Insurers often view affordable housing as a risky investment, even when properties meet safety codes and are well-kept. This misjudgment leads to higher insurance costs, which can threaten the financial stability of affordable housing projects. Nathan Kerr, a broker with 25 years at Scott Insurance, is working hard to change this perception.
As insurance premiums rise and coverage options shrink, affordable housing providers face tough challenges. In some areas, they can only find coverage through expensive surplus lines, adding financial strain to an already struggling sector. Kerr, who started an affordable housing practice group at Scott Insurance a decade ago, has seen insurance issues shift from a minor concern to a major obstacle for developers and property owners.
Kerr emphasizes that the root of the problem lies in long-held misconceptions about affordable housing. He points out that even before the current insurance market became difficult, stereotypes about the industry created barriers. Now, as costs rise, clients are starting to ask how they can take control of their insurance situations. This shift is helping them rethink their approach to insurance and risk management.
To tackle these issues, Kerr advocates for better underwriting practices and encourages the use of strategies like captives and higher deductibles. His goal is to promote a smarter, fairer insurance model based on education and evidence. He believes that understanding the affordable housing sector is crucial, as it often has stricter compliance standards and more oversight than other real estate markets. This oversight incentivizes owners to invest in their properties, making them safer and more appealing from an insurance perspective.
Kerr argues that the affordable housing sector actually performs better than the general real estate market, a fact that brokers should communicate to insurers. He stresses the importance of educating owners and developers on how to utilize insurance effectively and manage risks. By retaining predictable losses and exploring alternative funding options, organizations can better control their overall risk costs.
Kerr also highlights the need for brokers to advocate for affordable housing, especially with insurers who are hesitant to cover these properties. He believes that public perception of affordable housing often lags behind reality, and brokers have a role in changing that narrative. Many people mistakenly think that affordable housing lowers property values, but Kerr insists that these developments stabilize neighborhoods.
Developers need to present a strong case to underwriters, showcasing their properties and risk management strategies. Kerr advises them to know their properties well and to communicate their improvements clearly.
Ultimately, Kerr sees risk management as a discipline that goes beyond just budgeting for insurance. It includes making properties safer and effectively managing claims. He has witnessed the positive impact of this approach, noting that affordable housing projects he works with have shown better claims performance over the past decade.
Education remains a key challenge, as many still misunderstand the affordable housing sector. Kerr advocates for more insurance carriers to be open to writing policies for affordable housing, aiming to create a more supportive environment for these essential developments.