Stable manufactured housing market
offers agents opportunities

Carriers have developed products to serve this evolving niche

By Dave Willis

The manufactured home/mobile home market is just a shadow of what it was in its heyday. "This segment of the real estate market has been in a decline for more than 10 years," explains Darleen Fritz, president of Aegis Security Insurance Company. "Shipments of new manufactured homes in 1999 totaled nearly 350,000 homes. In 2012, the number shipped was just a little over 50,000."

Data from The Market Facts, a report outlining the results of an annual study done by Farmers Insurance Group's Foremost Insurance Company, show the decline has slowed or stopped. "Results from our most recent survey indicate that the manufactured home/mobile home market has stabilized," says Mike Cok, vice president-specialty property products at Farmers. "While industry new shipments continue to be significantly below long-term annual averages, we did see some growth in the first part of 2012." That said, second-half 2012 numbers reflected additional weakness, he continues.

"We are not expecting significant change in those levels in the near future," Cok adds.

Lending restrictions are helping to keep the numbers down. "A primary factor affecting this industry is the lack of available financing," explains Fritz. "As we know, the standard home market has had its share of financing issues. The manufactured housing sector has faced similar—if not worse—challenges."

Lack of government housing money for the sector is compounding the problem. "There is certainly a need for affordable housing, given today's economic situation," Fritz notes, "but the government agency that supports such housing—HUD—does not include manufactured housing in its 'affordable' category. That makes it impossible for individuals to make use of any of the billions of dollars in housing subsidies and grants to pay for manufactured homes, even though some 22 million Americans currently live in them."

With shipment levels a fraction of what they were years ago, the inventory of homes is aging. "We're seeing a sizeable number of older manufactured homes in the market," explains Cok. "Our 2013 Market Facts report estimates that nearly 40% of the units are 28 years or older."

Fritz sees this, too. "With the reduction in new manufactured homes, the percentage of older mobile homes is growing," she explains. "We consider that market sector—homes that are older than seven years old—to be an attractive, stable one."

It's likely that factors impacting the broader housing markets will affect manufactured and mobile home insurance for the balance of 2013. "Unprecedented hail, wind and tornadoes have ravaged site-built homes, as well as manufactured homes, in many areas in recent years," Fritz notes. "We expect to see an increase in overall premiums in those states where weather-related losses occurred in 2011 and 2012."

Adds Cok, "It will continue to be a challenge to insure property, including manufactured and mobile homes, in coastal and other higher-risk areas. Increased losses associated with severe weather patterns throughout the U.S. continue to force changes in risk assessment for property insurance in general. The insurance marketplace for manufactured homes is not immune to these pressures."

Understanding the niche

"Manufactured and mobile homes are excellent housing choices," Cok says, "and consumers who choose these housing options deserve excellent insurance products and customer care, just like those who opt for traditional homes with standard homeowners insurance. We insure one-quarter of all owner-occupied mobile homes, and we take great pride in serving this important market."

Over time, the manufactured housing marketplace has changed. "It has grown from single-wide mobile homes to double-wides and multi-sectionals," explains Fritz. "This led to development of insurance products to satisfy this more diverse customer base."

In some ways, the market is similar to more traditional residential coverage. "We look at a lot of the same things as standard homeowners insurance companies, such as loss history, occupancy, liability issues and location," she adds.

A key difference involves the manner in which value is assigned to the manufactured home, Fritz notes. "The value of a standard site-built home is largely influenced by the average market value of similar homes in the same neighborhood," she explains. "On the other hand, manufactured homes have a tendency to depreciate in value over time. Because of this, insurance for manufactured homes converts from replacement cost to an actual cash value (ACV) as one of the major differences from a standard home."

Cok says differences in the nature of risk and appropriate coverage for the needs of today's manufactured-home owner have led to products designed specifically for the segment. "Several additional coverages exist to address the unique needs of this customer group," he explains. "Agreed amount of loss with optional replacement cost, replacement cost on contents, named exclusion, and coverages needed for those located in mobile home parks or communities are just a few examples."

Serving the market

There are a number of reasons why retail agents and brokers should consider incorporating manufactured housing insurance into their product mix. One is the segment's traditionally high retention rates. "For many manufactured home owners, the house is their largest, if not only, major asset," Fritz explains. "They understand the value of the asset, and they not only continue to protect it, but they maintain it as well. That's why older manufactured homes are a very good segment of the market."

Growth opportunities are significant, too. "We have many successful agents who have used their professional counsel and expertise to target and grow these markets," Cok explains. He says online tools can help agents grow their book.

He encourages agents to understand products and markets—and product and market differences—as they look to grow their business. "Excellent agents don't let themselves or their customers get caught in the 'all insurance is the same' myth," Cok notes. "In addition to unique coverages, agents should look for tools and support that increase value and make it easier to do business. Plus, they should make sure the carrier has highly-trained claims professionals that don't serve this segment as an afterthought."

Fritz and Cok offer a handful of tips that can help agents build and maintain a strong presence in the manufactured housing/mobile homes marketplace.

First, says Cok, "Use successful target markets like manufactured housing and mobile homes to distinguish your agency. As we all know, standing out in a crowded industry requires special focus.

"Partner with a market leader that has the resources, tools, products and services that make the difference in your agency's success," he adds.

"Establish a relationship with the local mobile home communities and dealers in your area," advises Fritz. "They're good resources to find buyers of old and new manufactured homes.

"Promote the customer service capabilities of your agency and of the carrier you represent," she adds, "and focus on the carrier's excellence in claims handling as you talk to prospective clients."

"Make sure you provide a product that addresses the needs of the manufactured home owner," Fritz suggests. "This would include payment options that let the home owner pay over time."

Finally, advises Cok, "Build on your success. Professional agents who provide outstanding counsel and are partnered with a market leader can lead to growing customer counts and cross-sell opportunities."