Changes For Self Storage Operators Selling Insurance

Admittedly this article won't win any awards for entertainment value; it will however give you a fundamental understanding of the recent industry changes affecting the way self storage operators offer or sell insurance to their customers. 

If you operate a self storage facility or are thinking about building a new self storage business, and are not aware of the changes which have been implemented, grab a strong coffee, make yourself comfortable and read on to get up to speed on something which could save you time, money and potentially even legal headache. 

As part of our research we spoke to Chartered Insurance Broker, Adam Kellaway, who is the Technical Director at self storage insurance specialists Basil Fry & Company. For the last three years Adam and his team have been working to understand the implications of the changes and how they can evolve their offering to continue to support the self storage industry. You can watch the full interview between myself and Adam here.

Table of contents:

• What is the background to the changes ?
• How are self storage insurance brokers addressing the issue?
• What is insurance brokers Basil Fry's alternative solution?
• What does StoreProtect mean for storage businesses in operational terms?
• What happens if a customer needs to make a claim?
• Conclusion

What is the background to the changes in insurance in the self storage industry?

In 2005 the selling of insurance became regulated by the UK government, but in 2009 the treasury kindly issued an exemption order which allowed self storage operators, movers and freight forwarding companies to sell insurance to their customers. The industry subsequently benefited from around 10 years of relative simplicity, being able to sell self storage insurance to customers at the point of booking - some might say an 'upsell' - and that the customer would pay for each month in addition to their rent. 

However over the last 2-3 years there has been a change in how the regulator, the Financial Conduct Authority (FCA), approaches an unregulated sale. There has been no change in the actual law preventing storage operators from selling insurance, but the regulators have decided that unregulated parties, such as self storage operators, need to be controlled by the insurance industry more. What does 'more' mean? I hear you cry. Well Adam acknowledges the changes are quite vague, and the repercussions affect a range of industries not just self storage. 

Needless to say the insurance industry and all involved have been rather busy in recent years getting to grips with what the implications of the changes, Adam said 'Insurance companies themselves have focussed on every transaction they are involved with, including self storage...but effectively a lot of big name insurers who previously offered self storage insurance have now withdrawn, on the basis that it's too complicated and they don't fully understand what the regulator is expecting them to do; self storage is a big sector, but it's small to the big insurance companies and is easier to sever in order to make their business easier to manage in light of the changes.'

How are self storage insurance brokers addressing the issue?

Adam highlights that as a broker, after numerous prolonged discussions with insurance companies who were pulling out of the self storage industry, they took it upon themselves to try and get ahead of the changes, 'as everyone has...we have been looking at the details of what the regulations mean, negotiating with insurers and trying to come up with a workable solution for selling insurance', but Adam continued 'in case that didn't work out, Basil Fry have been developing an alternative solution called 'StoreProtect' that is similar but not insurance' so that self storage operators can continue to sell something to customers. Intrigued? I was..

What is insurance brokers Basil Fry & Company's alternative solution?

'StoreProtect is the name we have given to a new enhanced '8contractual liability' product that we have developed and is unique to Basil Fry' Adam explained. Other insurance brokers are approaching the changes in other ways and for those of you interested the team at Explorage.com will try and share with you the low down on them too in follow up articles. 

What does StoreProtect mean for storage businesses in operational terms?

Adam notes that once StoreProtect is up and running in all practical senses it works in the same way as previous insurance solutions.

• A customer can still buy protection from a storage operator at the point of sale. 
• The storage operator can still benefit from the additional revenue stream generated by the protection.
• The protection will continue for the duration of the customer's contract and they will pay for it each month in addition to their rent. 

Storage operators offering StoreProtect do need to amend their Terms and Conditions to be appropriate to the use of it, but as a broker, Adam's team provide Template Contracts, wording and the guidance to help implement this, based on documentation produced by their lawyers. They also offer wording and guidance for storage businesses FAQs, website, staff training etc. 

What happens if a customer needs to make a claim against StoreProtect?

Legally the claim is different, but again in terms of the practicalities, the end user experience is much the same. 

The contract is laid out in a similar way, in that the protection purchased by customers is laid out as an addendum alongside the contract and includes guidance on what to do if they need to make a claim. 

Adam explains that the guidance is somewhat more comprehensive than previously, but this is because they have effectively taken the opportunity to spell things out for the customer in more detail, for example what they need to do and when, and the consequences of what happens if they don't. 

There are details for the customer of who to notify in the event of a claim, including Basil Fry's claims department directly. 

Conclusion

It would seem that the insurance industry is continuing to get to grips with the changes brought about since 2019 by the FCA and now widely implemented. For insurance brokers serving the self storage sector, they each have their own approach as to how they are addressing it. 

In the case of Basil Fry & Company, StoreProtect is a product which aims to minimise the operational impact of the FCA changes by retaining many of the key features of previous insurance products storage operators will already be familiar with. The term used to describe it is different i.e. enhanced contractual protection, instead of the familiar 'insurance', and of course the wording of the fine print would illustrate further legal variants, but the team there are available to help business navigate and communicate them to customers. 

Given that this is one of the most impactful changes to have affected insurance in the self storage sector, Adam predicts that the effect of the changes will continue to be felt for another 12-24 months. He shares, 'we are only at the beginning of this transitional phase, and it will continue to be affecting storage operators when they get to renewal. The insurance regulator is having an increasingly wider reach into consumer insurances, but given that this is one of the biggest changes they could make I don't see further major changes on the horizon....and as the financial fluctuations that occurred post covid seem to stabilise, hopefully we'll see this new phase become the new business as usual.'

If you're watching the video interview it is well worth checking out the discussion from 14mins,30secs where we briefly delve into the notorious issue of under-declaring the value of goods in self storage, and in particular the implications of partial valuations which often customers and even sales staff don't appreciate. I never thought I would find myself compelled to delve further into the world of insurance, but it has prompted me to do a follow up article dedicated just to this topic....I know you're secretly counting down the days until it's released - we'll keep you posted. 

If you have questions, comments or suggestions about this or any other article in the Storage Insider series - or if you would like to talk to us and share your insight. Get in touch with our Network Manager, Jaqui Jeffries at jaquijeffries@explorage.com.