By William Mattern
The self-storage industry has undergone many changes over the past 20 years, growing from a small family of forward-thinking people to a large, powerful group of savvy business professionals. The growth and maturity the industry has enjoyed has also created some new issues we are learning to deal with in time.
When the self-storage industry was young, so were the buildings. We had new, secure roofs that did not leak, new doors that properly sealed the units, and we enjoyed an absence of crime in our facilities. This environment was very attractive to insurance companies, and several developed products specifically for the self-storage industry. These companies provided much better coverage than what was available at the time, at a significant reduction in premiums.
According to the Self Storage Association's First Annual Statistical Report, the average self-storage owner pays 1.3 percent of gross income for property insurance. Compared to an average of 40 percent paid by other types of businesses, you can see that insurance for the self-storage industry is very reasonable.
During the late '80s, while the self-storage industry was maturing, so were its buildings. Due to various issues we were experiencing at the time--primarily the recession--maintenance was deferred in many facilities. Additionally, the criminal element found self-storage units an ideal place to conduct activities. These developments caused the losses in our industry to skyrocket, and our insurance costs to rise.
One of the areas with a drastic increase in claim activity is customers' goods. Customers' goods legal liability is a very important coverage specific to our industry. The basic premise of the self-storage industry is that we act as a landlord, not a warehouseman; we never take possession of our customers' goods. Therefore, we are not responsible for those goods since we are simply renting space. However, there are certain situations that can create legal liability on your part for damage to your customers' goods.
For instance, by providing a building to store goods, we represent protection against the elements. If a customer's goods are damaged by water or some other form of the elements, he may feel that you were somehow negligent in honoring that representation.
If you are found liable for damage to customers' goods, your customers' goods legal liability coverage will pay the claim. More importantly, it provides defense costs even if a claim is found to be groundless, false or fraudulent. It also includes coverage for damage done to customers' goods stored in the open, should you be found legally liable for that damage.
Customers' goods legal liability coverage is not normally available in the standard insurance market and cannot normally be added to the standard business-owner's package policy. It is coverage that is available through specialty markets for self-storage insurance.
With the recession well behind us, many facility owners finally have their deferred maintenance schedules under control. Their new emphasis on routine maintenance is helping contain losses in the area of our customers' goods. Aside from completely re-roofing your facility, there are many new products available for sealing aging roofs. There are also companies that sell maintenance products, such as unit-door threshold seals, that provide cost-effective alternatives to more expensive repairs. Facility operators have kept themselves busy implementing new ideas, such as providing pallets in each storage locker. The pallets keep their customers' belongings a few inches off the floor, helping keep them dry in the event of surface water accumulation.
Security is also a major concern, and a tremendous number of vendors have gone into the business of providing various types of security equipment. A growing number of facilities today are equipped with door alarms, computer-controlled entry gates and high-tech surveillance equipment. These products, accompanied by a good resident manager, help control crime.
Although it's sad to say, the days are long gone when we can rent a unit to new customers and turn our back on their activities in our facilities. Many operators today photograph customers and obtain their fingerprints. This may seem a little drastic, but it has become a commonplace practice in some geographic areas. Some operators argue that this type of intrusion will chase off customers, but if it is done in a manner that managers express their concerns for the customers' property, very few honest people will mind the extra care taken for security. The customer that it does chase off might be a criminal, and lost revenue on a criminal is really money in the bank.
Another good crime-prevention procedure falls under the heading of follow-up marketing. For example, mailing the new customer a thank-you card the day he rents the unit is good marketing and can help you discover a problem sooner than if no contact was made until the customer became delinquent. You can also include referral cards with the thank-you note for customer's friends and neighbors. When a prospective tenant presents the referral card, the referring customer gets a gift or a discount. This creates good customer relations and helps reduce the likelihood of crime in your facility.
New construction and proper maintenance of buildings, combined with hands-on management, attention to security and the prevention of crime, add up to safe and secure places for customers to store their goods. Combine these efforts with good customer relations and we can all help keep insurance costs for our industry at a very affordable level.
Remember, no matter how large or small your self-storage facility may be, securing adequate coverage is essential for protecting your business and your peace of mind.
William Mattern is program manager for Universal Insurance Facilities Ltd. Universal's Self-Storage Insurance Program is underwritten by the Ranger Insurance Company. Founded in 1923, and licensed in all 50 states, Ranger is rated "A-" by A.M. Best and Company. Universal offers a complete package of coverages specifically designed to meet the needs of the self-storage industry.
For more information on Universal's coverages, or to get a quick, no-obligation quote, contact Universal Insurance Facilities Ltd., P.O. Box 5400, Scottsdale, Ariz. 85261-9957; phone (800) 844-2101; fax (602) 970-6240; Web www.vpico.com/universal.