Posts Tagged ‘Compliance’

Real Estate, Investing, Risk & Insurance

September 10, 2013

Following several meetings I have attended – as an observer – of various Real Estate Investment Forums, I decided that I should blog about some of the information and misinformation that I see being offered by experts in their fields when touching on my own expertise – risk and insurance.  Why?  Being in the business of sales, I must forgive them for trying to convince others to follow in their footsteps at being as successful as they are; I know how important it is to be contagious when selling but their excitement might give someone the impression that they know all and that their views are cast in stone when I know that they’re wrong.

Example, a very well recognized real estate agent recently mentioned about “his” contact and the “group” package for investors he uses.  Yes, it might be a very good program – sorry if I’m skeptical – but following 9/11, I’ve learned to read closely what is and is not included in an insurance policy coverage (from the definitions to exclusions and the legal descriptions).  I also know that any “program” – like the 80/20 rule – might be terrific for 80% of the people, 80% of the time BUT…what about the remainder?  Most insurance professionals tend to know less about risk and more about sales than what the public, business-owner or investor might think, especially those relative novices in the insurance industry (and there are far too many of those). 

When studying the Canadian Risk Manager (CRM) program, would you believe that insurance company underwriters or “risk managers” of companies like The Gap were in attendance but lacking were insurance brokers/agents, those professionals upon whom you rely for your information?  Risk involves understanding about currency, interest rates, market factors, contingent risk, etc. – NONE of which tend to affect the usual insurance policy nor reason for insurance salespeople to want to learn about risk since there isn’t any increased income to them – and not about selling insurance to a client or a prospective client!

Second example, another expert mentioned about the reasons “he” likes the previously mentioned group insurance package – yes, 90 days vacancy might be very important but that doesn’t mean one cannot buy coverage beyond 30 days in any other “in force” insurance policy – and that the buying power of “X” members ensures the best rates in the country?  Well, possibly, but the “X” was nearly 2X what the website for that organization shows as members.  I question where the figure originated since, again, this is misinformation for the insurance-buyer-investor who might be relying on those comments.  This expert is not in the field of insurance and should not be relied upon for that lack of understanding; all investors/buyers should look around and ask questions.  When that expert also downplays the delinquency risk of an investment, I wonder why 90 days vacancy is so important.  I worked in credit so I know this is a significant risk to any investor and one should NOT discount it when encouraging others to buy real estate as an investment – this is WRONG!  If there was never a delinquency risk and/or vacancy risk, would not every real estate investor be a millionaire and be driving up the value of real estate even further by wanting to outbid one another?

Following a phone call with a prospective client, I was surprised to hear that someone had researched the group plan and commented to me about the weaknesses in that policy.  Does everyone else research in this manner?  I know that most people don’t – having recently seen information from an insurance company that indicated nearly 25% of all commercial insurance buyers ask their lawyer or accountant for insurance information!  What accountant or lawyer will know as much about insurance as he/she should?  I don’t know any who don’t rely on an insurance professional friend for the answers because that is not their level of training and expertise.

I also had my eyes opened by a property manager I know; she didn’t realize that Tenants’ Vandalism could be purchased on Rental Units.  That individual commented on a Social Media site to the effect that damage by tenants could never be insured and this is absolutely wrong.  I have learned, with experience, to never say never in this business.  Many times, coverage can be bought – for a price!  Because I emphasize risk and discuss appetite for risk vs. risk transfer with clientele, I do understand what clients need and ensure they understand deductibles and risk retention on any investment of theirs.

Would you not prefer to deal with someone who represents your investment interests by knowing what you need, someone with a career in the financial services industry from banking to lending to insurance?  I have personal experience working with credit risk and currency risk; I’ve consulted with lenders and approved the compliance of insurance policies with loan agreements. 

As an insurance broker with a large and reputable brokerage, I can buy insurance for you – the right coverage for your individual needs – from most of the country’s insurance sources and I have the training of a recognized Risk Management program.  You need to put your faith and trust in someone who will represent you, in good faith, to be as professional as your accountant and lawyer!  Let’s talk!  I can be reached on Twitter @WRiskManager

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