The real estate industry is never stagnant.
It is impacted by regulation changes, the rise and fall of the economy, buying motivations and the generosity of banks.
Heck! Mother Nature can even wreak havoc and play a part in the way we buy, rent and manage property.
This year has been no different.
There have been ups and downs, and everything in between.
From major natural disasters to changes in legislation, the property industry has been turned on its head.
And, as the property industry evolves and changes, so too does the insurance that protects it.
Did you blink and miss most of 2019?
This is what went down.
DOMESTIC VIOLENCE LAWS
Earlier this year, we saw a legal shift that allows greater options and support for those suffering at the hands of abuse.
Amendments to family and domestic violence laws were a welcomed change for all Australians who advocate for a fair and robust justice system.
While the amendments were originally designed to better respond to those suffering abuse, they also impact landlords and property professionals who own and manage rental properties.
Under the rental reforms, survivors of domestic violence have added protections.
Immediately breaking the lease is now permitted in some states without incurring any penalty and, in some jurisdictions, the tenant cannot be held responsible for damage to the property caused by a violent partner.
In these situations, landlords will look to their insurance to cover the loss (rental losses and potentially malicious damage repairs).
This means agents and property managers need to make sure there is adequate protection in place so they can make a successful claim.
Images of frustrated and confused homeowners were splashed across the front page of newspapers this year.
We saw residents being evacuated from their homes at Opal Tower in Sydney and more recently, the same occurred at the crumbling Mascot Tower.
Some of these people had invested hundreds of thousands of dollars buying their first apartment or dream home.
However this year they steered down a path of financial uncertainty as the value of their property nose-dived and they were faced with the prospect of forking out for expensive repairs.
While the root of the issue is still unclear, it is clear that the defects were not maintenance or repair issues.
They were problems likely to have arisen on the back of construction, design or supplies.
Unfortunately, many landlord insurance policies do not cover the cost of damage which is a result of defective construction.
This means there is virtually no safety net for the owner-investors with properties in such buildings as Opal and Mascot towers, who ultimately lost a tenant and income.
This is only a recent development for this type of damage as more and more buildings fail to meet safety standards.
As a result, insurers are no longer willing to take the risk and are stepping out of the market, as is their right.
AFFORDABILITY IS AN ISSUE
What was once the great Australian dream is now looking more like a nightmare for millennials who want to own their own home.
CoreLogic’s Perceptions of Housing Affordability Report 2019 showed 83 per cent of non-property owners are worried about being able to afford their first home.
Securing a deposit (47 per cent) was the greatest obstacle to homeownership, which shouldn’t come as a surprise with the median house price in Australia sitting at about $533,000, according to CoreLogic’s most recent figures.
And, of course, it will take much longer if the budding home owner wants to buy in the most expensive markets of Sydney and Melbourne, where median prices are $877,000 and $716,000 respectively.
Other obstacles to homeownership include getting approval for a home loan (45 per cent) and stamp duty costs (44 per cent).
Torrential rainfall across Far North Queensland in late January and early February led to widespread flooding.
The Insurance Council of Australia declared the event a disaster on February 2 and since then, about 30,000 claims have been lodged with insurers and $1.24 billion paid out.
Of course, those figures only represent claims made by property owners who have flood cover in their policies – not all insurers offer this cover, and many owners in floodprone areas find cover is so expensive they choose not to take it up.
This is not a dilemma EBM RentCover policyholders face – all of our policies automatically include flood cover.
The peace-of-mind in knowing their investment is protected has been realised by close to 100 EBM RentCover policyholders who lodged claims with us following the monsoon event.
And, to date, we have paid out more than $2 million.
The Royal Commission report into Australia’s financial services sector was released this year and while it delved deep into the banking world – it also had huge implications for insurance providers.
A couple of the big suggested changes:
- Add-on insurance (such as travel insurance sold by travel agencies and vehicle insurance sold by car dealers) is proposed to be sold on a deferred basis.
This means if the legislation is passed, many suppliers will need to wait a certain number of days before referring a policy to a client who has just booked a holiday or purchased a vehicle.
The ramifications on landlord insurance are yet to be determined, but watch this space as we learn more about the impact on those who manage and own investment properties.
- Claims handling may soon be seen as a financial service and will be regulated within the Corporations Act, meaning ASIC may have more power in intervening during this offering.
This is to ensure those involved in the claims process are being fair, and expands on current protections offered under the General Insurance Code of Practice.
The Royal Commission was ultimately established on the back of poor and unjust consumer experience – the findings and proposed changes are a welcomed move to win back public trust and for insurers to ‘do the right thing’.
Funnily enough, ‘do the right thing’ is one of EBM RentCover’s values and while the changes may have great implications on some insurance providers, EBM RentCover has always worked under the proviso of utmost good faith, and not a lot will change to our service offering once the new reforms are enforced (proposed for June 2020).
EBM RentCover will continue to work with property professionals to ensure they are informed of the legal requirements that come with dealing in the financial services industry on the back of the Royal Commission.
Our advice about insurance is provided for your general information and does not take into account your individual needs. You should read the Product Disclosure Statement and Policy Wording prior to making a decision; these can be obtained from EBM. Article supplied by EBM. For more information visit rentcover.com.au.