It’s fair to say the real estate and insurance industries have faced some turbulent times in recent years.
Still reeling from the devastating Black Summer bushfires in 2019-20, our worlds were turned upside down by a global pandemic.
COVID-19 wreaked total havoc in 2020 and, two years on, we are still dealing with the fallout of the virus and its impact on the economy.
It was a time when government actions to protect renters had a profound effect on real estate and insurance.
Temporary measures introduced to protect renters saw big changes for property management and a surge in insurance claims for loss of rent and other tenant-related matters once the moratoriums ended.
In 2020, loss of rent (2460 claims) was the number one reason why EBM RentCover landlords needed to claim on their insurance.
Combined with claims for loss of rent and accidental damage (1158), and accidental tenant damage (371), tenant-related claims accounted for 3989 of the total 7660 claims settled over the year.
Meanwhile, in 2021, the Australian property market experienced what has been called a ‘once-in-a-generation’ boom, with housing demand hitting an all-time high, house prices soaring (up 23.7 per cent), dwindling supply, interest rates hitting rock bottom and buyer priorities shifting.
As far as the rental market was concerned, rents soared, and vacancies plummeted.
High demand and low supply influenced how properties were managed and the kinds of insurance claims landlords lodged.
Loss of rent (1483) again topped the list of claims in 2021, with the total number of tenant-related claims accounting for 3060 of the total 6456 claims lodged.
So what are some of the core lessons of the past couple of years?
Well, painfully, natural disasters continue to hit home.
Last year (and the years before it) not only saw catastrophic flooding and storms, but cyclones and bushfires.
Already, in 2023, ex-tropical cyclone Ellie is causing damage and stress in Western Australia. This is a sign that natural disasters are not slowing down.
And, sadly, these events are frequently resulting in severe property damage, which agents and insurers alike need to deal with.
There has also been a growing awareness in the community about climate change and how our homes and where we live need to evolve to address the issues.
This has ramifications for real estate and insurance too, with both industries increasing focus on sustainability during the year.
Another big one is the constant evolution of legislation.
Many changes to Residential Tenancy Acts in various jurisdictions came into effect during 2022 (with other states and territories reviewing legislation).
These changes include ending ‘no grounds’ evictions, making it easier to rent with pets, provisions for domestic violence survivors and minimum standards.
Obviously, changes in legislation have direct effects on property management but there are also often implications for insurance too.
That means landlords and agents need to be abreast of legislation updates to avoid ending up in legal hot water.
Other matters that hit the radar in recent times include the impact of interest rate rises, rental affordability issues, inflation, construction costs, tradie shortages, low unemployment, supply chain disruptions, cost of living pressures… the list goes on.
Many of these have made their mark on real estate and insurance in recent times and some of these factors are reflected in EBM RentCover’s insurance claims over 2022 and may continue to impact cover in the year ahead.
Top reasons landlords made insurance claims in 2022
When you reflect on 2022, one of the first things that springs to mind is floods.
Serious floods. Serious devastation. Serious damage.
Some of the worst floods in Australia’s history to be precise.
And not just one catastrophic event, but several.
The floods in NSW and Queensland in February-March 2022 have taken up the mantle as Australia’s costliest natural disaster (the Insurance Council of Australia puts the insured losses at $5.65 billion from 237,000 claims).
These were soon followed by more floods in NSW in July ($244 million, 22,000 claims), then floods in Tasmania, Victoria and NSW in mid-October ($477 million, 17,200 claims) and more NSW flooding in November (3600 claims and counting).
And these are just the floods that were declared insurance catastrophes!
So it’s little wonder that the main reason landlords needed to claim on their EBM RentCover policies last year was for storm damage.
In fact, 1629 of the total 6437 claims lodged in 2022 were for storms and flooding.
In one claim, the ceilings of the rental were damaged during a storm.
Without insurance, the owner would have faced a $4499 repair bill. Another owner would have been out-of-pocket $2365 to replace the carpets damaged in their investment property when a storm hit.
The second most common reason landlords put in insurance claims in 2022 was for loss of rent and accidental damage (1199 claims).
This is where the claim includes both rental loss and damage.
For example, in one claim settled in 2022, the tenant not only didn’t pay their rent and had to be taken to the tribunal, they caused damage to the property (inside and out).
The repairs took 14 days during which time the landlord lost rental income.
In total, the claim came in at $6253.
The year also saw 1049 loss of rent claims made, 1013 claims for liquid damage and 529 accidental damage (tenant) claims to round out the top five categories.
There were a few more unusual claims that came our way in 2022 too.
One involved a thief breaking into a rental to steal copper piping – $1890 worth of pipes that had to be replaced.
And another claim was at the hands, or rather claws, of a cat that was kept at the rental without the landlord’s consent. How much damage could one cat do? Plenty!
The bill to repair the damaged furniture, curtains and carpets came in at $14,458. Add in loss of rent during the repairs and the claim topped $15,500.
Why am I sharing this?
Well, no matter what is happening in the world of property – whether it’s dealing with a global pandemic or natural disasters – insurance provides a financial safety net to protect against insurable losses.
And as these claims (and the other 6437 made in 2022) prove, landlord insurance remains an important part of a landlords’ investment strategy.
Don’t let your landlord clients learn the lesson that insurance is a must the hard way, especially when so many other factors associated with owning an investment property can be so unpredictable.
Looking to partner with a landlord insurance specialist to protect rentals? Contact the EBM RentCover team today.