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The Storage Investor Show
Solving Insurance Issues for Storage Investors with Brian Bogdanoff
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DESCRIPTION
Insurance can turn a killer deal into a deal killer. In this episode, I talk with Brian Bogdanoff, the Director of Property and Casualty Insurance at Storable. Brian brings clarity to the complex world of insurance premiums, especially in high-risk states like Florida, Texas, Louisiana, and California, where hurricanes and wildfires have become game-changers.
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Hey everybody, Welcome to the Storage Investor Show. My guest today is Brian Bogdanoff. He is the Director of Property and Casualty Insurance at Storable. He was a former VP and partner with Insurance Office of America. He knows a ton about self-storage insurance. He's going to help us underwrite all of our deals so that it successfully close and do well into the future. Brian, thank you so much for being on the show.
Speaker 2:Yeah thanks, chris. Thanks for having me. Yeah, man.
Speaker 1:I think it's awesome, man, what you do over at Storable and your background and insurance is kind of a big topic. Insurance and taxes always come up, of course, and recently, with like as of the time of this recording in 2024, we had two big storms come through, one in Florida and one here in North Carolina, where I'm based. They're devastated. You know stuff up in the mountains, properties et cetera, like. With that in mind, let's just jump right into the questions. How has some of these recent natural disasters kind of affected, in your view, you know, insurance premiums and coverage options for self-storage owners?
Speaker 2:Sure, yeah.
Speaker 2:Now look, it's been a very hot topic.
Speaker 2:I mean, it's been over the past several years where we've seen a shift in a lot of the markets and you know the way insurance companies look at it is they're taking in a premium and they're in business mitigated.
Speaker 2:They offer, you know, certain risk management solutions to help prevent and mitigate risk and they just want to make sure that they're getting the appropriate premiums so they can pay claims. Very simple, obviously, their goal is to take in more premiums than to pay out and at the end of the whole day, operators it being their largest expense item, are focused on how to drive that expense lower. You know and unfortunately we've just seen a lot of insurance carriers which become more limited whether they're willing to take on the risk in certain areas, whether it be areas of high wind, hail exposure, thefts, crime, you know, wildfires, stuff like that. So it's, it's been definitely a change. I think a lot of operators are grasping, but it's never exciting. You know, when you're paying your largest expense item, everyone wants to understand why and if you haven't had the claims, it can be extremely frustrating to see the market change and you pay higher premiums over several years.
Speaker 1:Yeah. So I mean, if I put myself in the shoes of a beginner storage investor, really anybody this can affect multifamily, whatever you know. So how have premiums changed or increased over the last? Just give us a big snapshot here over the last maybe one, two, three years or so. And then are those premiums affected by location of the property, whether it's maybe, let's just say, on the coast versus somewhere inland. How have they changed over the last couple of years? And then does location matter?
Speaker 2:So, yes, short answer. Yes, location does matter. Type of facility matters. There's a lot of characteristics the facility could have, such as you know, appropriate fencing gates, you know signage. Is it well lit? Is there an outside manager? There's a lot of characteristics that go into the underwriting process. That does affect the overall premium.
Speaker 2:We do see higher rates, obviously in some of the areas where you're prone to higher catastrophes, such as hurricanes, wildfires, windstorm, hail type of risk specifically Florida, texas, louisiana, california. They've been affected tremendously because of those exposures. And the way the companies look at it is they have to apply certain deductible structures that make sense for them because they're taking on the risk. So you know, like just to give you an idea of what we're seeing, easily, the last several years we've seen an uptick in deframiums rates, those policy changes. So it hasn't been the most exciting thing as a operator when you get your insurance, because you never know how volatile the market's been. As I mentioned previously, some insurance carriers are either pulling out or adjusting their policy form. So when you don't have tons of carriers, tons of competition out there, they're the ones taking the risk. They're doing what they feel is appropriate to be successful and profitable in this industry and the rates. Just you know they just haven't been as competitive as we'd like them to be.
Speaker 2:You know what happens in the future that depends on the data that comes in from all these events that have taken place, how the insurance carriers profited up to, you know, a certain point where they feel like they can reduce their overall rates and take on more risk and exposure in certain areas. There's no, you know, only time will tell, and reinsurance contracts typically get negotiated during Q1. And so you know, we don't really know what's going to happen. You know, obviously we're in the middle of hurricane season right now. We've had a couple of storms in the past several weeks and months. Hurricane season right now. We've had a couple of storms in the past several weeks and months. So as our data trends and comes in and we see what was paid out over time, it'll tell us what that future holds.
Speaker 1:So has rates or premiums increased a certain percentage over the last couple of years in general, I'd say overall yes, there's no straight answer.
Speaker 2:We've been very successful placing coverage where premiums have come down in some spots, Some carriers just jumping in more competitively, but on average I'd say we've seen a 10, 15% uptick in premium rates across the board and in some areas it's been a lot worse. It just depends where it's located.
Speaker 1:Okay, got it. So you'd mentioned a minute ago that, depending on the characteristics of the facility uh, with this you know, fenced, gated, of course, uh lit, if there's a manager on site, etc. Can affect your premium. What kind of is the um, like I should say the two ends of that spectrum? So, and just in my estimation, obviously the larger facility to hire your premium but I would assume a nice class, a type facility is going to have some save the art, you know, security etc and that would help your premium, whereas maybe a mom and pop location, a smaller one, the premium overall will be lower because it's not as big but maybe it doesn't have some of the features that you'd like to have for security purposes. What kind of features really help investors save on their insurance costs?
Speaker 2:Yeah, the big thing during due diligence that I communicate to my clients and prospects is get as much information as you can about the construction. A lot of times there's a window clipped rating. Find out the age of the roof, if any updates to the wiring, plumbing is helpful, anything that you've done to maintain the property From an underwriting perspective. The underwriters like to know that you're taking care of the property. You take pride in it. You're not just going to let things happen right. So, to answer what you said about the Class A facilities, yes, we're seeing a lot more favorable rates. A lot of insurance companies have, you know, their box of saying where you can play and offer terms comes down to. If it is, you know, a newer bill and up to those standards, they're definitely first in line to say yes, we want to write a policy for them at the most competitive rate that's out there.
Speaker 2:And one thing that is overlooked a lot is the prior loss history. Just because you're a new owner and you're looking to acquire a property, make sure you get a five-year they call it a loss run which is basically the last five years tells that history where their claim's paid. A lot of underwriters and on the insurance side, we analyze frequency and severity and if there's a slip and fall claim that's happened eight times over the past three years we're going to dive into the details and understand why is that happening and what can we do to prevent it from happening in the future. And that's where, from the underwriting aspect of it, it shows that you're proactive in mitigating risks and where you can control the cost of the insurance payouts and premiums going forward.
Speaker 1:Okay. So if we're looking at, let's say, it's a smaller mom-and-pop deal, so not a class A one that would already have some of those bells and whistles and things, but a smaller mom-and-pop deal, let's say it's fenced or whatever, but that's about it. What are some of the things that we can do to add features et cetera? You know, the roof is what it is, the building is what it is. We're sailing right to that point where we're closed. We have a premium in place. Now what can we do to try and lower some of those insurance costs over time?
Speaker 2:Sure, you know, out of facility. Again, it's all about mitigating risk. So, as an owner stepping in there, what we summarize to the insurance companies, what are you doing to mitigate risk? You know, make sure you have a plan in place. I call it the disaster plan.
Speaker 2:Where stuff does happen, such as, you know, a wind event or a claim, how are you going to basically stop the bleeding day one, you know, do you have the right procedures in place, the right contractors? You know that everybody on site, or boots on the ground or you as an owner, can get back up and running as fast as possible. You know. Also, you know you can always put cameras on site. You can always offer a tenant insurance or protection plan product. Um, that gives that peace of mind to your tenants as well. But it's really just about how are you going to go forward, you know, in the event of a loss? And just to make sure that you know, insurance companies want to know that you take pride and that you care about your property, um, because obviously, the longer you wait to rebuild or release, you know, units that were damaged, the more they're going to end up paying out. So that's what you really can do as an operator. Interesting.
Speaker 1:I never. I know I've thought about it, but I never heard it articulated in that way that you should already have your list of contractors et cetera, so that if something were to go wrong, you're already thinking ahead, like if I had to deal out in Denver, colorado, with the snow piling up et cetera. Maybe I have my main person, but I need a couple backups just in case I need to snow plow it et cetera or clean off the roofs or whatever, just so they're not too heavy out there damaged roofs et cetera. That's a good if it's an on-site person. Does that change your insurance premium and if it does, how?
Speaker 2:so If you have it remotely managed versus the traditional full-time staff, sure, as an underwriter perspective, obviously they want to see boots on the ground. With today's day and age of technology, you're starting to see the unmanned facilities. Um doesn't necessarily mean that they're unmanned, there's just no office on site or boots on the ground, 24, seven, right. But yeah, you know, some underwriters look at that and say we're going to apply a higher rate because nobody's there. But what you can do as an operator is explain. You know, hey, if something goes wrong, we have a maintenance guy that might live in a 10 mile vicinity. He can get there in a heartbeat. Here's our plan If something was to happen in the event of a claim how we're going to mitigate loss going forward, maybe do check-ins every week.
Speaker 2:Somebody walks the site, make sure all the doors are locked, make sure the fence is in good shade. It's really just about how you're going to. You want to make the underwriters and the insurance company feel comfortable about your operations. So to be proactive and understanding how that can help in the long term is really key in running a successful facility.
Speaker 1:I was going to ask you it's funny you brought up the technology, et cetera. I was going to ask you about just general tech, but I wanted to ask you specifically. I always thought, like door alarms, there's a lot of things out there electronic locks, bluetooth locks, you know. Whatever there's other things you can do cameras, infrared cameras, you know. So we get really fancy with it and all that, just try and defer or catch thieves, etc. But I've always been curious about the individual door alarms. And do you see any? You know, reduction in premiums, if those are in place, and what is your been, maybe your experience with those?
Speaker 2:sure? Uh, yeah, short answer yes, we have a number of carriers. That's a question, a standard question on our applications, and the underwriters look at that as another risk mitigation effort. You know those alarms, there's tons of companies out there that offer those services and it's just another piece of mind, not only to your tenant but as the owner, if something was to happen, to prevent further damage or there's a theft, prevent more than multiple thefts. So you know it's just another item. A lot of operators obviously are looking at their expenses. It's not free to throw, you know, the whole alarm system in, but it's definitely something that's saved a lot of owners and, given that piece of that's really good man.
Speaker 1:I'm curious to know are there any like upcoming law changes or, just you know, government tech impacts that can affect uh insurance or?
Speaker 2:self-storage owners, it's all. It's a private market, so the insurance companies really dictate, like, what type of features they want to see at the facility. So I'm not aware of any laws per se um what you're referring to, but as far as, like, you're talking about privacy laws or yeah, just in general, because there's always something that's always the unknown, you know, like with taxes and not.
Speaker 1:We've had issues where you underwrite taxes a certain way and then they just triple and there's nothing you can really do about that. I understand that's a completely different industry. That is government, you know there. But I just was curious if there's anything you know, any sort of minimum insurance requirements. I understand it's private, but just anything that the government may end up doing.
Speaker 2:That's kind of a curve ball for folks. Yeah, so there, there's some state funds out there. I call it a market of last resort because you're not really getting a true comprehensive or specialty forms built in that, um, you know, are really are specific for self-storage operators or commercial real estate operators. But there are state funds out there that potentially can offer you coverage. Sometimes it's at a reduced rate, but again you're not getting all the necessary items that you would need in the event of a claim.
Speaker 1:Okay, interesting. And then I guess, going forward, you talked about, hey, we're not exactly sure how premiums could change, you know, going into 2025s, et cetera. What's the best thing that investors can do? So looking at a deal. Maybe right now or, as of this recording, you're looking at a deal and maybe you called your insurance company or contacted a company, got a quote on it. Could that change by the time you close? Could that change in your first year of ownership and operation? What should investors do to try and mitigate some of those unexpected changes in premiums?
Speaker 2:Sure, yeah, I mean, look, that's the big question, right, like if you're looking at a facility as an investor and it's a coastal facility or in a flood zone flood zones are always changing you just have to be very conservative.
Speaker 2:A lot of times I see these offering memorandums put out there and they're just taking the brokers or whoever's putting it together or they're just taking a percentage and it doesn't really account for the type of risk and underwriting that the insurance companies are doing. So the best thing to do is talk to your agent, you know, get a professional advice on how to budget appropriately and just be very conservative during your process of doing due diligence on it. Because you know, I just come across it too often where something in a coastal region or in a high hazard region it's just a price, but I mentioned before, look at that loss history and make sure you're underlying it appropriately. So a lot of times, like I'll come across a facility that the pricing in that pro forma well, that excludes hurricane coverage or tornado coverage. That's a pretty big deal and lenders obviously are not going to allow that. So you really have to rely on the experts, your breaker, to help you with that budget and planning ahead. What would be the?
Speaker 1:let's say you're looking at a facility I don't know. Let's say it's a $2 million facility what would be like, maybe the minimum, and I'm not saying do the minimum, but in general, you know, just general and don't take this as advice. If you're listening, you know this is what you should do. But just so you have a base of knowledge, what would be the minimum coverage that you'd want in a like a $2 million? Just maybe single story drive-on type facility?
Speaker 2:Yeah, I think the big thing about coverage what we see a lot, especially of recent last couple of years, is construction costs have gone up significantly right the days of building a facility at 15, $20 a square foot at the event of a claim with debris removal and construction materials and labor, that's really the major driver. The cost driver is that value of the property to rebuild. So I would encourage a lot of operators to find out what they're seeing in that area. A lot of the metal one-story construction facilities we've had insured previously. We're seeing close to about $60, $70 a square foot in replacement costs and I've had claims even show that the cost to rebuild and repair and debris removal and, you know, just putting it back up to like-kind quality have even exceeded that amount.
Speaker 2:So that's really the driver. You know that value you put on there is really going to determine your premium. And then from a liability standpoint I mean I'd recommend you shouldn't have anything less than a million bucks on the general liability per occurrence. And obviously we have operators that buy umbrella policies. That would you know if there was a judgment that would provide protection if the limits are exhausted. But that's kind of the rule of thumb. You want to make sure you have the right property limits, the right loss of income and the right liability coverage.
Speaker 1:That's really good man. I'm curious to know, guys, if you're listening, watching whatever. Two things real quick. One I'm wearing a workout t-shirt because I took all my shirts home to Washington. I'm in my office today and I forgot to bring them back. So to Washington, I'm in my office today and I forgot to bring the bag. So if you're watching, you're wondering why I'm wearing a t-shirt. That's why. But the second is Storable did not sponsor this episode. I had Brian Otis want to talk about insurance. I think it's helpful for everybody. But I want to ask how does Storable help or differentiate themselves from maybe the other insurance carriers out there, and what kind of service do they offer self-storage investors?
Speaker 2:Sure. So, as everybody knows, in the industry, store role is the elephant in the space, right Like they offer so many different technology solutions and insurance. Property casualty insurance is just one of them. We also have a tenant insurance arm as well. But for property casualty insurance we are essentially brokers, where we are nationally recognized by a number of insurance companies that we represent. We bring your facility or facilities to market, which means that we can shop it with various insurance companies. We are not the insurance company, we are acting as broker and represent you on your behalf and to provide the best possible terms and conditions out there. So you know, we're not just showing you one option, we're going to bring you know five, 10 or multiple options to the table and just kind of, you know, from a strategic perspective, make sure you're getting the right type of protection and then show you the price points, deductible options and help you make the best decision for your business. 100%.
Speaker 1:That can cut down on the time tremendously for a lot of investors. You're trying to call this one, call that one, make comparisons and it just becomes a very unruly process. So I appreciate that you guys do that. I didn't know that. I thought you guys actually asked for the insurance. I'm glad I asked. I didn't know you guys were insurance brokers. That helps a ton man. Well, we've covered-.
Speaker 2:I think a lot of people really, they don't really understand why is there a broker? Or how do you have multiple companies? We try to make everyone's life easy. I think that's really what Storable does. You know. As everyone knows, we have three different software platforms. You know we, we can assist in all ties together with the websites, the seo, the marketing aspect, tenant insurance, property insurance. We're really here to help operators, uh, you know, run their business seamlessly and, um, I think that's the misconception along the business where you don't really understand um, you know, we're here to help and guide you yeah, it's funny, there's a lot of consolidation in the self-storage facilities in general and that's touted as a good thing.
Speaker 1:We see the consolidation. You build up a portfolio, you sell that at a premium to somebody a bigger player out there, or just keep doing it yourself, and it's a great play. Storeable has essentially done that with the software offering side of the business, which is really interesting and it's funny. You're right, there's like people, there's a sense of distrust. It's kind of a weird thing that's out there, but what does it matter if you're getting good service at a good price, like good quality? So that doesn't make any sense to be worried about that type of consolidation. It may invite other competitors, which is fine, but because they may see an opportunity to do the same thing. But that's life, right, that's business. So, brian, we covered a ton of ground, man. I think it's been super helpful for investors. I've learned a few things myself. Let's transition real quick to the final four. We didn't really talk too much about your background, though I guess before we do that, let's give us your background. How did you get to be where you are at Storable?
Speaker 2:Yeah, sure, so I'll try to be quick because we can talk about that for hours, right, but essentially I went to school at Florida State University. I have a degree in risk management, insurance that you know not many people go to school where they are going to go do insurance. But the truth is, you know, you rely on your experts, uh professionals like your accountants, your attorneys, we, we, you know, as insurance professionals, we analyze, understand the policy forms, uh, cause nobody reads it Right. So my background is I really enjoyed reading through the contracts, understanding the nuances of insurance.
Speaker 2:Um, I happened to, right out of school, take a job in Fort Lauderdale, florida, for a few years and just happened to come across the specialty of self-storage. I mean, I was getting flyers across my desk at different industries and I thought self-storage facilities were just so interesting and at that time they were building them everywhere, um, so I kind of took it to the next level. I did all the studying, understanding of the business, um, and and then from there, like, just realized the potential of the industry. I joined the Florida Self Storage Association. I started going to national conferences, started speaking on different panels for them and what I recognized was there wasn't many self-storage specific type brokers. So I then joined Insurance Office of America, which is one of the largest privately held insurance uh agencies, um in the world, and from there I built my book, um kind of spread apart, licensed in every state, and um built my, my business, uh about 75, 80 percent of self-storage. The other uh 25 percent was restaurants, apartments, shopping centers, uh distributors, manufacturers, and you know, a couple of years ago we ended up actually doing the tenant protection plan for one of the software arms that Storable happens to own.
Speaker 2:And through conversation with the founders of Storable they said what do you think about coming on board and running our property casualty insurance division? And um knowing storable, knowing what they do, knowing the way the world is with technology and everything's evolving and changing, uh ai's, you know, taking over um. I was really excited to grow my business, really focus on self-storage niche and um, you know, took the opportunity to go ahead and really expand and grow a team and you know work warm leads that we had internally. I mean, out of the 60,000 storage facilities, there's a reason 40,000 of them plus use the storable platforms one way or another. So I thought that was just a drop in the bucket, you know, to expand my services, expand my business. It was a no brainer to partner with them and come on board and have that type of opportunity.
Speaker 2:How do you say no to that? So for the past three years we've just been in expansion mode, taking it to potential. We've already added on a number of new business, new clients. We have potentially probably over about $30 million in premiums that we have to date in our property casualty arm. We haven't done much marketing yet so I call it the best kept secret, but it's exciting and I see the potential of where we can grow and how we can take it to the next level with the technology that we have and with the experts in self-storage, which I wouldn't have had that opportunity anywhere else. And that's where I ended up here tonight. Yeah, that's fantastic man.
Speaker 1:Talk real quick. I mean, you guys are growing like crazy, so I imagine it's somewhat of a high point to join the team and help them grow. But talk real quick about a high point in your career. And what did you learn through that experience?
Speaker 2:Yeah, the high point you know it's always the growing pains. That's what excites me is how you can take a company to that next level. And the high point for me was obviously transitioning to storable and having that opportunity just to expand, grow, learn more about different products and then help my clients and have that expertise to assist them basically run their whole business operation.
Speaker 1:Talk real quick about a low point in your career and what did you learn through that experience? The low points are always the growing pains.
Speaker 2:When you grow quickly, you know you're hiring people, you want to fill in the gaps, how you can make it better, and obviously when you're doing that, you're trying to move quickly and find the right pieces to the puzzle to help your business take off. So the lowest point we had was a year into running the property casualty division. We had two or three people basically decide to transition out of the business around the same time, which was a very busy season of ours. So we had to pivot and really, you know, dive down, put in those hours. I mean, yeah, I'm obviously willing to, uh, you know, sit down and do what it takes to to grow and and uh, run the business. But so, you know, it's those growing pains managing people, um, understanding, um, and just trying to get past it. So you just, you know, put your head down, work really hard, be persistent and everything just works itself out.
Speaker 1:Yeah, 100% man Talk real quick about a business resource or maybe a self-sourced investing resource that the folks can check out.
Speaker 2:Sure, you know there's a number of classes, industry experts out there, but obviously, when, before you do that, do your due diligence. But some are major speakers. I'm not going to mention names, but they're. They're out there and you know, lean on them ever. You know what's really great about this industry is everyone's here to help each other. They're, you know we're all competitors in a way, but we're here to help everybody make your business run smoother, more efficient. So just lean on those experts that have done it tried, tested, proven and don't be shy to ask questions. What I've learned is anyone's here willing to help 100% man.
Speaker 1:Brian, how can people get in contact with either you or maybe someone in your office? You maybe want to learn more about insurance, or maybe just connect with you online.
Speaker 2:Yeah, the best thing to do is find me on LinkedIn. Obviously, brian Bogdanoff, you can look up storable storablecom, or shoot me an email at Brian B-R-I-A-N. The letter B at storablecom.
Speaker 1:Awesome. Thank you, Brian I.