Landlords with rent guarantee insurance policies are finding that these have become obsolete amid the coronavirus outbreak. Insurers that are proactive at mitigating their concerns will be better positioned to retain customers.
According to GlobalData’s 2019 UK Insurance Consumer Survey, 13.4% of respondents rented their main residence from a private landlord. While insurance is only taken by a minority of homeowners renting out their properties, landlord insurance is by quite some margin the most common type of policy purchased. 57.5% of homeowners letting out their properties cited having this type of insurance in place in 2019. Only some of these policies will have rent guarantee add-ons though, enabling landlords to claim for rental payments in the event that tenants fail to make these. However, the coronavirus outbreak has left many of these landlords in limbo.
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Rent guarantee add-ons are an invaluable feature for landlords that are still paying off the mortgage on a property, as well as those that have tenancy agreements with individuals that are more likely to default on their payments, such as the unemployed.
Regardless of the purchase reason, rent guarantee add-ons are intended to bring peace of mind to landlords. As the coronavirus pandemic spreads around the world, more and more individuals are losing their jobs – gig workers, for instance, are among the worst hit. In the UK, the government has announced that landlords will not be able to start eviction proceedings in a court against tenants failing to pay their rent without giving them at least three months’ notice, with emergency legislation dictating this initially until September 30, 2020.
The changes in legislation, however, jeopardises existing rent guarantee policies. Landlords with insurance covering rent guarantee are finding it difficult to make claims. Typically, insurers will pay default rent payments if the tenant has not paid rent for 30 days and an eviction notice has been issued. However, landlords are finding that the cover they once bought to protect against this eventuality has become virtually invalid. Meanwhile, several insurers have temporarily discontinued selling rent guarantee products.
Landlords facing loss of rental income might need to take a mortgage holiday on their let-to-buy properties. However, landlords in this circumstance are likely to question what the advantage is in them holding a rent guarantee policy if they cannot make – at least temporarily – a claim when they most need to. Under these circumstances, some policyholders will be tempted to cancel their cover.
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By GlobalDataTo avoid customers cancelling their policies, insurers should devise plans to offer added-value services. For instance, insurers can offer support to clients with regards to reaching alternative agreements on longer-term rent schedules with their tenants, in addition to offering them legal advice if possible. Insurers could also offer lower premiums – or premium breaks altogether – during these unprecedented times. Insurance is an industry with low customer trust, and failing to engage with and offer assistance to clients during these times will only worsen perceptions.
