"We never forget you have a choice,” used to be one of British Airways’ slogans; one which may have backfired on them – as people could see that that they did, indeed, have a choice – to go elsewhere.

Remembering that clients have a choice is probably a mantra best kept to in-house training; but it is one of the most important tenets of a successful business, particularly in areas of high competition such as insurance.
There are several dozen providers of insurance for landlords so the letting agent has to ensure that he provides a good insurance policy, while being aware that many insurers sell directly to landlords. Just like British Airways’ air travel market, there are plenty of alternative providers.

Philip Cook, founder of Ashton Wingate and a past Chairman of ARLA, says, “When I was Chairman of Ashton Wingate, I knew that we needed to offer the landlords something special which would, hopefully, benefit us as well. I introduced a very special form of insurance for agents to offer their clients; a unique rental guarantee and legal expenses indemnity scheme, branded with their own trading name.”

Insurance resistance
Landlords may be resistant to having insurance, believing it to
be a waste of money, too expensive, or that it’s just a way for the agent to make more money.
Philip Cook has heard all the reasons for landlords not taking insurances and handled a good number of claims over a long career in lettings. His original, family-run lettings business, Ashton Wingate, merged with Frances Burkinshaw several years ago and has since become part of Countrywide Residential Lettings.

Philip realised the importance of arranging cover for landlords’ rent and legal costs for those mercifully rare occasions when problems arose. As Chairman of ARLA from May 1997 to May 1999 he saw, on a wider scale, that landlords were facing all sorts of financial issues, largely stemming from poor advice and poor management of tenancies by their agents.

 “While the Housing Act 1988, encouraged landlords to invest in property and people to choose renting as an option, it also encouraged significant numbers of letting agents who could only be described as rogues. How were landlords supposed to tell the good from the bad? “ARLA was founded to improve the professionalism of agents
in the way they looked after their clients and it has positively informed the public perception of the Private Rented Sector, which has grown in size and grown up at the same time.

“We knew that one of the keys to security in letting was to provide sufficient insurance for landlords so that if the tenant failed to pay the rent, or wouldn’t move out at the end of a tenancy, the landlord’s investment would be properly protected.”

Progress slowly made
Specialist insurance policies were written, specialist providers grew in number, but still, not all landlords were persuaded. With the recession of the early 1990s, people were forced into rented accommodation, tenant numbers grew – and so, inevitably, did their level of default and the consequent damage to the landlords.

Housing legislation grew at the same time with an increasing bias towards the rights of the tenant; landlords found it increasingly difficult to get justice. Further legislation brought the payment of Housing Benefit directly to the tenant, who all too frequently found more entertaining ways of using the benefit, than using it to pay his rent.

In recent years, prosperity; or, perhaps more accurately, boom, created a relaxed attitude towards debt and, worse, to bad debt. Tenants are seemingly happy to walk away from a tenancy owing rent, agents, in some cases, seemingly happy to let them. After all, it takes a great deal of time and money to find a missing tenant and persuade them to pay their dues.

“The pressures of running a business, finding absconding tenants, finding new tenants to replace them, keeping the landlord happy, all have led agents into the habit of writing off missing rents,” says Philip. “That is all very well when rents are sufficiently high and business is doing well.”

Now, though, we are in recession once again. Money is tight, profits not so high and tenants are losing overtime or jobs, separating under stressful conditions, struggling with credit card debts... the black hole can get worse each day.
Meanwhile, the landlord juggles with mortgage debt and rents that may not be rising as rapidly as costs. Dropping rent protection insurance seems an economy. That is when the spectre of unpaid rent rises up to compound the situation.

What is the answer?
Philip Cook believes that insurance is still the key, still affordable, still vital to the success of any letting agency.
This explains his link with Let Insurance Services, where he now sits on the board. Launched by Michael Portman and Robert Lumley in January 2008, the company’s aim was to provide tenant referencing and specialist cover for landlords and tenants, supplied through professional agents. While still young, the firm is making good ground, finding a niche for a smaller, personal service-based insurance provider. Philip’s experience is a great asset.

Some landlords still think the regular Rent & Legal Protection Scheme fees are high, that the agent should make sure that the tenant is ‘good for the rent’. Equally, some agents believe that they are collecting money from landlords, for a small commission, passing over considerable sums to the insurer – and only very rarely making a claim, raising issues that do not encourage the purchase of insurance.

The solution lies with Philip Cook’s innovation. At Ashton Wingate, Philip had decided that there was another route to providing cost effective protection for landlords, particularly for the letting agent who is well established with longstanding landlord and tenant clients. “We developed an insurance product under our National Residential brand that enabled the letting agent to insure his landlords’ tenancies. The agent would charge the landlord a fee. This fee would, in most cases, be less than a general market rate and it would protect against loss of rent and provide for legal expenses. The agents would pass over the insurance premium to the insurer but the arrangement between the agents and the insurer would be on a profit-sharing basis.

This has several positive effects on the way the agent runs his business. As each Agent is accountable for the profitability of their own scheme, the Agents’ own tenant selection procedure and successful management of their tenancies is maintained to a high standard so that they make their scheme as profitable as possible.
In the normal run of insurance, where a tenant disappears leaving unpaid rent, the agent finds it too difficult and not cost effective to find the tenant and claim on behalf of the landlord (or the landlord does it himself). The insurer, subject to validity, pays out. The landlord is happy.

The agent may not be so happy as his fee income may be compromised in the event of too many claims. No rental income means no management commission. When the agent is part of Philip’s National Residential scheme however, it is very much in his interest to minimise claims. The agent will pay the landlord then attempt to find the tenant to get the rent repaid. In this way, he and his landlord are happy – and he retains his share of the profits.

This special product is now exclusively available through Let Insurance Services - but it isn’t suitable for every agency; the agent has to be sufficiently well established and fully aware of the greater responsibilities involved. Training is provided and the scheme is branded to each agent, who may set his own premium to suit his market; a typical fee would be around three per cent + VAT – similar to other schemes providing much less cover. This means that for a tenancy where the rent is £500 per month the premium would be £15 + VAT per month. This is a small price to pay for the peace of mind of knowing that the rent will be paid each month and no unforeseen legal costs will be incurred.

Is it popular?
“Yes!” says Philip. “It is very popular where we have offered it; for agents that suit the scheme it is an excellent way of providing a very good service and being rewarded for it, it is a win-win-win plan!” For those yet to meet the specific criteria, Let Insurance Services provides a choice of other insurances for rental guarantee and legal expenses – and they are easy to manage. These products range from comprehensive Rent Protection and Legal Expenses Insurance with cover for up to 12 months unpaid rent (up to £5,000 per month), legal costs to gain vacant possession and for other disputes (up to £50,000) and up to two months’ rent at 75 per cent while a new tenant is found to a standard cover which suits the more cost conscious.

Michael Portman says, “Our letting agent clients are very happy with the choice offered through this LIS range of Rent Protection cover. Coupled with tenant referencing, rent protection should be a key part of any agents’ strategy to manage risk and remove worry from their landlords. We provide training and support on all our products, which are FSA compliant.’

For more information go to www.letinsurance.co.uk
or call Let Insurance Services on 0844 478 0202