NSW Real Estate Rental insurance business idea

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Hustler101

Active Member
1 June 2020
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0
31
Hi
How do I establish an insurance company or brokerage firm to serve a particular niche of customers within the rental segment of Real estate industry?
I'm planning on establishing a firm that turns the rental deposit amount into monthly small payments, while the property owner is covered under a certain amount in case of any damages to his/her property when the tenant moves out.
Do I need a licence for the brokerage firm?
What steps do I need to take?
How and where do I get the policies agreement between us and the tenant?
how do I approach big insurance firms to corporate, if I can't afford to establish my own firm?

please, any advice will help
 

Atticus

Well-Known Member
6 February 2019
1,155
187
2,394
I'm planning on establishing a firm that turns the rental deposit amount into monthly small payments, while the property owner is covered under a certain amount in case of any damages to his/her property when the tenant moves out.
Sorry can't offer any suggestions on how to set up something like this, BUT.... can you explain how this differs from the current legislated rental management bodies (residential & commercial) that take the rental deposit (bond?) & hold it basically in trust to cover any damage that may be in dispute at the end of a rental agreement period? .... Those bodies also have legislated dispute resolution mechanisms, hearings etc .... how would your model handle disputes over damage for example?
 

Rob Legat - SBPL

Lawyer
LawTap Verified
16 February 2017
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501
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Gold Coast, Queensland
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I’m going to go right ahead and assume that since you’re floating your ideas here, and not in the boardroom of some top tier legal firm, that you’re not a billionaire.

if you want to start an insurance company, you’re talking in the millions of dollars. Actually in the millions of dollars. It’s been a while since I looked at the exact requirements, but one of the requirements is to take somewhere in the vicinity of at least $1 million in liquid funds, lock it away, and never touch it again (unless it all goes sour).

Starting an insurance brokerage operation is also going to be tricky. First, you need to be financial services licensed. That’s going to require a lot of time and investment, and (if you don’t have it already) academic qualification. That’s only part of the hurdle. You’ll need to find an insurer who either has the product, or convince them to create one. Getting an insurer to do that is no easy task. Assuming you can do that, the risk pricing is going to be all over the place for at least the first few years. Insurance companies don’t lose, so expect higher premiums until claims level data is established. Then, factor in that you’ll need brokerage on top of the premiums to make it worthwhile. Is that pricing going to be sustainable, or are you going to price yourselves out of the market?

All of that is assuming the current legislative environment supports the model (it could, I haven’t checked). If it doesn’t, you’ll have to lobby government and make a case for change. Since it’s not a ‘sufficiently broken’ situation, don’t expect this to get much traction even if they do show some interest. That process could take months and upwards.

There’s a whole raft of other considerations, these comments are just the gloss over. I’m not saying it’s not doable - you just need to know the lay of the land before you start walking it.
 

Hustler101

Active Member
1 June 2020
7
0
31
Sorry can't offer any suggestions on how to set up something like this, BUT.... can you explain how this differs from the current legislated rental management bodies (residential & commercial) that take the rental deposit (bond?) & hold it basically in trust to cover any damage that may be in dispute at the end of a rental agreement period? .... Those bodies also have legislated dispute resolution mechanisms, hearings etc .... how would your model handle disputes over damage for example?
let's say for instance; a rental property is $2000 a month, basically, the bond would be additional $2000 or ($1000).
the idea is to give the potential renters an opportunity to save on the bond money by paying an insurance premium of ex 40/month for the duration of the rent contract, which will cover any damages they will cause to the property. in case of any damages, these tenants when moving out will have to pay excess fees - let's say $500 to repair the damage by the insurance company.

on the other hand, the landlord will be covered as well in case of any damages happen to the property under the same policy
 

Hustler101

Active Member
1 June 2020
7
0
31
I’m going to go right ahead and assume that since you’re floating your ideas here, and not in the boardroom of some top tier legal firm, that you’re not a billionaire.

if you want to start an insurance company, you’re talking in the millions of dollars. Actually in the millions of dollars. It’s been a while since I looked at the exact requirements, but one of the requirements is to take somewhere in the vicinity of at least $1 million in liquid funds, lock it away, and never touch it again (unless it all goes sour).

Starting an insurance brokerage operation is also going to be tricky. First, you need to be financial services licensed. That’s going to require a lot of time and investment, and (if you don’t have it already) academic qualification. That’s only part of the hurdle. You’ll need to find an insurer who either has the product, or convince them to create one. Getting an insurer to do that is no easy task. Assuming you can do that, the risk pricing is going to be all over the place for at least the first few years. Insurance companies don’t lose, so expect higher premiums until claims level data is established. Then, factor in that you’ll need brokerage on top of the premiums to make it worthwhile. Is that pricing going to be sustainable, or are you going to price yourselves out of the market?

All of that is assuming the current legislative environment supports the model (it could, I haven’t checked). If it doesn’t, you’ll have to lobby government and make a case for change. Since it’s not a ‘sufficiently broken’ situation, don’t expect this to get much traction even if they do show some interest. That process could take months and upwards.

There’s a whole raft of other considerations, these comments are just the gloss over. I’m not saying it’s not doable - you just need to know the lay of the land before you start walking it.
Thanks.
Here is a rough idea on the plan
let's say for instance; a rental property is $2000 a month, basically, the bond would be additional $2000 or ($1000).
the idea is to give the potential renters an opportunity to save on the bond money by paying an insurance premium of ex 40/month for the duration of the rent contract, which will cover any damages they will cause to the property. in case of any damages, these tenants when moving out will have to pay excess fees - let's say $500 to repair the damage by the insurance company.

on the other hand, the landlord will be covered as well in case of any damages happen to the property under the same policy
Do I still have to go through everything you mentioned above?
 

Rob Legat - SBPL

Lawyer
LawTap Verified
16 February 2017
2,380
501
2,894
Gold Coast, Queensland
lawtap.com