TheGuarantors, a New York based insurance tech startup founded in 2014, is seeking to make renting an apartment in New York easier for landlords, brokers and renters through its newly launched tech-enabled lease guarantee platform.
The platform, which serves as the startup’s first product offering, connects renters who cannot secure a lease on their own with an insurance-backed co-signer through The Hanover Insurance Group, a Worcester, Mass., based holding company for several property and casualty insurance companies.
Founder and CEO Julien Bonneville said the idea for the platform first came to him through personal experience.
“When I arrived in the U.S. in 2010, as a foreigner and a student, I struggled to be able to rent an apartment here in New York,” he told Insurance Journal. “A few years later in 2014, I decided to launch this new insurance product to help all of these segments of the population – foreigners, students, retirees, entrepreneurs – to be accepted into the buildings they wanted. The concept is to cover rent in case of nonpayment or lease break, so the landlord would feel confident and happy to sign a lease with the renter. We are providing access to renters and security for landlords.”
Potential tenants that don’t meet landlord requirements without a lease guarantee can submit a free application online and upload supporting documents through the website, allowing applicants to secure approval within 12 hours of submission.
Once lease details are confirmed with the landlord, renters sign a Lease Rental Bond, and landlords secure apartment availability for the renter. Lease Rental Bonds are backed by The Hanover Insurance Group, licensed in New York State and A-rated (Excellent) by A.M. Best.
The cost of the service for U.S. residents is between five and seven percent of the annual rent. For non-U.S. residents, the cost is between seven and 10 percent. Fees are dependent on credit score information when available and personal financial condition.
After its launch in 2014, TheGuarantors spent the first year to year-and-a-half finding a carrier and negotiating a contract, as well as raising funds for the platform, Bonneville said, explaining that it is essentially a surety bond with the beneficiary being the landlord and the payer being the renter.
“In terms of the risk nature, it’s pretty exotic for the insurance industry,” he said. “It’s not like an unanticipated event, such as a house burning down, that you have to protect yourself against. It’s a real decision for a renter to stop paying rent. Due to the nature of the risk, it was a struggle to find a carrier, because it’s more like a bank or credit card risk than a contingent risk.”
Eventually, TheGuarantors partnered with The Hanover Insurance Group, who was drawn to the unique nature of the platform, Hanover’s Director of Transactional Surety Scott Reinke said in a press release announcing the product launch.
“Hanover’s Surety Division has always been very interested in growing in innovative spaces,” Reinke said. “When TheGuarantors asked us to be their carrier, we saw their team had the right vision and expertise to understand the changing needs of the insurance market.”
As the insurance industry becomes increasingly reliant on technology, TheGuarantors aims for its lease guarantee platform to be as tech-oriented as possible.
“All interactions are completed online, and everything is well automated and highly efficient,” Bonneville said. “All of the stakeholders, including brokers, landlords and renters, have their own platform with dashboards so they can track exactly what’s going on. We try to be as transparent as possible with all of these stakeholders.”
Landlords can log into the dashboard and monitor all renter activity, their exposure, when policies are expiring and the stages of each application being processed. This efficiency is key in helping leasing agents fill vacancies and landlords improve operations, he said.
“We want to be as quick as possible,” he stated. “It takes us 10 to 15 minutes to process an application, and most of the time, we’re able to underwrite clients in between two and six hours. Everything is done online, so we don’t have to slow the leasing process down at all.”
The platform categorizes renters into seven different risk classes and requires a salary that is roughly 27 times the amount in monthly rent, rather than typical salary requirements of 40 times the monthly rent to secure an apartment in New York City, he explained. The platform developed an algorithm to take into account liquid assets of renters as well.
“We were initially only covering 12 month leases, but based on market feedback and current trends in leasing in New York, Hanover has allowed us to write policies that could cover up to 18 month leases,” Bonneville said. “We can also cover up to two months of holdovers in case the lease ends and the defaulted renter stays in the unit.”
Another changing need TheGuarantors has observed within the insurance market is new construction buildings in what Bonneville classifies as “vertical cities,” such as New York. Because of regulation and tax abatement, owners of these buildings typically can’t ask for more than one month’s rent for a security deposit from renters, making it difficult to legally protect themselves against default, he said. Bonneville added that this is where the platform receives most of its demand in the initial stage of leasing.
“[That] is why we’re really relevant in that area of the market,” he said. “Right now, our demand is mainly coming from these high rises and luxury units, so our program is very well adapted for vertical cities where landlords are pretty concentrated and own portfolios of hundreds of thousands of units. We are also working to penetrate the long tail of the market with smaller landlords and figuring out how to enroll them in the program in a cost effective way, but right now, we see our current product fitting with about eight to ten vertical cities in the U.S.”
The program is open to any building in New York and is also filing in New Jersey. In the future, TheGuarantors hopes to expand the program to vertical cities such as Boston and Chicago, Bonneville said, as well as launch additional products nationwide.
“Our overall vision is to become a one-stop shop for insurance needs that landlords have in their relationship with renters, which is why we’re starting to work on some other new products that would match this type of insurance need,” Bonneville said. “This is a good, solid first product, but in the future, we’re also thinking of designing products that might be much more suited for a nationwide mass market.”
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