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Insurance policies for the lettings market

publication date: Apr 1, 2008
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HOMELET and LETSURE Managing Director John Boyle says:

"HomeLet is the UK’s largest tenant referencing and insurance provider for the lettings industry and has recently joined forces with Letsure to become a formidable force within the lettings market.

"Having recently exhibited at the 2008 ARLA Conference in London together for the first time, we are thrilled about the new and exciting prospects this partnership brings to the market and to our customers.

"We believe our customers deserve not only an excellent choice of marketleading tenant referencing, rent guarantee and insurance solutions, but also the guidance and support to help them make the most from their relationship with HomeLet. With a highly skilled team of over 20 Account Managers, with a real understanding of the lettings market we are now in a position to offer an even wider range of products to our network of almost 5,500 letting agents across the UK and can help our agents to grow their businesses providing advice and support along the way.

Improving the agent’s offering

"By taking out insurances and offering tenant referencing, letting agents can improve the service they offer to their landlords. Many agents get frustrated by the length of time it takes to process a rent guarantee claim, however, as HomeLet has an in-house legal and claims department we can process claims quickly and efficiently.

"Offering insurances and tenant referencing services to landlords is a fantastic opportunity for agents to generate additional income. Our agents enjoy attractive commissions against a wide variety of HomeLet and Letsure products.

Combining referencing and insurance – instantly!

"HomeLet offers combined reference and rent guarantee products that take the risk out of property rental and can be purchased instantly online. In the last two years HomeLet and Letsure have paid over £7 million in rent guarantee claims. This is money many landlords simply can’t afford to lose. It also helps protect your management income and reduces the hassle and paperwork associated with the eviction process.

"Tenant referencing is a crucial process which can be time-consuming and which is often neglected. Yet it is the single most significant factor in protecting agents and their landlords from tenants who can’t or won’t pay the rent, as well as helping to ensure the reliability of the tenant.

"HomeLet and Letsure offer a wide range of tenant referencing products; ensuring that landlords and letting agents receive a fast and efficient service, reducing void periods between tenancies. In 2007 alone HomeLet and Letsure completed almost 500,000 references. HomeLet also offers International Rent Guarantee which ensures that prospective tenants who do not have a UK-based guarantor can be easily placed in properties."


Michael Portman MD says:

"The insurance market is very competitive with new entrants competing with the older more established players, some of whom have had difficulty adapting to new technologies and to the demanding levels of service now required.

"Our job is to provide a professional service to professional agents. Our insurance products are designed with letting agents in mind to enable them to add value to their clients with a comprehensive and efficient service. With our experience in both the let property and insurance sectors we understand agents’ needs for good service and quality. (Michael Portman, Managing Director, is a qualified chartered surveyor and insurance practitioner; Philip Cook is ex-chairman or ARLA and Ashton Burkinshaw and other key staff have many years of experience – mostly with Letsure).

"FSA regulations governing sale of insurance have been in place for 2 years. When the regulations came out in January 2005, many letting agents stopped offering their clients insurance because of the increased red tape. There were tales of confusion and some agents felt that it was a restriction on the service they could offer, meaning that clients were suffering. The FSA has since simplified the regulations. This and new technology now make it easier for agents to return to offering added value to their customers.

"Economic slowdown and reduced turnover in the housing market are increasing the demand for lettings. Tenants are staying longer in properties; the tenants may be good when the agent takes out references at the start of the tenancy, but the risk of default through change of circumstances, for example job loss or break-up, increases over time. It becomes more important to protect against this risk by taking out rent and legal protection insurance. The credit crunch means that BTL mortgages are harder to obtain and many fixed term rates are due for renewal, resulting in higher monthly mortgage payments which landlords can protect through rent and legal protection insurance supplied by Let Insurance Services.

"Weather patterns are becoming less predictable – storms and flooding in 2007 made it one of the worst insurance years for property insurers. Only when you have a claim do you realise how good your insurance is. Agents should recommend that their clients check they are insured for enough and have assessed what to do in the event of serious damage. We envisage an increasing demand for landlords and agents wishing to protect their rental income from tenant default.

New products coming to the market

"National Residential (from which Let Insurance Services was developed) has been providing selected agents with their own-branded rent protection and legal costs schemes for their landlord clients for over 7 years. These have been very popular with top flight letting agents and their clients. Following the merger with Let Insurance Services, we will be expanding the product range to include:
● Online tenant assessment backed up by 2 new rent protection policies with legal expenses aimed at both fully managed and let only properties.
● Landlords Buildings and Contents insurance for all types of landlord from the most cautious/risk averse landlord letting his own house to the seasoned buy-to-let portfolio landlord.
● Tenants Content Insurance which will include accidental damage by the tenant to the landlord’s property.

When a landlord asks why he should take out insurances and references

"Economic slowdown and reduced turnover in the housing market are increasing the demand for lettings. Tenants are staying longer in properties, the tenants may be good when the agent takes out references at the start of the tenancy, but the risk of default through change of circumstances e.g. job loss, break-up, increases over time. In these financially uncertain times it becomes more important to protect against this risk by taking out rent and legal protection insurance.

"A reference on the tenant is no guarantee that they will pay their rent but provides a guide to the quality of tenant and helps pick up any anomalies in their application.

"And finally our strangest claim – sadly, perhaps, not that unusual...
One of our landlords called to lodge a large claim because his house had been burnt to the ground because the tenants had overloaded the electrics in their endeavours to cultivate a cannabis factory in the attic… "

Managing Director Miles Ritchie says: 

"Currently there is considerable uncertainty in the insurance market due to takeovers, mergers and consolidation of traditional specialist providers. This is resulting in a confusing clash of products and service due to the inevitable conflicts that result when multiple businesses merge. The most concerning issue is the irregular service and conflicting advice that agents are reporting from some suppliers.

A heightened profile of the residential lettings or “buy to let” insurance market has led to the realisation that it is an attractive and growing niche market for both insurers and intermediaries. This is causing an increasing number of “commodity product” providers and insurers to enter the market. These often lack the specialist knowledge of landlords’ and tenants’ specific needs and the risks they face, which are reflected in inadequate cover. Their service approach is neither tailored nor personalised. Most fundamentally, for agents, they seem uninterested in aligning with the agent distribution channel, instead preferring to target the direct market.

"Now and in the future, historic distribution channels will need to respect and adhere to increasing regulation. These continuing regulatory issues, particularly surrounding data protection and safeguarding consumers’ interests, need to be recognised by all parties.

A fresh face in the market

"PropertyRisks were a new entrant a couple of years ago. From the feedback we receive from letting agents, it is very clear that an alternative provider with a better service provision, aligned with agent needs, was required.

"We are growing rapidly and fast becoming a major player in the market, positioned between the traditional providers and the “stack ‘em high, sell ‘em cheap” offerings. We see ourselves as aligned with the interests of letting agents and the needs of their landlord and tenant communities. We are able to offer fresh alternatives that focus on service delivery and quality products, whilst being competitive on price. Primarily, we want PropertyRisks to be recognised as the leading provider of risk management services and insurance solutions to the residential lettings market and, critically, as the agents’ partner of choice.

Risk management

"Several tenant referencing products that have recently come to the market have struggled due to their lack of consistency, service and a reduced product offering. It is important that agents are aware that tenant referencing is a key risk management tool and not a function that you should cut corners on. Every tenant and guarantor needs to be fully referenced and any anomalies investigated, otherwise these providers are risking the agent’s relationships with their landlords.

"Innovative ways in which to offer protection for landlords against tenant default will provide an agent with differentiation and a competitive edge in the marketplace, whilst ensuring landlord loyalty and additional revenue generating opportunities for them. Why smart landlords reference and insure Problem tenants can lead to situations where the landlord’s rent is not being paid, there are lengthy legal disputes and sometimes damage to property. Landlords want tenants who can afford to pay the rent, actually will pay the rent and will not trash their property! Comprehensive references increase the likelihood of a successful outcome by getting a better quality tenant.

"A positive reference obviously goes some way to mitigating the risk of problem tenants, but is still only a point in time analysis. Unfortunately, no one has a crystal ball and circumstances do change! Insurance is available to cover the landlord in the case of a problem tenant; not only providing access to specialist legal expertise and removing the financial risks, but mitigating the potential hassle and providing peace of mind. It can compensate for meeting continuing mortgage payments and loss of rental income.

"Referencing applicants is an important risk management tool in mitigating risk. This, coupled with specialist insurance protection, covering the full range of a landlord’s property and financial risks, is essential."  


Noor Ahmed says:

"Austin Myer International has been providing Referencing Services for the past 9 years and we have established ourselves as one of the preferred partner for referencing by agents and landlords. Our company has grown 3 fold in last 5 years and we see ourselves to be one of the top 3 referencing organisations in next few years.

"In the past 3 years we have seen the Buy to Let market grow steadily and this led to lot of demand for referencing and also rent guarantee insurance. We also find that many landlords are now fully aware of referencing and rent guarantee schemes offered by various companies and they are making full use of these to find suitable tenants.

"We feel very strongly about referencing and we try to convey this message to all our agents and landlords that they must carry out a thorough check on each tenant to avoid any unhappy situation down the line. Referencing weeds out any unsuitable tenants and it protects the biggest asset that a landlord will ever own. So we believe that it is imperative that referencing gives a landlord piece of mind, knowing that they have checked their tenant thoroughly and that they know who they are dealing with.

"We can do our utmost to get all the facts and figures on a tenant through our long experienced referencing process, but events may happen that cannot be predicted. To avoid these, we strongly recommend the rent guarantee. This policy provides protection to a landlord with rental income for the rest of the tenancy period.

"We believe that we have perfected our referencing services over the years and we now have a long term and exclusive partner – Clarity Solutions, who will be providing us with the rent guarantee product and also all other property related insurance policies at a very reasonable cost. Clarity Solutions specialise in household insurance products, they have a wealth of experience and knowledge of this market and are very competitive in pricing."