Sponsored By

Keeping Insurance Costs In Check

February 1, 2000

4 Min Read
Keeping Insurance Costs In Check

Keeping Insurance Costs In Check

By David Wilhite

The self-storage industry has undergone tremendous changes over the past 20 years,evolving from a core group of small, mom-and-pop operations to a large, powerfulorganization of professional business people. The rapid growth of the industry has furthercreated a variety of challenging new issues, many of which we are just coming torecognize.

When the self-storage industry was young, so were its buildings. Facility owners hadsecure new roofs that did not leak, factory-fresh doors that properly sealed their units,and a lower amount of crime at their facilities compared to today. This environment wasvery attractive to insurance companies, several of which developed products specificallyfor the industry. These specialty insurers provided better coverage than what wasgenerally available at the time, and many offered significantly reduced premiums forsubstantial savings.

During the late '80s, the self-storage industry was maturing, as were its buildings.Due to various challenges we were experiencing at the time--primarily therecession--maintenance was deferred in many facilities. In addition, the criminal elementdiscovered that self-storage facilities were an ideal place to conduct their activities.These developments caused insurance costs to rise and claims activity to increasedramatically in certain areas, such as customers' goods legal liability.

Customers' goods legal liability is a very important coverage that is specific to ourindustry. The basic premise of the self-storage industry is that we act as a landlords,not warehousemen; we never take possession of our customers' goods. Therefore, we are notresponsible for those goods, since we are simply renting space. However, there are certainsituations that can create legal liability on your part for damage to your customers'goods. For example, by providing a building to store goods, we represent protectionagainst the elements. If a customer's goods are damaged by water or some other form of theelements, he may feel that you were somehow negligent in honoring that representation.

If you are found legally liable for damage to a customer's property, your customers'goods legal liability insurance coverage will probably pay the claim. Just as 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, shouldyou be found legally liable for that damage.

Customers' goods legal liability coverage is not normally available in the standardinsurance market and cannot normally be added to the standard business-owner's packagepolicy. It is coverage available through specialty markets for self-storage insurance.

With the recession well behind us, most facility owners have finally gotten theirdeferred maintenance schedules under control. This new emphasis on routine maintenance ishelping to contain losses in the area of our customers' goods. Aside from a completere-roofing of your facility, there are many new products available for sealing agingroofs. There are also companies that sell maintenance products, such as unit-doorthreshold seals that provide cost-effective alternatives to more expensive repairs.Facility operators have also kept busy implementing new ideas of their own to help containlosses, such as providing pallets in each storage locker. The pallets keep theircustomers' belongings a few inches off the floor, helping to keep them dry in the event ofsurface water accumulation.

Security is also a major concern, and a tremendous number of vendors are in thebusiness of providing various types of security equipment. A growing number of facilitiestoday are equipped with door alarms, computer-controlled entry gates and high-techsurveillance equipment. These products, accompanied by a good resident manager, helpcontrol crime.

Sad to say, the days are long gone when we can rent a unit to new customers and turnour back on their activities in our facilities. Many operators today routinely photographcustomers, and some even obtain their fingerprints. This may seem a little drastic, but ithas become a necessary practice in some areas. Some operators argue that this type ofintrusion will chase off customers; however, if it is done in a manner that expressesconcern for their property, very few honest people will mind the extra care taken fortheir security. The customer it does chase off just might be a criminal, and lost revenueon 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 goodmarketing and can help you discover a problem sooner than if no contact was made until thecustomer became delinquent. You can also include referral cards with the thank-you notefor customers' friends and neighbors. When a prospective tenant presents the referralcard, the referring customer gets a gift or a discount. This creates good customerrelations and helps reduce the likelihood of crime in your facility.

New construction and proper maintenance of our buildings, combined with hands-onmanagement, attention to security and the prevention of crime, are creating safer and moresecure places for customers to store their goods. Combine these efforts with good customerrelations and we can all help to keep insurance costs for our industry at an affordablelevel.

David Wilhite is the marketing manager of Universal Insurance Facilities Inc.Universal offers a complete package of coverages specifically designed to meet the needsof the self-storage industry, including loss of income, employee dishonesty, comprehensivebusiness liability, hazardous-contents removal and customer storage. For more information,contact Universal at Box 40079, Phoenix, AZ 85067-0079; phone (800) 844-2101; fax (480)970-6240; www.vpico.com/universal.

Subscribe to Our Weekly Newsletter
ISS is the most comprehensive source for self-storage news, feature stories, videos and more.

You May Also Like