Premiums keep climbing. That’s no secret. But there’s a quieter trend causing just as much damage to your bottom line: insurance shrinkflation.
In today’s market, it’s not just that you’re paying more—you’re getting less.
Across general liability, property, and umbrella policies, carriers are cutting back coverage with new exclusions, lower limits, and rising deductibles. For owners of Class A and B multifamily properties, this isn’t a future risk. It’s happening now—and it’s costing you.
General Liability: A Narrower Safety Net
General liability used to be your first line of defense against lawsuits. Now? It’s full of holes. We’re seeing:
- Assault and Battery Exclusions: A growing number of carriers are excluding these claims altogether. If a fight breaks out on your property or someone is assaulted, you could be left holding the bag.
- Firearms Exclusions: If gun violence occurs on-site—whether or not the weapon was legal or expected—many carriers won’t respond.
- Slip and Fall, Snow and Ice Exclusions: These basic premises liability risks are being carved out, especially in states with frequent claims. And yes, tenant behavior still comes back to you.
- Habitability and Mold Claims: In litigious jurisdictions like Fulton County, GA, and Los Angeles County, CA, insurers are increasingly excluding habitability issues, mold, and “continuous or repeated seepage,” even if you acted in good faith.
- Abuse and Molestation Exclusions: Some carriers are now excluding claims tied to alleged physical or sexual misconduct—regardless of whether the property owner had direct involvement. One accusation could trigger massive legal exposure with no coverage.
- Human Trafficking Exclusions: Particularly in hospitality and multifamily settings, some insurers are introducing broad human trafficking exclusions. These can apply even if you had no knowledge or control over what occurred on the property.
- Punitive Damages Exclusions: This one is especially dangerous. Some carriers are excluding coverage for punitive damages—even if awarded as part of a broader negligence claim. In states that allow punitive awards, this can turn a manageable lawsuit into a financially devastating event.
These exclusions shift more risk back to owners—at a time when legal costs and nuclear verdicts are rising.
Property Insurance: Less Coverage, More Deductibles
Severe weather is reshaping property coverage, and not in your favor. The key trends:
- Wind and Hail Deductibles: Flat deductibles are being replaced by percentages—often 2% or higher. On a $10M property, that’s a $200K out-of-pocket risk per event.
- Roof Coverage Shrinking: More policies are moving to Actual Cash Value (ACV) for roofs, especially in hail-prone states. That means depreciation hits hard—leaving you undercompensated after damage.
- Named Storm Deductibles: In hurricane-prone regions, some carriers are applying separate, higher deductibles for named storms, often with ambiguous terms.
The net effect? You’re insuring less while assuming more of the cost in every scenario.
Umbrella: Smaller Limits, Bigger Gaps
Umbrella policies were designed to catch what other policies miss. Today, those limits are thinner, and the gaps are wider:
- Reduced Limits: Carriers once happy to offer $25M now max out at $5M—or less.
- Harder Stacking: Building towers of coverage with multiple carriers is harder and more expensive than ever.
- Stricter Underwriting: Carriers want clean properties, low crime stats, and near-flawless tenant profiles. That’s a tall order, even in Class A buildings.
With social inflation and massive jury awards on the rise, a reduced umbrella could leave you dangerously exposed.
The Bigger Picture: Macro Trends Working Against You
Let’s zoom out.
- Climate Change is fueling more frequent, severe events. Carriers are recalibrating their risk models, raising deductibles, and exiting high-risk markets altogether.
- Economic Pressures: Labor and materials costs are still elevated, making repairs more expensive—while policies cover less.
- Litigation Explosion: Certain jurisdictions, including parts of Georgia, California, and Texas, are seeing a spike in high-dollar settlements. Plaintiff attorneys are targeting multifamily owners, especially in premises liability and habitability suits.
- Reinsurance Crunch: Global reinsurers are pulling back or repricing. That ripples down to your policy—in the form of tighter terms and higher rates.
Shrinkflation Can Hurt More Than Premium Increases
Higher premiums are painful. But hidden reductions in coverage can be worse. You may be unknowingly self-insuring multi-six-figure risks—from storm damage to tenant lawsuits to punitive damages that your policy flat-out refuses to cover.
What You Can Do
EIS specializes in protecting Class A and B multifamily portfolios. We understand the market, the exclusions, the pressure points—and how to optimize your insurance program to reduce your total cost of risk, not just premiums.
Let’s cut through the noise. We’ll:
- Review your current policies for hidden exclusions and silent coverage gaps
- Benchmark your coverage against current market standards
- Recommend strategies to strengthen your protection while managing cost
With the right partner, you don’t have to absorb the risk alone.
Contact Engineered Insurance Services today to schedule a strategic coverage review.
