Commercial Insurance – Page 15 – Setnor Byer Insurance & Risk

Protecting Valuable Business Papers and Records

Businesses often prepare an inventory of valuable property to simplify the process of filing an insurance claim in the event of a loss. For some reason, papers and records rarely make the list, even though losing these documents could disrupt business operations. Fortunately, insurance is available to cover the unbudgeted and often significant costs of dealing with a loss of business papers and records.

Valuable Papers and Records (VPR) coverage is a type of property insurance that covers the cost to research, replace or restore information that is lost when papers and records are damaged or destroyed. This insurance generally covers papers and records owned by the insured or in the insured’s care, custody and control, and it is often found in property insurance and small business owners’ policies. Large or unique risks may require a separate, stand-alone policy.

Notably, since VPR covers the cost of reproduction, it is not intended to protect items that cannot be replaced or duplicated because they will only be valued at the cost of blank material of substantially identical type. So, if an original Declaration of Independence is lost, the insurer will cover the cost of a blank piece of paper. To ensure maximum protection, irreplaceable items must be listed separately under the policy and possibly appraised so their value can be determined. In some cases, a separate insurance policy may be necessary.

VPR coverage is ideal for most businesses, including:

accountants
law firms
architects and engineers
physicians and medical offices
businesses that regularly produce and rely on important documents, such as files, receipts, invoices, lists, contracts, etc.

When shopping for VPR coverage, it is important to know what the policy does and does not cover. Although definitions may vary, ‘Valuable Papers and Records’ are generally defined to include documents, manuscripts and records that are inscribed, printed or written, including abstracts, books, deeds, drawings, films, maps and mortgages.

VPR policies do not typically cover money or securities. Importantly, once papers and records are reduced to electronic format or saved on some form of electronic media (CDs, hard drives, tapes, disks, etc.), they are generally excluded from coverage under a VPR policy, and need to be insured under an Electronic Data Processing policy.

The cause of the direct physical loss or damage to the papers and records must be a covered loss under the policy. Losses caused by errors in processing or copying, earth movement, war, neglect, nuclear hazard and various events involving water are typically not covered. Since even the broadest policy forms have exclusions, it is important to review them carefully.

Coverage limits should be enough to cover the cost of replacing or reconstructing lost information through research or transcription from other sources. While VPR generally covers items kept at the premises listed on the policy’s declarations, papers and records kept at an unlisted location may be subject to a lower limit (sub-limit) or may be excluded from coverage altogether. Make sure the policy lists all locations where papers and records may be stored.

In addition to VPR insurance, businesses may consider storing papers and records in a facility with the reputation, amenities and expertise needed to offer maximum protection. According to Carlos Diaz of Value Store it, “Not all storage facilities offer a comprehensive approach to this risk. Not all solutions are the same.” Some additional services to look for in a storage facility include:

Professional and responsive staff
Physical features/amenities (fire and security system, climate control, etc.)
Experience in handling and storing similar papers and records
Comprehensive Solutions (digitizing, e-filing, bulk shredding, etc.)
Ability to comply with applicable laws (HIPAA, Gramm-Leach-Bliley, etc.)

Be sure to visit the storage facility and check references, and before moving in, confirm coverage by checking the VPR policy. If it has lower limits for papers and records stored off-premises or excludes coverage altogether, the storage facility may need to be added to the list of covered locations.

Though protecting against the loss of papers and records is rarely high on the list of priorities, it should be. Those who underestimate the importance of papers and records may one day recognize they are not just valuable, they are invaluable.

If you would like to learn more about protecting your valuable papers and records, please contact us.

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Will business owners buy insurance online?

Insurance companies such as Geico and Progressive started selling personal insurance online over a decade ago. So is it safe to assume that business insurance can also be sold online?

We decided to explore this endeavour and we’re not the only ones. Plenty of insurance agencies offer business insurance, but very few can offer clients an online quote.

Just because the tool is out there doesn’t mean business owners will use it. Getting a quote for business insurance is significantly more complicated than obtaining a personal quote. Some of the other agencies that are offering business quotes are approaching it quite differently than we did.

Hiscox is targeting small business with a page on their site dedicated to explaining the various types of insurance coverage small business owners need. Apogee lists the types of insurance they can quote instantly and features a video tutorial of how to use their quoting tool. Our tool lists all the instant quotes we offer including Property and Liability Quotes, Professional Liability Quotes, Business Auto Quotes, and many more.

The introduction of this tool to our website also created the need for a complete redesign. We call ourselves a full-service independent insurance agency and creating this tool made us realize the possibility for an online marketplace. If clients can get quotes online they should be able to service their policies online as well. That’s why we also created a service page which allows clients to manage their policies online

If successful, online quotes for business insurance could be a big game changer. It will be interesting to see how many more agencies begin offering business quotes online. Get a quote and let us know what you think.

At Setnor Byer Insurance & Risk, we are committed to offering you a seamless insurance experience. Check back with us periodically for informational updates about insurance news. If you have specific questions about our instant quoting tool or if you are ready to take action and would like to see how Setnor Byer Insurance & Risk can help, contact us.

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Health Benefits and Value under the Affordable Care Act

The Department of Health and Human Services (HHS) released final rules pursuant to the Affordable Care Act (Act) that are designed to help consumers shop for and compare health insurance options in the individual and small group markets. According to the HHS, these final rules will promote consistency among health plans, protect consumers by ensuring that plans cover a core package of health benefits and limit out of pocket expenses.

To make it easier for consumers to make apples-to-apples comparisons among health insurance plans, the final rules create uniform standards of coverage and value.

Essential Health Benefits

The Act provides that health plans offered in the individual and small group markets, including those available through Health Insurance Marketplaces (Exchange), must offer a core package of items and services known as Essential Health Benefits or EHBs, which must be equal in scope to those benefits offered by a typical employer plan. Under the Act, EHBs must provide:

Ambulatory patient services
Emergency services
Hospitalization
Maternity and newborn care
Mental health and substance use services, including behavioral health treatment
Prescription drugs
Rehabilitative services and devices
Laboratory services
Preventive and wellness services and chronic disease management
Pediatric services, including oral and vision care

To protect consumers against discrimination the final rules also:

Prohibit discriminatory benefit designs
Include special standards and options for coverage not typically covered by individual and small group policies
Include standards for prescription drug coverage

Actuarial Value

The final rules outline actuarial values of individual and small group plans to help consumers distinguish and compare plans offering different levels of coverage. Actuarial Value, or AV, is calculated as the percentage of total average costs covered by a plan. For example, if a plan has an AV of 70%, a consumer could expect to pay an average of 30% of the costs.

Beginning in 2014, non-grandfathered health plans in the individual and small group markets must meet certain AVs, which have been assigned the following “metal levels”:

A platinum health plan has an AV of 90%.
A gold health plan has an AV of 8%.
A silver health plan has an AV of 70%.
A bronze health plan has an AV of 60%.

To give health plans some flexibility, a plan can meet a particular metal level if its AV is within 2% of the standard. For example, a silver plan may have an AV between 68% and 72%. The final rules also provide flexibility, if necessary, for issuers in the small group market regarding annual deductible limits to achieve a particular metal level.

To streamline and standardize the calculation of AV for health insurance issuers, HHS is providing a publicly available AV Calculator. In 2014, this calculator will use a national standard population, but in 2015, HHS will accept state-specific data sets for the standard population if states choose to submit alternate data for the calculator.

According to HHS, these final rules will give consumers a consistent way to compare and enroll in health coverage in the individual and small group markets, while giving states and insurers more flexibility and freedom to implement the Act. Time will tell if these final rules will achieve their desired purpose.

At Setnor Byer Insurance & Risk, we are committed to guiding you through Health Care Reform. Check back with us periodically for informational updates about the Affordable Care Act. If you have specific questions about the Act or if you are ready to take action and would like to see how Setnor Byer Insurance & Risk can help, contact us.

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Department of Health Issues Final HIPAA and HITECH Act Rules

On January 25, 2013, the Department of Health and Human Services (HHS) published its omnibus Final Rule regarding the Health Insurance Portability and Accountability Act (HIPAA), the Health Information Technology for Economic and Clinical Health Act (HITECH) and the Genetic Information Nondiscrimination Act (GINA).

According to HHS, the Final Rule “greatly enhances a patient’s privacy protections, provides individuals new rights to their health information, and strengthens the government’s ability to enforce the law.” Here is a brief summary of some of the Final Rule’s provisions.

Breach Notification Standard

Previously, an incident involving the impermissible use or disclosure of protected health information (PHI) was generally not considered a breach unless an internal risk assessment revealed a significant risk of harm to those whose information was compromised. Under the Final Rule, an impermissible use or disclosure of PHI is presumed to be a breach unless an internal risk assessment demonstrates that there is a low probability that the PHI has been compromised.

Although the Final Rule keeps the risk assessment requirement, it is more structured and objective than before. It requires a covered entity to consider:

The nature and extent of the PHI involved, including the types of identifiers and the likelihood of re-identification;
The unauthorized person who used the PHI or to whom the disclosure was made;
Whether the PHI was actually acquired or viewed; and
The extent to which the risk to the PHI has been mitigated.

Modifications to HIPAA Required by the HITECH Act

The Final Rule implements previous proposed and interim rules regarding HIPAA modifications required by the HITECH Act. These modifications:

Make business associates of covered entities directly liable for compliance with various requirements of HIPAA’s Privacy and Security Rules.
Strengthen the limitations on the use and disclosure of PHI for marketing and fundraising purposes, and prohibit the sale of PHI without individual authorization.
Expand individuals’ rights to receive electronic copies of their health information and to restrict disclosures to a health plan concerning treatment for which the individual has paid out of pocket in full.
Require modifications to, and redistribution of, a covered entity’s notice of privacy practices.
Modify the individual authorization and other requirements to facilitate research and disclosure of child immunization proof to schools, and to enable access to decedent information by family members or others.
Adopt additional HITECH Act enhancements to HIPAA’s Enforcement Rule that were not previously implemented, such as the provisions addressing enforcement of noncompliance with HIPAA due to willful neglect.

Genetic Information

The Final Rule modifies the HIPAA Privacy Rule as required by GINA to prohibit health plans, but not long-term care policies, from using or disclosing genetic information for underwriting purposes. It also clarifies that “health information” includes genetic information.

The effective date of the Final Rule is March 26, 2013, and the compliance date for covered entities and business associates is September 23, 2013. Since much of the Final Rule merely implements previously issued non-final rules, many covered entities and business associates should find that they are already in compliance.

Covered entities and business associates should consider insuring against the substantial costs associated with a security breach. Various insurance products protect against privacy injuries resulting from security breaches, such as identity theft. Insurance may also help cover the significant cost of complying with applicable breach notification laws like those discussed above. Given the variety and complexity of these products, an experienced insurance agent should be consulted to ensure that proper coverage is obtained and that no gaps remain.

If you would like to learn more about insuring against data security breaches, contact us.

Additionally, clients of Setnor Byer Insurance & Risk enjoy access to various risk management services such as our affiliate’s HIPAA Standards Training which has been approved by the HR Certification Institute as well as the Florida Bar.

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Affordable Care Act Notice Requirement Delayed

To help individuals understand their health insurance options under the Affordable Care Act (Act), employers are required to give employees written notice about Affordable Insurance Exchanges. The Act’s March 1, 2013 deadline for employers to start giving this notice to all employees was recently pushed back by the Department of Labor (DOL).

Under the Act, the DOL is required to define the scope of the notice requirement and provide guidance on how the requirement can be satisfied by issuing regulations. Unfortunately, these regulations aren’t finished yet, and the DOL has taken the position that employers should not be required to comply with the Act’ notice requirement until the regulations are done.

According to the DOL, “the timing for distribution of notices will be the late summer or fall of 2013, which will coordinate with the open enrollment period for Exchanges.”

So what is the reason for the delay? According to the DOL, efforts need to be coordinated with the Department of Health and Human Services and the Internal Revenue Service. The DOL is considering the possibility of including model, generic language in the regulations that could be used to satisfy the notice requirement and also allowing employers to satisfy the notice requirement by providing employees with an employer coverage template. Regardless of their final form, the DOL expects the regulations to provide employers with flexibility and adequate time to comply.

Until the Act’s notice requirement becomes effective, Setnor Byer Insurance & Risk can be your source of information about health insurance. Be sure to check back with us periodically for future updates. In the meantime, if you have specific questions about your health insurance or if you are ready to take action and would like to see how Setnor Byer Insurance & Risk can help, please contact us.

Protecting Your Business from Cyber Liability Risks

Almost every business relies on computers, networks and electronic data to support their business operations and serve their customers. What most business owners don’t realize is the substantial exposure associated with their use of electronic platforms and the data those platforms host. Today, Cyber Liability insurance is available to business owners for the exposures associated with their use of electronic platforms.

Most businesses are not aware that standard Commercial General Liability policies do not contemplate these types of claims, leaving companies with significant gaps in coverage for cyber-related perils. Any business that collects or handles confidential information, stores client data, uses email, generates revenue online, relies on the internet for transactions or uses a network to conduct its business is in need of this important coverage.

Cyber Liability insurance is designed to protect the insured against direct and indirect loss to the Company’s assets as well as third party claims of negligence. Losses can be caused by hazards such as the transmission of virus/malicious code, denial of service attacks, physical theft of a computer/device, accidental release of an insured’s confidential data and attacks by hackers. First party coverage under the Cyber Perils policy includes:

Loss of data
Loss of business income
Electronic theft
Cyber extortion
Security event costs

Third party claims of negligence can include allegations that an insured:

Permitted the unauthorized disclosure of confidential information
Failed to secure a Network against attack
Committed an act of defamation

Of particular interest to many businesses are data breach security concerns. Recent studies have shown that over 70 percent of all data security breaches are experienced by small to medium sized businesses and the cost of a breach can be staggering. The average cost for a data breach claim is over two million dollars. These damages include the cost of data reconstruction, customer/client notification and credit monitoring. This leaves small businesses most at risk because they are unlikely to have the time and resources necessary to handle a data breach security event.

Given the variety and complexity of these occurrences, an experienced insurance agent should be consulted to ensure that proper coverage is obtained and that no gaps remain. If you would like to learn more about insuring against data security breaches, contact us.

New Health Insurance Notice Requirements for Employers

Thanks to the Affordable Care Act, the Fair Labor Standards Act (FLSA) is moving beyond its traditional role as the nation’s principal wage and hour law. In addition to establishing minimum wage, overtime pay, recordkeeping and youth employment standards, the FLSA now deals with health insurance.

Under the amended FLSA, employers must notify employees that:

Affordable Insurance Exchanges exist, along with a description of the services provided by Exchanges and how to request assistance from an Exchange
If their employer’s health plan pays less than 60% of allowed costs the employee may be eligible for a premium tax credit and a cost sharing reduction if the employee purchases a qualified health plan through an Exchange
If the employee purchases a qualified health plan through the Exchange, the employee may lose the employer contribution (if any) to any health benefits plan offered by the employer

Employers must distribute this notice to every current employee by March 1, 2013. Employees hired after this date must receive their notice upon being hired.

The precise form and content of the notice, as well as acceptable means for providing the notice, are not yet certain. The law states that employers must provide notice “in accordance with regulations promulgated by the Secretary.” Presumably, these regulations will clarify what should be included in the notice and how it can be provided to employees.

Despite the current lack of regulations, it is reasonable to assume that the FLSA’s broad definition of “employer” means that most employers will need to comply with the new notice requirement. Similarly, the FLSA’s broad definition of “employee” means that every employee, regardless of status, will likely be entitled to receive this notice.

Consequently, employers need to be ready to comply with the notice requirement by March 1, 2013, especially since the penalty for violating this requirement is unknown.

At Setnor Byer Insurance & Risk, we are committed to guiding you through what is sure to be a bumpy ride. Check back with us periodically for future informational updates about health care reform. If you have specific questions about the Act or if you are ready to take action and would like to see how Setnor Byer Insurance & Risk can help, contact us.

The Aftermath of a Data Security Breach

Data security breaches clearly pose a significant risk to organizations that collect or maintain customers’ personally identifying information in electronic format. Unfortunately, too many organizations do not fully understand the risk.

Here is confirmation that a data security breach can be a huge problem.

700 Approximate number of Barnes & Noble locations nationwide

63 Number of locations with tampered credit and debit card PIN pad devices

3 Number of days before a federal class-action lawsuit was filed

THREE whole days before any action was taken!!!

Although federal or state law may require a business to notify those affected by a data security breach, can that business also be held liable to individuals who had their identities stolen because of the breach? The Eleventh Circuit Court recently joined other courts in holding that a business may be liable to an individual if there is a sufficient link between the data security breach and the identity theft.

Though bare allegations of time and sequence are usually insufficient, the Court held that a link between a breach and identity theft can be established by showing that:

The individual gave the business his personal information.
The personal information used to steal the individual’s identity was the same information lost in the breach.
The identity fraud incidents began within a reasonable period of time after the breach.
The individual had not previously suffered any such incidents of identity theft.

Under these facts, the Court held that the individuals have sufficiently stated a claim for damages and that their lawsuit could proceed. This means that the business is likely in for a long and expensive legal battle.

Since it is impossible to eliminate the risk of a data security breach, insurance should be used to limit it.

Various insurance products protect against privacy injuries resulting from security breaches, such as identity theft. Insurance may also help cover the often substantial cost of complying with security breach notice laws. Given the variety and complexity of these products, an experienced insurance agent should be consulted to ensure that proper coverage is obtained and that no gaps remain.

If you would like to learn more about insuring against data security breaches, contact us .

Contract Litigation Insurance: Focus on the Principle Rather than the Principal

Unfortunately, the concepts of right and wrong often may not influence the decision to breach a contract. This is particularly true during difficult economic times when parties to a contract often use the threat of litigation to forcibly renegotiate the terms of their agreements. Needles to say, when asking a party to honor their contract, it is unsettling to hear someone respond with “sue me.”

Though litigation may be a necessary evil in today’s business environment, it is disruptive to business itself. Lawsuits often bring about harmful and potentially devastating side effects, such as damage to reputation, increased costs of production, decreased ability to obtain credit, disruption of growth opportunities, and overall uncertainty.

Typically, the greatest burden of litigation involves attorney’s fees. Many contracts contain a provision stating that the prevailing party in a contract dispute is entitled to have its attorney’s fees paid by the losing party. Similar “fee shifting” or “loser pays” provisions are also found in many state and federal statutes.

Though confident litigants often rely on such provisions to justify their decision to litigate, attorney’s fees are only awarded after victory has been declared by judge or jury. Thus, there remains a significant risk of having to pay an opponent’s attorney’s fees.

However, for those seeking some certainty surrounding legal fees associated with engaging in contract litigation, an insurance product offered by Zurich may be the answer.

Zurich’s Contract Litigation Insurance is designed to insure a plaintiff or defendant in a contract-based lawsuit against the risk of paying their adversary’s attorney’s fees if unsuccessful in prosecuting or defending their contract claim.

Zurich’s Plaintiff Contract Litigation Insurance and Defendant Contract Litigation Insurance can offer various benefits to individuals and businesses, such as:

Reducing the financial exposure of litigation;
Increasing settlement negotiation power;
Providing greater budget certainty;
Supporting attorney best practices in litigation;
Tiered pricing that is tied directly to the increased level of risk of a lawsuit; and
Claims handled by former practicing attorneys who understand an insured’s needs and litigation best practices.

As with any insurance policy, it is important to understand the extent and nature of the coverage, as well as any limitations or exclusions from coverage. Consider the following highlights of Zurich’s Contract Litigation Insurance:

For Plaintiff Contract Litigation Insurance, policies must be purchased within 60 days of filing of a contract-based complaint; for Defendant Contract Litigation Insurance, policies must be purchased within 60 days of service of the lawsuit.
Upon being deemed the prevailing party in a contract lawsuit, policies will pay reasonable attorney’s fees, as determined by the court. This may also occur in tort or statutory claims provided the court finds they were intertwined with the contract claims for purposes of any award of attorney’s fees.
Policies are subject to exclusions and non-coverage caveats, including: (1) “bad boy” fraud; (2) no fees awarded if there is a resolution other than a merits-based prevailing party determination; (3) no fees awarded for post-rejection fees incurred after rejection of an offer of judgment (or similar device) under applicable rules of procedure (although pre-offer fees may be covered); and (4) no fees awarded if they are based on discovery sanctions or bad faith conduct sanctions.
The insurance company reserves the right to appoint, at its own expense, counsel to oppose a fee petition or represent the client in an appeal of a fees award.
The insurance will follow if the plaintiff is compelled to arbitration by defendant; however, the insurance coverage will not remain if plaintiff compels arbitration or if the defendant under a Defendant Contract Litigation Insurance policy compels arbitration.

The cost of engaging in litigation is oftentimes the determinative factor in deciding whether to enforce or defend one’s contract rights in court. As a result, a party to a contract may elect not to file a breach of contract lawsuit for purely financial reasons despite having a winning case. Moreover, if the loss resulting from a breach of contract is small compared to the costs of filing suit, a party is vulnerable to abuse simply because the other party to the contract knows it is not worth pursuing in court.

When applicable, Contract Litigation Insurance allows a party to a contract dispute to focus on the merits of the case, rather than the attorney’s fees associated with pursuing the case.

If you would like to learn more about Contract Litigation Insurance, or if you would like to discuss how we can help you in identifying and controlling your business risks, please contact us.

Moving Up: Raising Self-Storage Rents

By Elizabeth Ferrin

Some self-storage managers have adopted a strategy of using sophisticated algorithms and demand analyses designed to maximize revenue when calculating their rents. This means that customers will receive a different rate for storing at the same facility. A customer who calls twice in a single day may receive two different quotes.

Though still limited in use, an increasing number of stores are reviewing and updating their approach to rental rates to maximize the bottom line. “Managers need to provide input,” says Brad North, president of Advantage Consulting & Management. “They need to give their opinion on what sizes should be raised and they need to shop around.

Shopping The Competition

Keeping tabs on the street rates and pricing policies of neighboring facilities is crucial to understanding where your rates fall in the marketplace. “You’ve got to look at the three-mile market surrounding your self-storage facility,” explains Ken Nitzberg, chairman and CEO of Devon Self-Storage.

He adds that in addition to rental rates, it is important to have some idea of the giveaways and move-in incentives being offered at all of the self-storage stores in the area. “Promotions have become almost a requirement to rent space in most markets,” says Nitzberg. “That’s been the most competitive piece in many markets across the country.”

It is also important for self-storage managers to have a good handle on the type of market they serve. “If your site is in a retirement area in Florida, your customers might call 20 different sites looking for the lowest price,” says Nitzberg.

Rental Rate Philosophies

When it comes to raising prices, there are a variety of philosophies that drive rental rates. Some storage businesses roll out an annual rate increase for every customer; while others look at each unit size individually to determine when and where to adjust pricing. Other facilities may reevaluate pricing only sporadically.

Since there is a level of apprehension that often accompanies a rate increase, North explains that he advocates managing rents selectively and adjusting rates only on a size-by-size basis. He uses a unit’s economic occupancy, which takes into account any discounts renters are receiving, as a guide. He uses an economic occupancy rate of 85 percent as a benchmark number to signal the need for a higher rental rate for that specific size. “Don’t think that because the competition increases rates on 10-by-10s that you need to do it as well,” says North. “It all depends on your occupancy.”

Annual Increases

Another strategy involves annually increasing rates across the board. “We raise rents on every unit each year,” says Brenda Scarborough, CEO of Accountable Management. “No one jumps up and down with excitement about it, but we’ve found that if we keep it small enough, everyone expects an increase.” She found that large, irregular increases are less accepted by customers and says she is now committed to yearly increases for all tenants.

On each tenant’s anniversary date, the computer generates a reminder about the new, higher rate that will be assessed going forward. “Unfortunately, many stores have reduced their rates in the economy,” says Scarborough. “However, we still have a small increase every year.”

Adjusting Street Rates

Many operators draw a distinction between street rates and existing customers, preferring to adjust rents only for new customers to keep current tenants from revisiting the necessity of maintaining a storage unit. “You won’t lose many tenants over a $5 to $10 increase,” says Nitzberg. “But, an increase makes customers think, ‘Do I really need this?'” He recalls a Self-Storage Association study which found that the sector’s single biggest competition was the dumpster.

Nitzberg warns against going toe to toe with the dumpster in the name of a small rent increase. “You don’t want to force tenants to make this type of decision based on $5. That’s why we tend to be more aggressive with new customers than existing tenants–new customers don’t know what the old rate was.”

Communicating Rate Changes

The most common way to communicate the increase is with a well written form letter on company letterhead. This keeps correspondence consistent and takes responsibility out of the hands of the manager, who can simply say, “This was a corporate decision. It’s out of my hands.”

It is also important to include a phone number or email address on the letter and invite tenants who are concerned about the new rate to get in touch with the facility. If and when a customer calls, the manager can then go over the new pricing, explaining that the store’s costs are also on the rise and that the higher rates are necessary for the storage business to cover its expenses.

Fearing Negative Feedback

Some managers also worry about potential backlash from customers who will be angry about the new rates. However, it is important to remember that those few angry customers were in the minority as the majority of tenants likely willingly paid the higher rate with no questions asked.

Some managers also worry that a drop in occupancy will accompany a scheduled rent increase, but managers need to remember that keeping a store as full as possible is less crucial than maximizing profits. “Occupancy is important, but revenue and net operating income are very, very important,” says Nitzberg. “I would rather be 85 percent full and have $1 million in gross revenue than 100 percent full and have $750,000 in annual gross revenue.”

Timing Rate Increases

Proper timing of rental rate increases can also make them more palatable for customers. Many suggest implementing higher rates when demand for self-storage tends to be highest. It can also be a good idea to roll out a new rate after the fifteenth of the month rather than the first so the facility is not competing with other monthly bills.

According to North, good communication and understanding is the key to a successful rate increase. When everything is done in order–meaning tenants are sent letters 30 days or more ahead of the rent adjustment explaining the increase–most rate changes are met with very few questions and very little resistance.

It is also important for the manager to understand and concur with the higher rental rates. “It’s the manager’s job to eagerly sell the rates and the manager is the single most important factor in the equation,” says Nitzberg, adding that a successful increase is the result of the combination of the right rental rate and an excellent facility manager leading the way.

From “Moving Up: Raising Self-Storage Rents” by Elizabeth Ferrin, a freelance writer based in Maple Grove, Minnesota, who is a contributing writer for the annual Self-Storage Almanac and other self-storage publications. This article is provided courtesy of Setnor Byer Insurance & Risk with the permission of Mini-Storage Messenger Magazine.© MiniCo, Inc. All Rights Reserved. It is not intended for further reproduction/distribution without the exclusive permission of MiniCo, Inc. http://www.ministoragemessenger.com