If last year you’d asked lettings agents about hot topics they were excited by, landlord and tenant insurance would probably not have been top of their list.
Things have changed. With the lettings fee ban coming in, agents are wondering how they will make up the shortfall in fees. Tim Barnett, Sales Director at The Lettings Hub, says, “The more proactive lettings agents are asking how they can generate more income. Many are looking at every possible income stream they can find.” Landlord and tenant insurance can be profitable for the agent, with mark-ups of 30 per cent or more, and premiums can be reasonably chunky, so it’s an attractive area for agents to look at.
Agents and landlords have always required this level of protection – and it’s no different now. Our product portfolio will continue to grow because we know this serves a genuine need and works for our customers.
Unlike standard home and motor insurance, landlord and tenant insurance is a specialist subset of the market that doesn’t often feature on comparison websites. The larger insurance companies are present in the market but usually distribute their products through specialists such as referencing providers rather than going direct to the landlord or tenant.
Compared to an owner-occupier policy, landlord and tenant policies have small but significant differences. For instance, a tenant, unlike a homeowner, is responsible for someone else’s possessions, so accidental damage cover is important to protect white goods or carpets in the property – and could help protect the tenant’s deposit, too.
Most homeowner policies have quite tight limits on the amount of time a property can be left empty – again, not best suited to the rental sector where voids need to be taken into account. And owner-occupiers don’t need to think about legal costs – whereas legal cover and rent guarantee protection are strong sellers into the landlord market. And a landlord has a potential liability that a homeowner doesn’t, if tenants are injured due to a fault in one of the fixtures, for instance, so liability cover needs to be included.
Luke Burton at rent4sure, says, “First and foremost, agents want quality referencing from a supplier they can trust. Our customers tell us that while value for money is important, great service and a range of tried and tested products are also essential.
“Our experience has proved that products for the lettings market need to be fit for purpose. Agents want insurance cover with a proven track record, that’s easy to understand but that also offers the right level of cover and protection to their landlords.
“The foundation of a good tenancy will always be excellent referencing, but agents’ experience tells them that the future isn’t always predictable. There are any number of unforeseen life events that could affect a good tenant’s ability to pay the rent, such as losing their job or a relationship break down. If the worst does happen then having the right level of cover takes the stress out of the situation.
“More agents are becoming aware of the benefits of insurance products and how these can add value to their management fee by providing full protection and assurance to their landlords.”
MODERNISING TENANT PRODUCTS
Homelet revamped its insurance product in 2016. Its tenant insurance, for instance, is now portable; Andy Glynne, Commercial Director of Homelet says, “It’s continuous if they move tenancy, and it’s also portable if they move into their own property.”
This now has a blanket £50k coverage limit – which takes the onus off tenants to work out how much cover they need, and makes it an easier sell. He also says that agents have a really easy way to improve their revenues. “Legal cover and rental guarantee in our view isn’t sold as well as it should be in view of the benefits it provides,” he explains – so agents who are already selling other cover successfully should consider whether they can emphasise these products more.
At The Lettings Hub, there’s a lot of work going on to improve insurance products and create an even better package for lettings agents to sell. Tim Barnett says that as soon as The Lettings Hub realised the lettings fee ban was coming, they started work on a packaged product that includes all the different forms of cover required. That’s good for lettings agents seeking new sources of revenue, but it’s also good for The Lettings Hub as a major reference provider. “We might not be able to charge for references,” Tim Barnett explains, “but if we reduced referencing costs but sold other products we could still be profitable.”
Referencing companies are in a great position to sell insurance because of their place in the rental process as the reference is made just before the let is agreed.
However, landlords are a slightly more difficult sell than tenants. Almost all tenants will need to change their insurance when they move; most landlords won’t need to change their insurance for a new tenant. Tim Barnett says, “There’s not one single step in the process that gives you the opportunity to sell to landlords”, but landlord insurance is the most profitable product, so lettings agents should get to know when annual renewals are due and take their opportunity to switch landlords to a better product.
While it’s possible for landlords to have a number of separate policies covering buildings, liability, and rental guarantee, increasingly the various covers are brought together under a single landlord policy. For instance, Let Alliance (used by Belvoir Lettings, among others) includes buildings, contents, accidental damage, liability, and rental guarantee cover within a single package.
One area that’s become a focus of attention is the nil-deposit insurance scheme. For instance, Belvoir has teamed up with Let Alliance to offer tenants the opportunity to pay a one-off charge rather than hunt around for a deposit. Tim Barnett says, “it’s a hot topic at the moment,” and believes we’ll see more innovation in tenant insurance, “since the industry is becoming more and more tenant led.”
It’s also the focus for proptech new entrants. For instance, Canopy profiles tenants with a ‘trust score’ similar to a credit rating to create a ‘Rent Passport’ rather than a standard reference, and also sells a deposit free policy that covers up to £30,000. But with companies like Homelet, Let Alliance and The Lettings Hub all actively focusing on the area, proptech companies might not have the sort of advantage they’ve gained in other sectors.
Meanwhile, Luke Burton at Rent4Sure says, “Agents are very good at choosing the right product to fit their needs and, as an experienced business, we only offer products that the market wants.
“The feedback we’re currently getting from customers is that they’re looking to incorporate our products into their full offering, so that they can enhance the service and value they give to their landlords and applicants. It’s a very sensible and pragmatic approach to take in the current market.
“Agents and landlords have always required this level of protection – and it’s no different now. Our product portfolio will continue to grow because we know this serves a genuine need and works for our customers.
AGENT LED POLICIES
Another way agents could use the insurance product, though, is to build it into their management service. Tim Barnett says one agent who works with The Lettings Hub has absorbed the cost of landlord insurance into his business, but by providing a higher level of service, he can compete more effectively. Whether or not that works for an agent will obviously depend on their marketing strategy and where they sit in the market; as he says, “No two lettings agents are the same, and there is no golden bullet.”
An agent can, for example, buy a master policy from The Lettings Hub, and can then simply add properties to the policy when needed. Tim Barnett says “they have autonomy to manage it online,” and the process is very simple, “Just click; you put in the tenant’s details, you put in the property details, and away you go.”
REAL CHANGE AHEAD
His vision for The Lettings Hub is to provide solutions rather than just products. For instance, it can help lettings agents organise utility management – it’s a service they need anyway, but by routing it through The Lettings Hub, they can generate commission off the back of the process.
“It’s all about process efficiency,” Tim says. “Referencing is becoming a lead generator and we want to make sure we maximise its lead potential.” That suggests lettings agents should be thinking about the lettings process, too, as a lead generation process rather than simply placing tenants in accommodation.
Right now, landlord and tenant insurance looks like quite a quiet sector. But it appears that there’s a lot going on under the surface, with many providers working on a number of initiatives in anticipation of the lettings fee ban. Some commentators give it a year till we’ll see real change, but Tim Barnett thinks things may happen earlier rather than later. “The next five or six months will be a bit of a plateau, with not a lot happening,” he says, “but then it will get manic.”
That gives lettings agents who’re currently not involved time to get their act together. But hurry up, once the lettings fee ban actually arrives, it could be too late.