CONDO ASSOCIATION UNDERWRITING
Understanding Underwriting
What’ s going on in the insurance business today and what can condominium associations do to keep solid coverage at the best price?
BY: SEAN M. AHERN, CIC, CIRMS VICE PRESIDENT, JGS INSURANCE
Insurance company underwriters are a rare breed and they have a tough job to do. They’ ve got to look backward at your condominium association’ s loss history and then analyze where it’ s located and how it’ s built to somehow figure out how it will perform going forward! That, combined with the current insurance market and how your broker presents your association to the insurance company, is where pricing comes from. Since the underwriter makes the final pricing decision, condominium associations need to know the best ways to give underwriters a warm and fuzzy feeling.
Insurance brokers do the negotiating, and if your broker is doing a good job, you’ ll see solid coverage and fair premiums. Below we’ ll discuss how insurance underwriters look at your association and illustrate a few prudent insurance practices.
INSURANCE TO VALUE
As far as insuring buildings, we’ d all like to insure only what we realistically think we could lose. The chances of a 10-building community losing all 10 buildings in one year is probably remote, especially if the buildings are separated by great distances. But insurance carriers determined long ago that in order to make a profit and pay future losses, insureds would not be permitted to experiment with and determine coverage amounts purchased. Instead, carriers usually require insureds purchase 100 percent of the current replacement cost of their properties.
On a partial loss, insureds who do not comply with this replacement cost requirement will share in the loss as a
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