This article appeared first in the August 2018 Campus Safety Magazine.
New approaches to renters insurance programs are helping protect students and colleges from common risks, such as fire and theft.
Imagine this campus moment: A student decides to find out how automatic sprinkler systems work and holds match to the fusible link setting off the system. Maintenance and the fire department are slow to respond and considerable damage to the property of students and the university results.
If this scenario hasn’t occurred at your campus yet, then consider that in 2015 Clery Act data indicated that 1,926 fires occurred within on-campus student housing. In addition, FBI crime reports for 2015 reported more than 69,502 property crimes and thefts on campus.
As a result of both the scale and frequency of losses experienced by students, colleges and universities are adopting new approaches to managing this risk through adopting preferred renters insurance programs. Specifically, schools are taking steps to disclose the limits of institutional liability while also providing a convenient way for each resident to enroll in a renters insurance program that names the institution as a beneficiary of the policy.
Timely 2017 Research Confirms Move to Transfer Risk to Renters Insurance Programs.
A 2017 survey by University Risk Management & Insurance Association is a useful benchmark for campus officials. The survey included 132 responses regarding the handling of property damage to student personal property and university property caused by students. The key findings of the survey are:
- Colleges and universities generally do not pay for damage to student property.
- Institutions may hold the student responsible for damage to the property of other students but are much more likely to do so for damage to institutional property.
- Colleges and universities are reluctant to involve their property insurance companies when students and their property are involved.
According to the survey author, Glenn Klinksiek, the retired Assistant Vice President & Risk Manager of the University of Chicago, “to state the obvious, the presence of students on campus create risks for colleges and universities. The risk to institutional and student property is just one. Instances of loss or damage are likely to occur and sometimes the damage is significant. These campus fires damaged student and campus property and though less frequently also involve injuries to dozens of students annually. Water damage is also a common occurrence. One university system identified nearly $6 million of damages in residence halls with only 10 percent of it successfully subrogated against an alternative insurance.”
Housing operators know that student residents are unlikely to be able to afford to pay for the damages they cause. Although homeowners insurance may sometimes pay for damage caused by students who live in on campus housing, students are never covered in off-campus housing. Homeowners insurance coverage is highly variable and often subject to high deductibles and the insurer’s claims adjustment practices. Some campuses have large portions of their residents whose families may not own a home and therefore no insurance. Or some institutions may require insurance of student in the housing system but students who live outside the system escape the requirement.”
Why Now – More On-Campus Student Housing than Ever Before
According to the College Board, more than 1,237 institutions now guarantee student housing for all freshmen and more than two million students now reside in on-campus housing. In addition, new forms of student housing have been developed to serve the unique needs of specific student populations including international students, graduate students and family housing.
In many cases, today campuses are managing large portfolios of apartments and multifamily properties. As a result, it should not be surprising to see the best practices used by off-campus property owners (where according to research by the Multi-Family Housing Association - 84% require residents to maintain personal liability coverage) to transfer the liability & property risk of residents to a HO4 renters insurance policy.
A 2017 survey published by HigherEdStudy.com of 138 student housing leaders, indicated that 80% of these campuses support a similar requirement for student residents. The survey also revealed, that 4 in 5 student housing leaders believe that financial losses to students due to the theft or damage of a backpack, computer or bicycle can become a student financial crisis that and disrupt a students’ education.
Turning a Negative Event into a Positive Opportunity
Providing an opportunity for students to enroll in renters insurance prior to moving on campus may turn a bad event – loss to students that a result of theft or damage – into an opportunity for the school to say: “we anticipated this problem and you were provided an opportunity to protect yourself.
According to Bob Soza, President of College Parents of America, "institutions are smart to require their college student residents to consider renters.” He continued “students cannot often pay for the damages they cause or afford to replace their property that is stolen or damaged. As a result, we recommend that families who can’t afford to replace stolen or damaged property of their student, purchase a low deductible renters insurance policy for about 50. cents a day.
Like many other good ideas that can impact campus safety, getting the attention of students remains a challenge. Just recommending students consider renters insurance or providing a list of alternatives leads to low levels of participation and student protection.
The most successful campus programs take an approach inspired from behavioral economists, that is discussed in the popular book Nudge, written by University of Chicago economist Richard H. Thaler and Harvard Law School Professor Cass R. Sunstein.
The truth is that that passive approaches - links, brochures, and text within a housing contract do not provide any meaningful form of awareness of the limits of institutional liability or protection to residents or institutions. Instead, more schools are implementing an active approach to disclose institutional policies and provide a convenient way to enroll in renters insurance during the leasing process.
In fact, the most common approach by schools today is to implement a "policy acknowledgment and mandatory consideration" program that features a preferred (non-exclusive) insurance provider. This policy acknowledgment occurs within the leasing process of more than 100 colleges and also provides each resident the ability to voluntarily enroll in a renters insurance program. This approach provides direct access for risk managers who want to their institution to be a beneficiary of the policy and maintains access to a list of insureds.
Requiring students to live on campus also creates an unforeseen risk for students and their families. Because many young adults may not have any insurance to replace their property if it is stolen or damaged or to pay for damages for which they are liable, many schools are now making renters insurance available when students sign their lease. For example, according to Steve Fucci, Vice President of GradGuard, “the University of California at Davis which manages more than 6,000 on campus residents began to offer renters insurance within their leasing process and found that more than 60% of their students chose to protect themselves with renters insurance.”
A Useful “Nudge” that Successfully Transfers Risk & Provides Protection
A case study from Georgia College, a 7,000 student part of the University of Georgia system based in Milledgeville, demonstrates how risk transfer works for both institutions and students. In 2017 an international student attending Georgia College caused an automatic fire sprinkler system to engage setting off the system creating $103,000 of damage to the property of students and the university.
Fortunately, the student had completed a policy acknowledgement process and purchased a renters insurance policy that contained $5,000 of personal property coverage, $100,000 of liability coverage with a $100 deductible. As a result, the insurance policy paid the $100,000 of damages caused to the property of the school and other impacted residents. The student was able to focus on classes and a avoid a collections problem for the student and institution.
Like so many well designed student processes, providing an opportunity for students to easily enroll in a renters insurance program during the leasing process is a smart “nudge” that can easily transfer the risk from the institution and student to a renters insurance policy.
The impact to both an institutions reputation and also to a student’s well-being. Student who suffer a loss to laptops, tablets, clothing, phones and other equipment needed for school, can have a negative impact on both student satisfaction and academic performance.
If your institution is not going to replace stolen or damaged student / resident property, then it is smart to have an electronic verification that you have disclosed the limits of institutional liability. In addition, if you seek to collect for damages caused by students it helps greatly to verify that the liability disclosure made by the institution isn’t just in the small print of the lease or housing contract.
Lastly, it is useful to note that a growing number of schools mandate or purchase renters insurance coverage for all their campus residents or specific populations such as short-term residents (visiting faculty / short-term camp programs), graduate housing, family housing or international students.
Next Steps for Campus Officials
Given the growing scope and frequency of losses experienced by students and institutions, it is useful for campus officials and risk managers to ask these questions regarding resident liability and the approach to renters insurance taken by student housing leadership.
- How are campus residents actively notified of their liability and the limits of liability of the college or university for losses they may experience due to theft or damages to their personal property?
- How can schools transfer the risk caused by students to a renters insurance policy? Be sure to note, that legacy student insurance programs often only provided personal property protection.
- If your institution will not replace stolen or damaged property, then it is prudent for schools to identify a convenient and active opportunity to protect students from a financial loss.