Aging infrastructure and decentralized maintenance practices are creating major insurance headaches for Texas condominium associations according to expert Herb Dorow. Recently, Herb explained how outdated plumbing, HVAC, electrical, and other building systems lead to claims that prompt insurer exit from the condo market. He also outlined solutions his firm, Condo Insurance Pros, implements to overcome aging infrastructure challenges.

Rising Risk from Decentralized Maintenance

Unlike apartments owned by a single entity, condominiums have individual unit owners responsible for maintenance and upgrades within their residence. Herb explained how this decentralized approach creates problems as buildings age.

“Insurers found out there are a 100 co-owners, who each own a condo in the association, and all get to dictate when they replace their furnace, when they replace their water heater, and when they ensure their smoke detectors are working effectively and correctly. So, there’s no single oversight of the maintenance on the guts of a building,” he said.

With no centralized standards or oversight, critical building systems like plumbing and HVAC age to the point of failure while individual owners simply patch problems as needed in their own unit. This reactive approach leads to claims from failures that would have been prevented under a more coordinated maintenance plan.

Challenges of Older Condo Construction

Herb points out that the very nature of condominium construction often lacks longevity in mind. “A 1980s building is 40 years old now. A building built in the 70s is approaching 50 years and so as they age, their infrastructure ages with it,” he explained.

Built during housing booms where speed and affordability were prioritized, life spans beyond 25-30 years were not top of mind. “Without having a common point or a common maintenance plan that everyone has to adhere to, carriers are finding that lack of maintenance in the guts is a problem,” Herb said. This combination of decentralized maintenance responsibility and aging original builds is creating a ticking time bomb for claims.

Aging Systems Causing Insurance Claims

When asked to provide specific examples of aging infrastructure driving claims and carrier exits, Herb pointed to water heaters, pipes, and HVAC systems.

“The water heater that’s 25 years old is a really big problem. And there’s no way to force that to be replaced, so carriers are having claims come up that they don’t want to be having, because no insurance carrier wants to insure a building that has 25-year-old water heaters and furnaces—that’s a claims nightmare,” he emphasized.

Between major flooding claims from corroded pipes or catastrophic HVAC failures leaving residents without heat or air conditioning, critical building systems breaking down ultimately show up on the carrier’s balance sheet. Faced with rapidly escalating infrastructure-related claims, insurers are increasingly unwilling to take on the risk.

Implementing Centralized Infrastructure Standards

To help associations combat aging infrastructure risk, Herb said Condo Insurance Pros works with boards to implement centralized infrastructure standards and planned replacement schedules.

“We found out having a common point or a common maintenance plan that everyone has to adhere to helps resolve this,” he explained. “Replacing older water heaters, HVAC systems, electrical panels on a scheduled basis really reduces infrastructure-related claims over the long term.”

Herb noted it takes education and diplomacy to enact these kinds of association bylaw changes. “It takes a lot of conversations instead of just emails and a piece of paper going back and forth to each other,” he said. But the long-term payoff in reduced risk and stable premiums makes the effort worthwhile.

Leveraging Risk Expertise to Access Coverage

Even with proactive infrastructure upgrades, Herb noted some carriers remain leery of condos given past losses. Here he said Condo Insurance Pros leans on its deep expertise to access niche markets.

“We have to look at the association as a whole and say, if we have 30 of those buildings, we need this coverage, but we don’t effectively have it because of the deductible structure,” he described as an example. By presenting a clear picture of the individual risks and needs of an association based on in-depth understanding, they can access specialty carriers where traditional insurers now fear to tread.

Herb also emphasized the importance of creativity and persistence. “It’s about getting more and more creative and putting things together and finding different markets,” he stated. “We have expertise throughout the country, we do a lot of business here in Michigan and some of the Carolinas—bringing some of those carriers and kind of telling the story of Texas.” This refusal to accept the status quo enables Condo Insurance Pros to find solutions where competitors hit dead ends.

This holistic, partnership-based approach provides maximum value to associations facing the inherent risk challenges of aging infrastructure and decentralized ownership. Through expertise and advocacy, Herb seeks to be a conduit for overcoming these multifaceted hurdles.

To learn more about Herb Dorow and his approach, check out his website Herb Dorow | The Official Website of Herb Dorow or on  LinkedIn profile