Company Profile
Evergreen Management Company (EMC), a midsize company managing 83 locations in 15states. EMC specializes in Self Storage and Multi-family housing. EMC is owned by REIT.
- INDUSTRY– Self-Storage
- UNITS– 73,559
- ANNUAL GROSS REVENUE– $13 Million
- OWNER STRUCTURE– LLC with multi-member board
Risk Description
The management company requires tenants to provide some form of liability coverage in case of damage to property while in storage. The number of tenants and revolving tenant base coupled with the varying 3rd party insurance companies make it nearly impossible for the management company to properly verify and enforce.
Business Situation
- EMC requires that all facilities offer coverage via a 3rd party insurance provider.However, participation in this program is not substantial and EMC only receives a small percentage of premiums earned.
- Due to an increase in competition, EMCwas looking for a way to differentiatethemselves from their competition.
- Seeing that no third-party insurance provider (Tenant Insurance) presently provides any type of coverage for vehicles not parked in an enclosed unit, EMC sees this as a missed opportunity.
- When an incident occurs, EMC lacks effective ways to help clients offset damage caused by a tenant. Ultimately, the risk and repair costs are assumed by EMC and paid out of gross revenue or its own traditional insurance policy, potentially leading to increased premiums and decreased profits for EMC and facility owner.
- The EMC management team is looking for more efficient tools to mitigate risks to their facility owner and increase their Net Operating Costs
DETAILS OF STORAGE ASSURANCE & THE ACCIDENTAL DAMAGE WAIVER
- Contents Coverage would provide occupants with specified coverages and coverage limits from damages while stored at the facility.
- Accidental Damage Wavier (ADW) would provide incident coverage for damage done by tenants to the facility property and/or to other tenant’s belongings.
- SRA was tasked with designing and implementing a new program for the Self-Storage community. This new program is fast becoming a cornerstone in the industry.
- The Storage Assurance program is arisk management solution developed specifically for the Self-Storage industry.
- SRA suggested they add an AccidentalDamage Waiver to each rental space agreement in the amount of $1,000 (tenant would receive a separate addendum with covered losses).
- The Storage Assurance program allows the business owner to have greater control over the claims process whereby the business owner can have a more positive impact on customer retention.
Resolution
SRA was able to incorporate the Storage Assurance Contents Coverage andAccidental Damage Waiver programs and build EMC their own customizedProtection Plan. This allows the utilization of tax-deferred dollars which is only available to Protection Plan companies
SRA’s program provided owners with the most efficient way to mitigate their potential risk, all while utilizing a well-defined turnkey solution that was quickly incorporated into their business process with no impact to their day-to-day operations.
Key Takeaways
BENEFITS TO EMC & OWNERS
- The Contents Coverage and ADW programs created the framework for a successful self-owned Protection Plan solution for EMC. This allowed EMC to take charge of their claims/repair processes
- The Contents Coverage & ADW programs offered real value to occupants as the program is protecting them from possible liability
- EMC now has a consistent product that provides consistent coverages and coverage limits across its managed properties.
- EMC can now mitigate other business risks in the future through the use of their own Protection Plan.
- EMC has the option to reduce traditional insurance premiums through ADW which can reduce small claims, resulting in potential cost savings, and giving the business owners increased control over costs.
- Based on previous years of experience with low loss ratios, funds set aside from Contents Coverage and ADW can be used for reinvestment. These funds are tax advantaged dollars not subject to the same taxes as general revenue.
- Through the help of SRA, ownership of the Protection Plan was structured to mirror the ownership of EMC SelfStorage.
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