This week we have an interview with Heather Gatrell of HGI Insurance. Listen in to find out all about insurance involved in Serviced Accommodation letting and why a broker might be important for your business.
The Serviced Accommodation Podcast is a show brought to you by Chris Poulter and Ritchie Mazivanhanga aimed at new and experienced property investors alike. With each show we help you Start, Systemise and Scale your Serviced Accommodation Business.
Find out more about HGI Insurance on their website: http://hgi-insurance.co.uk/
Hi I’m Chris.
Hi I’m Ritchie.
Welcome to the Serviced Accommodation Podcast.
Hi I’m Ritchie from the Serviced Accommodation Podcast. Today I’m with Heather from AGI insurance.
Hi Ritchie, it’s great to be here.
Fantastic. It’s great to have you here. So Heather, what exactly do you do?
I’m an insurance broker so I work with property people to insure their properties and I work with business people to insure their businesses.
Okay so private and businesses as well yeah?
We focus on commercial insurance so that’s to do with all business related insurances yes.
Okay, as we are on the serviced accommodation podcast so if I’m looking to go into serviced accommodation, what insurances will be available for me?
Well there’s quite a few and it depends on how you’re going to operate your business as to what your needs may be and this is where an insurance broker is a valuable resource – part of your power team because what we should do as insurance brokers is talk to you, understand what your insurance needs are, how you’re going to operate your business and then fit a portfolio of policies around the information that you’ve provided to us.
Okay. So what kind of policies are we talking about or what kind of policies will be available to me as a serviced accommodation provider?
There are general property insurances obviously if you own a building or you lease the building or you rent a building then you might have insurance needs for the actual property or the contents. There are liability covers that you may need in connection with the property or with your business they’re different things but you can insure the liabilities for your employees that help you with your office work. But you can also insure the employees for the people that maybe if you employ them directly work in and around the properties themselves, the cleaners and other service providers. And there’s you know obviously if you have an office you may want to insure your office equipment you can insure that. And then there’s professional indemnity which is about the service that you provide and obviously protecting your business for any issues of professional duties.
Okay, thank you Heather. And why are these types of insurance important?
Well carrying on with the professional indemnity thing that is important because we all have obligations within our businesses. And if we are providing a service or we are a service provider which serviced accommodation is then we have obligations to how we or how people describe their properties. So if a property is mis-described then that could be a breach of a professional duty. If the risk assessments are not quite right or maybe not carried out then a risk assessment could be a problem for the business as well as for other parties.
Is that just risk assessment or does that include fire risk assessments as well?
Risk assessments include things like fire risk assessments but it could also be an assessment of the property because under certain acts like the Occupiers Liability Act you have certain obligations to make sure the property is safe for people to be within. So that’s really important to do a risk assessment so that you can prove that you assess those risks and that any necessary matters have been highlighted to your guests.
Business insurance – that’s to do with how you operate your business. So if you’re going out networking then you mainly public- well you should have public liability. If you employ staff obviously employer’s liability is a legal requirement so you need to make sure you comply with the legislation. You might want to protect your property in terms of things like laptops and other business equipment they may take out to do a presentation or something like that and that can all be insured as part of business insurance.
Okay, just taking a step back you said about networking. Could you please elaborate on that point at all because you said if you’re going out networking you need liability insurance was it?
Public liability, yes.
Okay, how does that work?
Well if you’re presenting and you have a laptop and that needs to be plugged in or you have other presentation equipment then if somebody were to fall over that equipment then that could be something where an injury that they sustained they could try and make a claim against you if they can prove you were negligent. So that’s a business risk that you may need to protect yourself.
And of course then there’s the general insurance for the property themselves and there’s various models that people who are operating with serviced accommodation. So some people are purely a management based company. Some people take the leases or rental agreements in their company name or private names and so the types of liability insurance for that, for the property itself are similar but vary. And of course then there’s obviously your own contents that you may have been there. One of the major things that people possibly don’t realize is the loss of income as a result of say a fire at one of their serviced accommodation properties could be quite catastrophic in certain circumstances and the income from serviced accommodation is actually very profitable. Above what you would normally expect for say a buy to let. So there’s some policies out there that would give you a standard percentage as a loss of rent value. So you need to assess whether that’s adequate or if you need to insure it on a different basis specific to your loss of rent needs. So that would be basing a whole new actual rent as opposed to a percentage that’s a policy feature.
So I’ve just mentioned those types of cover. Obviously there are different covers and that may be important to you but obviously trying to keep it to a small number of covers that are most important when discussing it to start with but other covers may be more important. And obviously when you talk to your insurance broker they should be able to guide you as to what’s best for you based on that discussion.
So in order to satisfy the insurance needs of a serviced accommodation business I for one know that you carry out a very thorough fact finding process. From your experiences Heather, in these meetings what do you find requires the most attention or the most focus?
I find that establishing the basis on which a customer intends to operate their business is often quite a detailed process. Establishing whether they are going to operate as a residential property manager as opposed to a tenant or rent to rent type arrangement, that often is quite important because sometimes you can have more than one party in the chain of the process so maybe that you could have a freeholder, you could have a lease holder then you may have a rent to rent and then you may have a residential property management agreement in place. So each part of that chain has to have their own insurances for their own risks associated with their part of the business. So that may involve property insurances or it may just involve business insurances so it just depends on how people are going to structure their model as to what’s right for them.
When you say, when you talk about structures, I know structure is very important so do you have to have clear definitions of roles and responsibilities? Who’s responsible for what within the company? What happens so that you insure them in the right way? How does it work?
It’s very important if there’s a chain involvement where you may have, say a rent to rent and then a residential property manager, to know say who’s taking the money. So if the money is going through the service element so the residential property manager then obviously the contract is with that party between however you know how the rent is coming in. But if it isn’t through that person they just arrange say the services and the contract for the accommodation is with the rent to renter then obviously there’s different obligations on either side. So it’s important to understand where the responsibilities of each party is to make sure that the guidance that we give is appropriate for each person that we’re dealing with so we may be dealing with just the residential property manager so it’s important to understand their role to fit their insurances to them.
So their role and their kind of exposure, yeah?
Some of the other important factors involve the actual locations and properties themselves. So obviously people that rent properties and then put them into serviced accommodation they often don’t understand why we need to know about the construction of the building and things like that. But obviously if you’re renting a property you have a liability for anyone entering that property. So things like whether or not it’s an old building and obviously if it’s a Grade 2 listed building certain features may or may not be permitted in terms of security features or changes and things like that so the more we know about a property the better we can understand the risks and exposures and make sure that they’re notified to an insurer so that in the event that you know say somebody was injured and wished to make a claim then that would be a process that would be a smooth process for our customers to move forward and make sure that that is covered by the policy and that sort of thing. So knowing what the security is of the property. Things like security drops for the keys, the key security drops they tend to be different from every service provider. So some have key boxes, some have arrangements with other establishments even. So how they change their key codes, how they change their drop arrangements, you know where that goes to a cleaner or if that goes to another entity how they choose to change security afterwards as well.
So if it’s a key case some people have got by iPhone type apps that they can change the key code. Some people it’s a physical thing so somebody’s actually got to go to the keypad and change it. Sometimes it’s just not possible, It’s a block of flats so understanding those security features are quite important because insurers need to be aware if there’s a potential that you know there are different security features that that may or may not affect a risk.
Yeah because we use the Yale keyless ones where it’s just coded doors and we can change the codes remotely from our office because we’ve got varying entrances on site so I know the various insurance risk associated with every kind of entrance system really.
There is, so when we ask about security and the types of locks that are on, say a block of flats as well as your individual flat, it’s important to know that just so that we can make sure that any matters that should be notified to an insurer are put forward to them and that they when they quote that they know the risk that they’re quoting for. We talk in terms of risk being the actual sort of whole picture. So when I say you know they know the risk they’re taking on it it’s about the customer, their properties and potential liabilities and that sort of thing. So that phrase means that when I say that.
Thanks for clearing that up, clarity is always important.
It’s also important to know about the services that people are going to provide because not everybody provides exactly the same service.
So it’s serviced accommodation we’re talking about, it’s short terms lets, so accommodation is it not just serviced accommodation?
Well what makes it serviced accommodation that’s the big question? So the services that are provided generally may be the linen and laundry and cleaning. But some people provide a welcome basket and some people provide other facilities that they consider, so maybe food or not as a B and B but maybe in a packet or something like that so it just depends on what serviced accommodation means to the actual customer that I’m discussing their insurance needs with. So it’s important to understand you know what features they’re going to offer as an element of the service of serviced accommodation.
Okay, alright so will the various people that are providing the services like cleaners, do they need their own insurances or do you need insurance for the cleaners whilst they’re on the property? How does that work?
It again it depends really; it depends on how you’re engaging that person to work with you. So if you’re taking on somebody who is an independent contractor so they run their own business and they work for multiple clients then it will be one of your professional duties to make sure that they have their own insurance and that they were adequately protected. But if you were going to take on an employee then obviously it’s your employee and your worker that you need to protect and any work they do for you then becomes your liability.
So it really does depend and that’s why it’s important to understand that as a broker, it’s important for us to understand how people are going to engage their contractors and also whether or not they’re going to have any potential risks that maybe they don’t anticipate. So if you were to have an agreement where you maintain a property say and you have some people doing certain value maintenance and repairs so up to a certain value they pay for it and anything over that maybe you know the landlord pays for it. It depends on how you actually take that cost whether it’s your cost or whether the landlord pays the contractor direct as to whether there’s any other liability matters that you need to consider in relation to the work that’s being carried out in and around the property or responsible for.
So that’s kind of boils back down to the point you made earlier where it’s clarity on which roles and responsibilities in and around the business or the company itself, yeah?
As I said earlier Heather, I know that you carry out thorough reviews for people. Why is that so important to you?
As a professional broker I like to make sure I understand my customers’ needs and that I obviously work really hard to find a policy and portfolio of policies that suits those needs. There’s new insurance legislation that’s come out recently in the last year and that has changed the focus and for a customer, the consequences of not getting it right can be quite onerous but the new Insurance Act also puts in place statutory penalties. So it’s important to make sure that the information you provide is what we are now referring to in the insurance industry a fair presentation of the risk. So a fair presentation means that you notify an insurer of any matter that is relevant to their consideration of offering you insurance. So again go back to why with a rent to rent we would ask for details about the property itself as opposed to just the business. That’s important because a flat roof may be an issue for an insurer or the type of tenant may be an issue for an insurer. And so the more we know about the business, the better we can make sure that information is put forward to the insurer and so when they offer you a quote the quote that you’re accepting is on the right basis for you. And that can include things like financial histories for people and other matters that maybe you wouldn’t necessarily think might affect an underwriters perception of the risk. But these things can be very important so all matters have to be disclosed to an insurer and because of that if you get that bit right, in the event that you do need to ever make a claim then you can be certain that it will operate for you and respond to that claim. You won’t have to worry, the whole point of insurance is to give you peace of mind. So by providing the right information and making sure your insurer is aware of how you are operating your business and the people within that business then you can be very comfortable in the insurance product that you’ve purchased.
Okay and obviously updating you, updates to make sure should anything change within their process.
That’s very important. Yes. And you know we like to keep communicating with our customers throughout the year. You know if a customer has a change, they change their style of serviced accommodation with a different property or something like that you know by talking to us when we take the new property on and insure that then we can make sure we understand how their business is evolving and changing and that may affect how we look at when the policy comes around for renewal or it may be that you know we work with different insurers on a different style of policy or maybe your insurance needs expand. You may start off as a small company and then you may take on, say you take on small flats to start with and then you take on a much bigger property that is more like a BnB or something like that then you know as those needs change then we can make sure that the policy constantly evolves as your business constantly evolves accordingly.
Yes it’s very important.
In summary your insurance broker is part of your power team and it’s really important to make the most of that insurance broker in guiding you to fit your insurance portfolio to meet your insurance needs.
If anybody would like to have a chat or wish to email me my email address is mail@HGI-insurance.co.uk I’m here to help if I can at all. I’d be delighted to talk to anybody that’s interested.
Excellent. Thank you very much for your time today Heather.
Well thank you.
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