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How insurance companies use criminal cases to assess risks in the affordable housing industry



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Many insurance companies use third-party offenses to evaluate their exposure to criminal risk when taking out general liability insurance. In the worst case, a high crime score can prevent the owner of an apartment building from receiving insurance coverage, and in the best case, a high crime score can result in higher premium costs. These insurance methods are particularly influential for the affordable housing area, as affordable housing can be in areas with higher crime rates compared with traditional multi-family houses. Thus, it is very likely that suppliers of affordable housing will experience a loss of coverage or relatively high insurance premiums.

Scott Insurance funded research on this pressing issue of affordable housing, with funding support from the Stewards of Affordable Housing for the Future, a nonprofit collaboration between affordable housing providers and Virginia Community Capital, a nonprofit social development financial institution and a for-profit investment capital bank. . This research addresses a key question: Does crime accurately predict property-specific crime risk?

10 reasons why criminal results may not show the exact risk of criminal activity for a specific property:

  1. 1. Crime results at the property level are estimates from larger geographical census blocks.
  2. 2. The FBI database, which serves as the main database for crime results, may have data entry, coding technology, or crime shortcomings.
  3. 3. Crime results can distort crime risk near census blocking group boundaries.
  4. 4. Crime points treat all crimes as equal, and therefore do not take into account increased general liability risk associated with certain types of crime.
  5. 5. Affordable housing providers are subject to more rules than owners of traditional multi-family houses and these rules can reduce property-specific crime rates.
  6. 6. Affordable housing complexes often have on-site programming that reduces the risk of on-site crime.
  7. 7. Affordable housing improves neighborhoods and helps reduce local crime.
  8. 8. A crime score can capture a concentration of crime in the block group and incorrectly attribute the concentration to nearby properties.
  9. 9. Crime results do not take into account geographical characteristics associated with surveillance and crime prevention.
  10. 10. Crime results do not take into account property-specific characteristics such as architectural patterns or management methods.

The exercise of using crime results to assess property-specific risk can have a negative impact on affordable housing actors. In order to better serve all parties, we recommend that you use the ten points highlighted in this report to initiate a conversation between insurance companies and affordable housing operators.

Read the full report here.


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