How many times have you heard someone muttering about their insurance premiums rising just because they made a claim (even if it wasn’t their fault)?! LOTS, we suspect – it’s a common annoyance when it comes to insurance coverage. But when it comes to claims and premiums at EBM RentCover, we do things differently.
There are a number of factors influencing how landlord insurance premiums are calculated, with most insurers basing premiums on numerous property-specific factors including address, postcode, crime rate, natural disaster risk (e.g. bushfire or flood), and the building structure. Another consideration usually factored in is claims history – so if you've made a claim an insurer may see you as a high risk of making more claims and price your premium accordingly.
For many insurers, a review of premium pricing is dependant on whether a claim is made. And in many instances, a premium increase will be on the cards as a result of a claim being paid out. But we have good news – this is not the case for EBM RentCover clients!
We aim to make access to insurance affordable for every property owner – and believe everyone is entitled to the same cover at a reasonable price. This is why we use premium pooling to determine premiums. Instead of looking at the risk an individual property (and owner) presents, we look at our entire portfolio and spread the risk. This enables us to offer comprehensive cover at a fair price for all landlords regardless of where their property is located.
Example – Flood Cover
By using premium pooling we have been able to provide flood cover for all of our clients at an affordable price. We believe flood cover is something our clients need and have ensured our policies automatically include this cover.
If we were to look at the flood risk an individual property posed, those owners with investment properties located in flood-prone areas would likely find the cost of cover excessive and opt-out even though they need it to protect their investment. This would result in even more properties being uninsured, underinsured or inadequately insured because they don’t understand the risks they face as a property owner. But we don’t want people in flood-prone areas to have significantly increased premiums they can’t afford.
So we have used premium pooling and been able to make flood cover more affordable for all investors – not just those who are believed to be an imminent risk. The premium is not determined specifically by the risk the individual property presents (most policies look at where a property is situated and determine risk) and instead covers all policyholders, at the same price. We have found this better protects both those who are more likely to be at risk and those who may not realise they are at risk.
Instead of looking at an individual address, premium pooling enables us to look at regions/states and our entire portfolio to spread the risk and adopt standard premiums for our policies. There are variations in pricing for the building component of our policies, based on the building itself and what it is constructed of, its age and condition, the postcode it is located in and the sum insured, as these are highly variable between properties. But, we don’t factor in the crime rate or the likelihood of a natural disaster impacting the property.
This approach also allows us to review premiums periodically and then make changes across the board. Any adjustments are based on an overview of the entire portfolio’s performance and take into considerations such things as inflation, changes in government taxes and any state or territory duties or levies, the volume and cost of claims and the cost of doing business. This ensures our underwriter has the funds available to pay out claims when needed.
As the risk is spread across the portfolio we don’t increase the premium on an individual policy if a claim is made. We believe this is an affordable and fair way to ensure all owners can access cost-effective insurance; a way that does not financially penalise a policyholder simply because they were unfortunate, suffered a loss and had to make a claim. Of course, if we find individual policyholders take advantage of this system and make a large number or frivolous claims, we simply decline to continue insuring them – ensuring policyholders who don’t make claims aren’t paying for the bad behaviour of others.
At EBM RentCover we do things differently – with simplicity and certainty you are receiving exceptional service. If you need us, we are there – 1800 661 662.
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