Everyone is familiar with the advice that it\u2019s worth paying a little extra for a quality product. We hear it in so many guises \u2013 buy cheap, buy twice; false economy; you get what you pay for. We\u2019re certain you could add other sayings to the list, but we\u2019d like to warn you of another danger. Paying less can lead to you paying more.<\/p>\n
Here\u2019s what can happen in a situation that\u2019s relevant to our industry \u2013 tenant referencing and rent protection insurance.<\/p>\n
Some providers offer very low-priced referencing. They can afford to do that because the checks are limited and less thorough than we would recommend. The landlord is reassured that his interests are protected because the provider offers a low-cost rent protection policy alongside the reference. The landlord believes he\u2019s got a great deal: a cheap reference and insurance back-up should the tenant default.<\/p>\n
Problems arise, however, when there are too many claims on the insurance policies sold. And there are a lot of claims because the referencing is inadequate and hasn\u2019t fully explored the risks. The insurance underwriters immediately increase their premiums to recoup their losses, and that increase is passed back to the landlord in higher renewal costs.<\/p>\n
Inadequate referencing has the potential to lead to spiralling costs of insurance. The more it\u2019s used, the more losses are incurred, the more the premiums rise. We see providers in the market whose references are ridiculously cheap (and some might argue worthless) but whose insurance products are getting more and more expensive.<\/p>\n
We think this approach is wrong. A quality reference used alongside an appropriate policy doesn\u2019t cause premiums to keep increasing because the risks are carefully balanced. We know that it works because that\u2019s how we operate \u2013 delivering quality and ultimately, great value for money.<\/p>\n