A customer comes into your office complaining about water leaking into his storage space and leaving him with damaged property. How do you respond? Do you say something like, “We sure hope you have insurance on your stored property, because the rental agreement makes it clear that damage to property is not our responsibility”?
Let’s call this response “reject and deflect.” You are using the defense of the nonliability provision in your rental agreement to reject your customer’s complaint. At the same time, you’re using the fact that insurance may have been purchased by your customer to deflect the grievance.
Could there be a better approach to this situation? Perhaps an alternative that would permit you to provide a superior level of service to your customers when problems arise? One that earns you higher rents? Deans & Homer has developed just such a solution.
The “Storage Operator’s Protection Plan” is a new approach to customer property problems. This is not an insurance plan that is sold to the customer. You offer customers property damage protection for additional rent. You assume liability for specified types of losses for a limited dollar amount in an addendum to the rental agreement. The customer agrees to pay you additional monthly rent for the service.
Wait—you are concerned about accepting this additional risk. But this risk can be transferred in whole or in part to an insurance company. What could this do for you? It can increase your facility’s revenue. When you buy insurance to transfer your entire assumed risk, you will probably keep 40 percent of the revenue generated by the program. You can earn an average of $5 to $10 per month per participating space in additional rental revenue. Operators who elect to retain some of the risk can earn even more.
Because this is your product and not a third-party vendor’s, you have more control. You set your rent. You write the terms of your rental agreement. It is not an insurance agreement subject to regulatory control over licensing. How you offer it to your customers or pricing is in your control. Flexibility in pricing can bring an important competitive edge in an overbuilt market or substantially increase profit margins in a less competitive market—your choice, your control.
What could this do for your customer? Let’s go back to our opening scenario. Your customer was offered the Storage Operator’s Protection Plan option in your rental agreement and he accepted, paying you additional rent each month. He is upset because a leak in the roof allowed water to damage his stored property. Instead of rejecting and deflecting his claim, you can help. Instead of saying “It’s not my responsibility or concern,” you can stand behind your new agreement and provide a real service to your customer.
What if he had not participated in the Customer Storage Protection Plan? Your response is firm and direct: “We offered you the opportunity to participate in our protection plan, and you declined. We would have paid you for your loss had you accepted. We are very sorry you did not take advantage of this service.”
Would this type of program reduce or eliminate the protections provided by the nonliability provision of your lease agreement or separate insurance purchased by your customer? No. This program would work to reinforce your nonliability provision and would not restrict the availability of separate insurance. Each customer has an opportunity to mitigate the impact of the rental agreement nonliability provision by participating in the protection plan. Those who choose not to participate make a clear election to be bound by the provision.
- ...the competitive edge of offering an additional service built in to your rental agreement.
- ...the elimination of the barriers and, for operators in some states, the concerns about involvement in an insurance transaction. (Remember, this is a function of a rental agreement, not an insurance transaction between you and the customer.)
- ...the impact of an enhanced rent revenue stream on your facility’s value. Property values are often established through rental income, while auxiliary income sources are discounted in property valuation.
Deans & Homer hopes you will not have to imagine for long. The company is currently working with insurance departments across the country to make this option a reality for the self-storage industry. There is something new coming to insurance.
For more information, contact a Dean’s & Homer Storage Operator’s Liability division underwriter. Call 800.345.2054; fax 800.789.0464; e-mail firstname.lastname@example.org.