MARKETING
With 50 million-plus uninsured renters in the U.S.,
a huge potential is often overlooked by agents
By Phil Zinkewicz
"You sell them [college graduates] renters insurance today, and tomorrow you may be selling them homeowners insurance or insurance for that fancy car or boat. The agent has to look to the future, not just the bottom line of today."
-- Trey Hutt, Hutt Insurance Agency
When Thomas (Tommy) Dietz, of the Bedford Hills, New York-based insurance agency that bears his name, began his career in the insurance business just out of graduate school in 1965, he knew nothing about insurance. He was lured into the business by a local insurance agent who was on the verge of retiring and who wanted to leave his agency to someone he felt could maintain it and make it grow. "I went door to door and found that most people had homeowners insurance, but very few renters had coverage," says Dietz. "I remember that garden apartments were big in those days, and I thought this was a market that needed to be tapped. Eventually, I sold a great many policies and, in a sense, that became my first target market."
That was nearly 40 years ago and it might be surprising to learn that, today, the renters insurance market remains an under-served market for insurers and for agencies.
A new independent consumer survey conducted for the Independent Insurance Agents & Brokers of America (IIABA) has found that nearly two-thirds of those living in U.S. rental properties are currently going without renters insurance and thus are risking severe financial loss.
The national consumer telephone survey of 1,000 people was conducted by International Communications Research (ICR)--an independent survey firm based in Media, Pennsylvania. When survey participants living in rental properties were asked whether they had renters insurance, 64.4% said "no" and 2.2% answered "don't know."
"IIABA and its Trusted Choice agencies are surprised by the survey results because our society pays such careful attention to securing auto insurance for our vehicles, yet we have millions of renters neglecting the need to insure the rest of their possessions," says IIABA CEO Robert A. Rusbuldt.
"Consider the value of someone's furniture, television, stereo, computer, jewelry, clothes, and other items. They likely add up to more in value than that person's automobile," according to Rusbuldt. "And without renters insurance, what liability coverage does that person have in the event someone is injured in the rental unit and sues for damages?"
More than 81 million Americans rent homes in the United States. A frequent reason many renters give for not purchasing renters insurance is the expense, according to the survey. However, renters insurance policies cost as little as $10 per month, Rusbuldt says. The average cost of renters insurance is $12 per month for about $30,000 of property coverage and $100,000 of liability coverage.
"The risks for our personal possess-ions are many: theft, vandalism, fire or lightning, hurricane or tornado, explosions, damage from smoke, damage by broken glass, water-related damage from home utilities ... and the list goes on," says Rusbuldt.
The survey also found that the most common misconception among renters is that they are covered under their landlord's insurance in the event of fire or theft. Not so, according to Doug Culkin, executive vice president of the National Apartment Association.
"The landlord's insurance covers the building and the infrastructure of that building, whether it is the elevators, the air conditioning, or the structure itself," Culkin explains. "That coverage does not extend into the homes of the individual residents and the possessions they maintain in their units."
That's where renters insurance comes in.
"Renters insurance covers the items you have in your apartment, condo, or other rental home should those items be stolen, destroyed or damaged," explains IIABA President Louise "Bebe" Canter of Patterson/Smith Associates, an agency in Falls Church, Virginia. "Renters insurance also includes some liability coverage should someone be injured in your home and you are held liable, or even in the event you accidentally burn down your apartment and the landlord's insurance company sues you for damages."
The survey results also suggest that many families with college students could unknowingly put themselves at risk when they send their kids off to school. While homeowners coverage extends to students who live in campus dormitories, there is a gray area for students living in off-campus housing. Students renting off-campus units need to check with their insurance agent to make sure their parents' homeowners coverage extends to their possessions. If not, they will need to purchase a separate renters insurance policy.
Apartment renter Meg Gallogly admits that she is one of the more than 50 million Americans going without renters insurance. "It's something I never really considered," Gallogly says despite owning a stereo, large TV, laptop computer and lots of jewelry and clothes.
"Living in a small apartment by myself, I didn't know it was something I needed. I'm not even sure how to get it," she admits.
"All renters must realize that going without renters insurance means they would have to start from scratch in the event of a tragedy," notes Rusbuldt. "For as little as $10 per month, renters can rest assured that their possessions are covered in the event of a loss, and they will have liability protection if the pizza delivery man, a door-to-door salesperson, or any visitor is injured in their home."
Dietz has personally experienced the trauma of renters losing all their property in a fire. He has been a volunteer firefighter in his home town and is chairman of Bedford's Board of Fire Commissioners. "We'd go to a fire that started in someone's apartment and then, once we were finished, the residents would tell us they had no insurance. Sometimes, they would be in tears because of the loss of all or most of their property. I know that renters insurance is not a line of business that generates tremendous profits, but it's really an easy sell. All an agent has to do is ask someone who is buying automobile insurance if that person owns a home or rents a unit. If the person is a renter, the agent should recommend renters insurance and explain why."
Jim Armitage, of Arroyo Insurance Services in South Pasadena, California, says that agents who are really dedicated to the personal lines market should always remember to ask clients who are purchasing auto insurance whether they have renters insurance if they rent. "It's not that an agent is going to make a tremendous profit, but statistically it has been shown that the more policies a person has with an agent, the more likely that insured is going to stay with that agent. It's a matter of retention."
Trey Hutt of the Hutt Insurance Agency in Panama City, Florida, agrees. "Unfortunately, renters insurance is still an undersold product," he says. "Many people just don't know that renters insurance is out there and how important it is for renters. It's not so much the property damage, although that's important. When we sell renters insurance, we emphasize the liability aspect of the coverage. People understand that because they read every day about the crazy lawsuits that are filed. They recognize they are at risk."
One point all the agents interviewed stressed is that today's renter may be the homeowner of tomorrow. "You take a young college student who is renting an apartment," says Hutt. "When that student graduates and gets a good paying job, his or her asset base increases. You sell them renters insurance today, and tomorrow you may be selling them homeowners insurance or insurance for that fancy car or boat. The agent has to look to the future, not just the bottom line of today." *