As if insuring multi-family housing weren’t already unpredictable enough, some states are adding layers of regulation around issues like sexual harassment that pose new risks to property managers and their insurance providers.
In the past year, three states — New York, Connecticut and Illinois — have passed significant sexual harassment legislation that reduces the threshold for illegal behavior and increases employer liability.
Other states are stepping in with their laws on issues like fair housing, rent control and marijuana, creating a fragmented regulatory landscape that complicates the risk assessment for property owners.
The cost of poor compliance can be very high. Since 2017, the U.S. Department of Justice has filed or settled 14 cases of sexual harassment in housing, resulting in $1.6 million paid out to victims. But just looking at federal action significantly understates the financial impact of #MeToo and sexual harassment liability. These cases are the tip of an iceberg that includes litigation most typically handled through civil suits with employees or residents bringing claims, and whose cost in terms of legal fees and judgments remains confidential.
There’s a tremendous opportunity for insurers that can adapt their products to changes in the market and work with property managers to understand their risks and train their employees accordingly.
New sexual harassment laws
While the same social forces born from the #MeToo movement have spurred a number of state legislatures to take up new sexual harassment laws, each state is developing unique legislation with unique demands on employers.
With a new law in New York, harassment does not need to meet a severity standard to be prosecuted, and employers will be liable for harassment even if an employee did not follow the employer’s complaint procedure.
In Connecticut, new provisions went into effect last October. Now, virtually all Connecticut employers must provide two hours of sexual harassment training to all employees, and supervisors must also receive training.
See also: How to Cut Insurers’ Legal Costs
In Illinois, all employers must provide sexual harassment training to all employees each year. As in New York, the new law protects not just employees but also independent contractors from harassment and discrimination.
In each case, these states are stepping beyond federal law, both in terms of consequences for companies and in making employers liable when bad things happen under their watch.
Insuring multi-family housing is fundamentally complicated. It’s an area where issues associated with the workplace and home overlap — not to mention the challenges of affordable housing, income inequality and threats from the outside, like natural disasters and active shooters.
But complicated doesn’t mean impossible, and there’s a tremendous opportunity for insurers that can quickly respond to emerging trends, adjust to their risk assessments and work with property managers to adapt on the ground.
Too often, property managers are caught in a cycle of playing defense when it comes to new insurance or regulatory risks. Rather than responding to lawsuits or waiting for laws to change, executives in this unique market need to see what’s coming before they are forced to respond to it. For issues like sexual harassment, this means integrating agile training systems that are instantly updated based on the emerging threats and expectations.
Insurers can help create the tools — and, thanks to their intimate and expansive view of the market, collect the data — that allows property managers to see what’s coming and respond to it, before it becomes a costly transgression or drive-by lawsuit.
The claims intake process is a powerful tool in collecting data on emerging risks. Taken in aggregate, this information can then be presented to property managers as a sort of real-time risk analysis. Paired with agile training systems, this data empowers property managers and their employees to be prepared for the coming threats, rather than react to them.
Insurers that embrace the unique challenges of multi-family housing — and form dynamic, data-based partnerships with the managers of those properties — will not only mitigate the emerging risks, they will make these homes safer and more secure places to live and work.