Q: Lettings agents tell us they are receiving requests from landlords every day for rent insurance, what should they consider when selecting a policy provider?
A: Our industry feedback also bears out this current market trend. The threat of unemployment looms large for employees and many tenants will almost certainly suffer the effects of the credit crunch. Faced with difficult financial decisions, some tenants will inevitably default on rental payments and anecdotal evidence suggests that defaults, not just the fear of defaults, have already risen significantly over recent weeks.

Agents, consequently, are increasingly reassessing their options to ensure that their landlord clients are best protected.

The caveat is not to assume that all providers’ products and services are the same. For example, LetSense’s rent and legal protection policy illustrates the extent, and significance, of insurance variations. It has a nil excess, the option to include vacant possession cover, and insures an entire tenancy of up to five tenants in the same residence – not just individual tenants. So money isn’t wasted on multiple policies.

There are providers that will even offer rent protection in the form of a warranty – in other words they themselves provide the indemnity rather than placing the risk with an authorised third party insurer. This may be a risky option for agents and they should make sure that the company carrying the risk is financially stable.

The ease of arranging and administering the policy, to minimise disruption to agents’ day-to-day activities, should also be a consideration. Some providers require policy information to be faxed while policy administration software systems vary considerably in terms of reliability.

Q: When selecting a rent insurance provider, what compliance issues need to be considered?
A: When selling an insurance product to a landlord, agents have to meet various Financial Services Authority (FSA) standards. Some providers will make this process as painless as possible while others, who have invested less time in the provision of suitable training, will inevitably make it more onerous.

There is an alternative and that is to take out a rent and legal protection policy in their own name and provide rental payments to their clients, even if tenants should default, as part of their service offering. LetSense’s policy, for example, does exactly this and negates the need for the agent to be FSA regulated.

Q: Can tenant referencing be carried out adequately by agents in-house?
A: Independent referencing by a reputable company is advisable. It is possible for agents to acquire a financial reference from a third party referencing company and then research and gather all additional supporting references and information themselves. Liability however will then lie entirely with the agent, rather than with specialists.

As is the case with insurances, quality and speed of service will once again vary appreciably between providers so agents should choose their preferred company with care. In most cases, the fastest turnaround of in depth references are offered by those providers that provide an automated system – referencing services that utilise, for example, interactive forms to enable tenants, guarantors, landlords and employers to submit their details online.

Q: Can the provision of lettings insurance products and services prove lucrative for agents?
A: At a time of economic hardship, any additional means of boosting revenue streams must surely be exploited to the full. If letting agents meet average industry sales, commission levels can be substantial. Of equal importance however is the opportunity that such provision offers in raising the standards of service to landlords in what is an increasingly competitive market. Agents need to differentiate themselves from the competition and a good lettings risk provider will enable them to do this.

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