiable premiums.
The risk management group is designed to keep the group intact,'' Skoler says. If you don't keep your losses to a minimum, you can be dropped from a carrier. While it's not really possible to be loss free, that is your goal. You can't prevent a catastrophic loss like an earthquake, but you can guard against a broken sidewalk.''
The area of workman's compen-sation insurance offers great potential for savings, according to sources. Since the premium rates are based on past claims, care should be taken that on-site staff are taking proper precautions while working.
You want to make sure that your supers and porters are not doing things that could give rise to greater claims,'' says Nancy Gelardi, vice president of Gallagher Newman, a New York insurance agency. There is a lot of potential for injuries such as back problems associated with these jobs. Superintendents work 24 hours and if one is injured, you're paying him for 24 hours, whether he works or not.''
Board members can make sure that building workers are properly trained and not performing unnecessary duties which can lead to claims. I had a superintendent who was helping a tenant disengage a stove,'' Gelardi says. There must have been a gas leak and the super suffered severe burns. The super was in a burn center for weeks. He was helping an individual, but the claim goes against the experience of the building.''
One of the best ways for buildings to save money on workman's compensation insurance is to join safety groups. Formed by brokers and carriers, safety groups are groups of buildings with similarities such as comparable risks or the same managing agent. Members can collect dividends if workmen's compensation claims are kept to a minimum. Buildings that want to join safety groups must have high premiums, usually at least $400,000 per year. The higher the premium, the higher the potential dividend.
Safety group members with high premiums and low claims each receive a check at the end of the year. I just sent out 50 checks this week,'' says Gelardi. The checks go straight to the buildings. The broker doesn't even take a commission.''
One of the most obvious precautions to take is to make sure that the building has the correct amount of insurance. Boards should not make it a habit to rubber-stamp the building's policy renewals from year to year, experts say. Responsible boards should hire a professional appraiser, which the insurance broker can provide, to insure that the building is not over-insured or under-insured. Proper assessment of a building's insurance means more than simply evaluating the building's worth. It means assessing what it would cost to replace the building, Oberman says.
After recently joining the board of his New Jersey condo, insurance agency president Stuart Badler immediately suggested that the board hire an appraiser. Sure enough, we were under-insured, says Badler. If something catastrophic had happened, everybody would've been in the hole.''
If board members are correctly running their buildingslike the businesses they arethey should look to save money when prudently possible. The area of insurance is no exception. Money can be saved on insurance premiums and it is the board's responsibility to work with 8de the insurance agent to assure that the co-op or condo has the most economical, yet conscientious coverage.
Mr. Ratliff is Associate Editor of The New York Cooperator.