With inflation at its highest since the 1980s, American homeowners are experiencing painful insurance premiums and renewal rates. The cost of building new homes is more than last year. Global supply shortages create surges in construction labor and material costs. As a partner at Johnson Kendall Johnson insurance agency, Kevin Brooks specializes in homeowners insurance. Homeowners across America want to make keep their home safe from wildfires and water damage. Listen to Chip and Kevin chat about insurance’s role for safety in new home builds and against catastrophic events.
Inflation and Homeowners Insurance – Part 1 Transcript
00;00;02;01 – 00;00;18;29
Chip Arenchild
Welcome to Know Your Risk and Insurance Coverage with Risk Pro Net, where we will discuss all things insurance for you and your company. Risk Coronet is a network of independent agencies who offer specialized insurance across business sectors.
00;00;19;01 – 00;00;44;17
Chip Arenchild
Regardless of where you are in your insurance journey. We want to invite you to join us to think about insurance differently. Know your risk and insurance coverage with risk. Coronet provides answers to all your insurance questions. Welcome again to know your risk and insurance coverage with Risk Pro Net. Hey, today I’m super excited that we’re going to be talking to Kevin Brooks of JC Jay in Philadelphia.
00;00;44;19 – 00;01;05;20
Chip Arenchild
And we’re going to be talking about personal lines insurance in particular the homeowner market. I think like many of us know and our clients know as well as people that are listening to this podcast. Insurance rates for property insurance are going through the roof. And for those of you that have experienced it, it doesn’t make any sense. You’re frustrated by why that is.
00;01;05;22 – 00;01;26;04
Chip Arenchild
We don’t have a lot of solutions, so today we’re going to have a chance to talk to an expert about what’s causing this inflationary trend. How long can we expect it can continue? What impact of the claim history in the last three to 5 or 6 years having on the marketplace? And what are some of the things you should be doing as a consumer to protect yourself?
00;01;26;04 – 00;01;56;08
Chip Arenchild
So I’m really excited to introduce everyone to Kevin Brooks from JC. As I mentioned, Kevin specializes in homeowners insurance or personal lines insurance for individuals and families. He is a partner at JC Jay. He runs their private client personal insurance division, and he specializes in what we consider to be high net worth individuals, where you need a little more high touch on your portfolio, where people typically have a primary home and then a secondary home somewhere on the eastern seaboard.
00;01;56;08 – 00;02;00;11
Chip Arenchild
So, Kevin, hey, we’re glad you could be with us. Thanks. How are you doing today?
00;02;00;13 – 00;02;15;10
Kevin Brooks
Very cheap. Thank you very much for having me. I am doing well living the the insurance dream, as my predecessor would say. So that’s, one of the phrases that I’ve caught on. And, I’ll tell you what it’s been. It’s been a dream mostly. And sometimes a nightmare like any other career. Right.
00;02;15;12 – 00;02;35;08
Chip Arenchild
Well, it seems to be a nightmare right now, just like it is for our clients. Let’s just jump into it. We’re in the, the whole world in this inflationary program, in this personal insurance is inflationary right now as well. And I know it started long before what we’re experienced in the world. But what are the causes of this inflation that we’re seeing.
00;02;35;08 – 00;02;41;11
Chip Arenchild
And what do you expect how long they’re going to last and what what should people do. What are you thinking.
00;02;41;13 – 00;02;57;22
Kevin Brooks
Yeah. So Chip, it’s again it’s a good point. I mean, as a, insurance consumer myself and as a homeowner, unfortunately, you know, none of us are spared from these trends that we’re seeing. And, you know, I joke with folks, but I have to remind them on occasion that, you know, most insurance companies, these are not philanthropic organizations, right?
00;02;57;22 – 00;03;18;03
Kevin Brooks
I mean, they’re they’re in it to make a buck. And, and if they can’t do that successfully, many of the the costs that they are also experiencing or those heightened costs are getting passed along to, to us, right to consumers when it comes to inflationary trends. What I can tell you from experience is that in a normal year, you know, we see, homeowners premiums, you know, they’re going to fluctuate.
00;03;18;03 – 00;03;46;04
Kevin Brooks
But some of the increases that many of us are experiencing have to do with the surge in the cost of labor and materials. Right. And in the normal world, over the past, I would say 4 or 5, six years, a 6% inflationary rate has often been what’s assigned. Right. So if you look at your homeowner’s policy and you look at the amount of coverage on, you know, the insurance is is dwelling, but in plain English, it’s the amount of coverage on the house itself, the dwelling coverage amount from year to year is typically been around 6%.
00;03;46;04 – 00;04;04;19
Kevin Brooks
That’s what we’ve seen. And for the most part, it’s been reasonable and we haven’t gotten a lot of pushback on that. What we are starting to see, I would say especially with with 2022 homeowners insurance renewals, that 6% factor is getting bumped up to 8%, 10%, even 12%. With some of these companies.
00;04;04;21 – 00;04;26;16
Chip Arenchild
And so, Kevin, that’s just the carriers on what they’re internally facing. Right. Are you also discussing that some of that rates coming, the cost of materials when you mention labor? I know we’ve seen the lumber prices over the course of the last 12 months fluctuate greatly. I know there’s a demand for labor. I think if people try to find a contractor right now, it seems like it’s almost impossible.
00;04;26;19 – 00;04;33;01
Chip Arenchild
So is that what you’re referring to is that’s what’s playing into this inflationary. Is this or is there something else.
00;04;33;04 – 00;04;49;15
Kevin Brooks
That’s exactly a chip. And again, something that we’re all familiar with at this point. Anybody that you know, reads the news, understands where the the country in the world is trending. But what I can tell you, and it was interesting, I sat on a, a webinar with one of the insurance companies we represent, recently, I think it was last week.
00;04;49;15 – 00;05;10;17
Kevin Brooks
I sat on this and they gave some hard numbers that I think are worth the kind of sharing to our audience here. So when you take into consideration between, in February 2022, inflation is accelerating at around 7.5%. Now, that’s that’s the highest that we’ve had since the 1980s in America. Right. Probably predates quite a few folks now in the insurance industry.
00;05;10;20 – 00;05;31;29
Kevin Brooks
The material increases have been astounding. And it’s been across the board. You know, you look at the cost of lumber. It’s up over 100% within the past couple of years. Structural steel, you know, copper piping, plywood foundation framing, anything that you have that has to do with with building a home or repairing a home, the cost has gone up.
00;05;32;02 – 00;05;50;15
Kevin Brooks
You know, the cost of fuel chip, right? I mean, I think you’re you’re, one of those unfortunate folks living out on the West Coast. I’m reading that the average cost of fuel in California is over $6, right? For a gallon here on the East Coast in Pennsylvania. You know, we’re looking at close to 450 a gallon. So we’re filling in the pumps.
00;05;50;17 – 00;06;09;15
Kevin Brooks
Just the cost to bring these materials to the job sites is more expensive, right? So there really is a trickle down effect that’s compounded by this boom in, in new buildings. Right, right. Folks want to get out of the, the cities and move to the suburbs. And they want to build their beautiful new homes. Well, guess what?
00;06;09;15 – 00;06;22;02
Kevin Brooks
The cost of doing that is more this year than it was last year. And, and the insurance companies that are on the hook for potentially rebuilding these properties, if something happens, you know, again, they’re going to be passing those cost along to the consumers.
00;06;22;05 – 00;06;41;11
Chip Arenchild
That’s a good point. On the on the contract itself. Now as an insured and I’m I’m I’m one of your clients. How do you advise me on selecting a limit these days. My renewals coming up. We have this inflationary pressure. I have all these other issues going on, and now I need to know I don’t read this contract.
00;06;41;11 – 00;06;57;28
Chip Arenchild
I don’t know how it works. You know, it’s one of the most confusing things out here in California because of the wildfires. There’s a big push to get people. There’s billboards all over the place to say after a fire is the wrong time to check your coverage. Right. So it’s kind of a funny public service announcement we have going on.
00;06;58;02 – 00;07;02;29
Chip Arenchild
What do you advise people to do, or what types of contracts do you look to put people into?
00;07;03;02 – 00;07;25;02
Kevin Brooks
Yeah. So again, Chip, great question. And it’s difficult right. Because we are, you know, insurance professionals. We are not builders. We’re not contractors. And we have to preface that with most of the conversations that we have with our own clients or prospective clients. We often find ourselves chip having conversations with these folks about, hey, you know, market value is one thing, and reconstruction cost is something entirely different, right?
00;07;25;02 – 00;07;41;14
Kevin Brooks
So when you’re buying a property, you’re buying the school district, the neighborhood, the desirability of the neighborhood, the land that it comes with, whatever number of factors. But when it comes to to insured values, we’re talking about the sticks and stones, right? All the factors that we just mentioned before, all of which the costs are going up on.
00;07;41;16 – 00;07;59;19
Kevin Brooks
So, you know, we do our best when, when we can to kind of help these clients come up with an idea of the estimated rebuild value of their homes. Sometimes it comes with, you know, having candid conversations about the the characteristics of the home that make it unique. And then we can run an estimate on our end. But again, that is just it.
00;07;59;19 – 00;08;27;17
Kevin Brooks
It’s an estimate for many of the higher valued properties that we work with, with with much of our clientele, the companies that we place their business with will, you know, more often than not coordinate an inspection of the property. So after they write the policy, the operative word being after, will say, we issue this policy on, you know, April 1st, probably within the first 3 to 4 weeks, that client is going to be hearing from the insurance company that they want to come out and perform an inspection.
00;08;27;19 – 00;08;45;29
Kevin Brooks
Now, the purpose of that inspection is threefold. Number one, really, most importantly is they want to make sure that the insured value of the property matches its estimated rebuild value. Right. Again, the sticks and stones, they want to make sure that they’re getting the premium for the risk that they’re taking on, which a lot of people, you know, they understand that.
00;08;46;01 – 00;09;07;28
Kevin Brooks
Number two is they want to make sure that this client is getting, credits for all of the mitigation devices they have in place. So us, like many other agents, are going to be asking these clients about, hey, are you maintaining a burglar fire alarm or are you maintaining a sprinkler system, etc.. So they want to validate the credits that are being applied to the policy, and sometimes they find new credits that they weren’t aware of going into it.
00;09;08;00 – 00;09;27;09
Kevin Brooks
And then lastly, Chip, they just want to make sure that the home is in good insurable condition. Right? The roof is in good shape. If you’re in a place, out west, they want to make sure that it’s within a safe, proximity to brush, you know, for the wildfire concerns. So these these companies are doing what they can as far as due diligence to come up with these, estimated rebuild values.
00;09;27;09 – 00;09;52;13
Kevin Brooks
But again, it’s a tough job because if with all the fluctuation in the cost of labor and materials, they can apply these inflationary coverage, you know, increases each year as it kind of they see fit. But that’s not always enough. And unfortunately, with today’s environment, we’ve seen, you know, a few cases of of total losses, whether they’re fires or significant water damage, where the amount of coverage on the policy was not enough because of these inflationary factors.
00;09;52;16 – 00;09;57;26
Kevin Brooks
So it’s something we do our best to advise our clients on. But, you know, there’s a lot of ownership on their end as well.
00;09;57;28 – 00;10;16;21
Chip Arenchild
As well, that’s for sure. Right. And I think I always joke around when you talk to somebody about their homeowner’s insurance, they’re really not sure what they have. It doesn’t matter what their private net worth or high net worth or just, run of the mill off the street. It’s just something you assume that it works until it doesn’t.
00;10;16;23 – 00;10;33;19
Chip Arenchild
And I think that’s what I’ve kind of enjoyed watching these public service announcements out here, because no one does. No. Right. And so the other thing that we discovered with the wildfires in California is the length of time it takes to rebuild and finding somebody to do it. And now we’re adding on top of that, these materials shortages.
00;10;33;24 – 00;10;49;21
Chip Arenchild
How do you address that? And do you talk to your clients about that potential like if if this worst case scenario does happen to you, do you have a game plan for where are you going to live, what you’re going to do, how long this money’s going to last as we wait for this rebuild to start? What how do you address that situation?
00;10;49;23 – 00;11;13;17
Kevin Brooks
Chip? That’s an excellent question. And unfortunately, I can tell you I have some real life experience with this, with the clients. So this is almost April of 2022. I had a client, main line Philadelphia, so immediate suburb of the city here, who had a fire that was actually originally this was March of 2020. The fire was sparked due to mulch being placed over an outdoor lighting fixture.
00;11;13;17 – 00;11;31;19
Kevin Brooks
Okay, so this was a seven figure claim. This client, I am not kidding, is still not in their home. So the insurance company, in addition to paying for the cost of repairs and the cost to replace all of their belongings that were damaged by the fire. And again, it’s not just fire damage, it’s smoke damage. I mean, there’s a lot that goes into this.
00;11;31;22 – 00;11;49;11
Kevin Brooks
The cost for this client to get a a comparable home in the same area, in the same school district where their kids could still go, was over $8,000 a month. And this has been over two years that this rebuild has been going on. So to your point, it absolutely is a conversation that we need to have as insurance professionals.
00;11;49;11 – 00;12;07;16
Kevin Brooks
And and really, you know, kind of be sometimes the voice of reason and the voice of experience to remind them that, hey, this what they call loss of use coverage, which is what you’re referring to, right? An insurance peak loss of use is what it sounds like. If there is a covered claim in your home becomes uninhabitable, where are you going to go and how long is it going to take?
00;12;07;23 – 00;12;34;26
Kevin Brooks
And I can tell you again, from, from experience, folks perpetually underestimate two things, right? Number one, how long it’s going to take to get back in their home after a claim. And number two, what it’s going to cost to replace all of their stuff old for new, you know, that that brand new 65 inch TV, that Samsung TV that you want back in your family room that’s going to cost more than what you paid probably four years ago for it, or maybe not, but you want something comparable and you got to have the right coverage for it.
00;12;34;28 – 00;12;53;10
Chip Arenchild
So I think that’s so important. Right? I think it’s just human nature. Right? We don’t think about these worst case events happening to us until they do. And we’ve heard that repeatedly from folks who have gone through the fires in Santa Rosa, the campfire up in Paradise outside of our Chico office, the Redding fire. Unfortunately, we’ve had plenty of these experiences.
00;12;53;10 – 00;13;11;08
Chip Arenchild
Now, do you do anything particular to try and bring that to the forefront of their mind, or why that’s so important that we, your clients, know that? Okay, when I work with Kevin, I know I’m going to have this conversation around these variables that if it does happen, I can rest at night knowing it’s taken care of.
00;13;11;11 – 00;13;31;00
Kevin Brooks
Absolutely. I mean, I would say the these candid conversations that we have with our clients or prospective clients kind of in the giddyup, is hey, we are here to help you insure against the catastrophic. That’s that’s a phrase that, you know, my team and I use pretty frequently to remind these folks that, you know, this is a useless piece of paper until it’s time to use it.
00;13;31;01 – 00;13;32;13
Kevin Brooks
You made reference to that earlier?
00;13;32;13 – 00;13;39;07
Chip Arenchild
No, no, it no one wants it until it until you need it. And then you’re like, well, damn, I wish I would have known more about it when I bought it.
00;13;39;07 – 00;13;53;20
Kevin Brooks
Hey. And even the the folks like myself that have been working in the industry for a while, I mean, we had the same viewpoint. You know, I’ve told clients, I hope you never have to use this, but I feel good knowing that, you know, rest assured, if push comes to shove in, it’s time. When rubber meets the road, you have the right policy.
00;13;53;20 – 00;14;17;05
Kevin Brooks
And that has to do with talking about risk management devices. You know, water leak detection systems. It’s about selecting appropriate deductibles depending on your tolerance for risk and your liquidity. It’s talking about, again, market value versus rebuild value of your home. Talking about hey, are you going to have enough coverage? God forbid. There is a severe, you know, loss, lots of damage, and you’re going to be out of your home for a while.
00;14;17;05 – 00;14;45;12
Kevin Brooks
So there’s a lot of factors, Chip. I mean, we could do a whole segment on this alone, but I will just kind of leave it at, there is a reason why some of these more sophisticated clients with folks with, you know, properties all over the country, let alone, you know, the eastern seaboard, why they need a little bit more white glove service than they need to be working with someone that has the experience and the knowledge and the perspective to make sure that they are not just looking at it from a dollars and cents standpoint.
00;14;45;12 – 00;14;51;12
Kevin Brooks
Right. Because at the end of the day, there is nothing more expensive than an unpaid claim, right?
00;14;51;14 – 00;15;12;08
Chip Arenchild
Totally. Yeah, yeah. You’re indirect loss on an unpaid claim is, pretty steep. You mentioned water damage. That’s one area that I sometimes think around. All insurance, property insurance in general. How do you handle or advise your clients on water coverage within a homeowner’s insurance? My experience has been, you know, everyone thinks that everything’s covered until it’s not.
00;15;12;08 – 00;15;29;08
Chip Arenchild
And then they’re totally upset because they found out there was a limit for a certain coverage. And they if I would have known it, I would have done something different. I mean, I have heard that 100 times in my career. So is there anything special you do to help point out how a contract is written and what you can do to modify it?
00;15;29;11 – 00;15;52;03
Kevin Brooks
For sure, for sure. Before I answer that question directly, I’ll just I’ll kind of give you some some stats here as well that I think will resonate with the audience. There was kind of a misconception for folks, you know, again, not in the industry that the reason for rising costs on their, their homeowner’s policies has to do with, you know, natural disasters and inflationary factors.
00;15;52;03 – 00;16;12;25
Kevin Brooks
And for sure, again, those are absolutely playing a big part in these increases that we are seeing. But what folks don’t realize is that non weather related water damage claims are absolutely by far the industry driver. And it has been for over five years now. They say that 1 in 4 insurance claims that are filed is filed for non weather related water damage.
00;16;12;27 – 00;16;39;10
Kevin Brooks
One inch 50 homes are going to experience frozen pipes every year. One inch 50 homes are going to experience water damage or frozen pipes every year. Why? Why is this happening with so much more frequency? Homes are getting older, right? Pipes are getting older and appliances. And this is kind of an interesting one. Chip. The new building trends in kind of what’s in and the fad these days is moving appliances upstairs versus keeping them on the lowest floor.
00;16;39;13 – 00;17;06;13
Kevin Brooks
So when leaks do happen, they are making their way down to other living spaces. So that’s kind of some stats and some, you know, a small explanation as to why. Now, what can we do, as you know, trusted advisors for our clients to help them mitigate this risk? You know, there’s devices out there, but from purely a coverage standpoint, every single human that with a homeowner’s policy in a home should have coverage for water backup of sewers and drains.
00;17;06;15 – 00;17;25;03
Kevin Brooks
Okay. Again, non weather related water damage. And that could be you know, a toilet overflow. Sink overflow. There’s a variety of of claims scenarios that I’ve seen. But I will say that there are many companies out there that do not automatically include this coverage. Okay? It’s a it’s a rider in many cases that you have to add for an additional premium.
00;17;25;05 – 00;17;39;27
Kevin Brooks
But I’ll tell you, Chip, one of the most memorable experiences that I had with a client was maybe 3 or 4 years ago. I got a phone call at 530 in the morning, from a client, and I look at my phone and believe it or not, I’m like, awake and having coffee. At this point. That’s what small children do, too.
00;17;39;29 – 00;18;06;00
Kevin Brooks
And I see this call coming in and I say, all right, you know, it’s 530. Call me for a reason. And I answer and sure enough, this gentleman had used his, his restroom up in the master bathroom around 11:00. He woke up around 5 a.m. to the sound of dripping water. The toilet had an overflow, and he had slept through it, and it had made its way down into his newly renovated kitchen and went so far as to cause bulging in the ceiling of his finished basement.
00;18;06;05 – 00;18;28;26
Kevin Brooks
And that was over the span of about six hours. So imagine that scenario. Had he gone away for the weekend, right? Do you use the facilities and left for the weekend? That claim Chip was over $50,000? Okay. That’s something. Where again, this this water backup of sewers and drains endorsement, which is common on a homeowner’s policies. That’s what pay this this claim for this gentleman.
00;18;28;26 – 00;18;49;19
Kevin Brooks
And it was a again, a large enough claim, but really just this, you know, tip of the iceberg in terms of other horror stories that you hear out there. So that’s an easy thing that you can add to a policy where a responsible agent will at least recommend it. And certain policy forms automatically include it. But there’s a prime example of, you know, everyone should have it right.
00;18;49;19 – 00;19;09;06
Chip Arenchild
And I think people don’t even recognize it. Just assume it’s covered. Again, it’s you don’t know to you don’t know. Do you recommend the leak detection systems? I’ve noticed that those are being sold by whether it’s Culligan water providers or you buy it yourself at Home Depot and you see all these things with the home alarms or any carriers, demanding that those be installed now.
00;19;09;06 – 00;19;29;08
Kevin Brooks
Yeah. So it’s again, great question. You know, myself personally, I do not have one I would say yet. But it is certainly a trend that we’re starting to see become more and more common, whether it’s a recommendation or in some cases, a requirement. Now we have plenty of clients, again, high value homes or even kind of, you know, more traditional middle market homes.
00;19;29;15 – 00;19;46;09
Kevin Brooks
And if you’ve had a non weather related water damage claim within the past five years, and you are going to move your insurance to another company, or if you’re looking at alternatives, there’s a very good chance that the carrier you are considering moving to, it’s going to have some kind of a requirement to get one of these systems in place.
00;19;46;11 – 00;20;02;08
Kevin Brooks
So I have to think, Chip, that there’s got to be some relevance to that, right? I mean, why would they be requiring this if they didn’t believe that it could significantly, you know, mitigate the impact of a claim or prevent it from happening in the first place. So I am seeing it more often. It is certainly becoming more of a requirement.
00;20;02;11 – 00;20;21;03
Kevin Brooks
I do know, you know, from a cost perspective, it’s like anything else within that space, the, the cost of the system is going to, you know, vary depending on the, the manufacturer, but it’s really the cost of installation because you have to get a professional, a plumber to install that. I believe most of the cost has to do with the diameter of your piping throughout the house.
00;20;21;03 – 00;20;37;23
Kevin Brooks
So it’s not a small task. It’s not something that you really go out and within two hours it’s done. I mean, it’s going to take probably, you know, a couple of weeks of planning and get into pieces in place and, obviously getting the right tradesmen to come out to your home with any within any kind of reasonable amount of time these days is also, difficult.
00;20;37;23 – 00;20;53;22
Kevin Brooks
But I do think it’s worth it. I think it’s especially worth it for, you know, folks who have had issues in the past. And for those folks who are, again, looking to move companies, I think that they need to be ready to hear that this is a requirement in order for that carrier to provide coverage.
00;20;53;24 – 00;21;14;23
Chip Arenchild
Yeah, I think, technology, right, continues to seep into all aspects of our lives. And now, you know, on motor, self-driving cars and, water detection systems, they seem to make sense and seems like a good place to, put a little focus for homeowners. You mentioned the water damage contribute to the claimed cost. Wilson, you mentioned wildfires earlier.
00;21;14;26 – 00;21;31;26
Chip Arenchild
So what are we seeing with second homes or areas that are being impacted? Right. We we just had a wildfire in Texas, which hasn’t had one before in the dead of winter, Colorado earlier this year. We have a freak wildfire burns through the town the next day. It snows right there. And we used to think this is a West Coast phenomenon.
00;21;32;02 – 00;21;48;04
Chip Arenchild
It’s beginning to look like it could happen anywhere at any given time. What are the carriers thinking about those? And I think we often don’t think about hurricanes and flooding. We’re all subject to where we live is the only potential hazard, right? We never think of it as a across the United States in the impacts of it.
00;21;48;06 – 00;22;05;24
Kevin Brooks
Yeah, absolutely. I mean, I should preface this by saying, you know, being an East Coast based agent, the majority of the secondary homes or primary homes that we’re working with or, you know, predominantly at the Jersey Shore and Florida. So fortunately, you know, knock on wood, we haven’t had a ton of issues with wildfires for our specific clients.
00;22;05;24 – 00;22;30;22
Kevin Brooks
However, you know, we have clients all over the country. We are licensed in all 50 states. So it’s certainly something that we’ve been exposed to in terms of having issues with, with, the wildfires out west in your part of the world. So what we’re seeing from carriers, Chip, is number one, again, for those Western states, whether it’s, you know, Colorado, Utah, California, seeing a few in the Jackson Hole, Wyoming area, they are asking a lot of questions about proximity to brush.
00;22;31;00 – 00;22;48;20
Kevin Brooks
All right. So they’re looking at these properties, you know, and they’re doing a deep dive on how close are they to, you know, wildfire or wildfire hazard and what what mitigation steps are in place. So they’re absolutely going to be asking about, you know, do they have a fire hydrant close by? Do they have an interior sprinkler system?
00;22;48;26 – 00;23;15;17
Kevin Brooks
Some of these folks, chip and I was actually talking to a, an Irvine, California based agent in our Risk Pro Net group. A couple of months ago, they actually advised me that for some of the wealthier clients that they work with, because the cost of insurance is so expensive for these properties, and I’m talking hundreds of thousands of dollars to insure a multi-million dollar property in Santa Barbara or the Los Angeles area that these folks and many of them do not have a mortgage, so they are not required to maintain insurance.
00;23;15;17 – 00;23;38;14
Kevin Brooks
This is their choice. They are forgoing the insurance component, and they are essentially self ensuring that part of the the risk. But they are contracting with private fire. Companies that are close by that are at their beck and call. That will come by as soon as you know there’s a wildfire within reach. They’ll put down fire retardant spray surrounding the property.
00;23;38;16 – 00;23;57;19
Kevin Brooks
Some of these folks actually install tanks full of thousands and thousands of gallons of water in front of their home so that that fire station, that private station can have access to it quickly. So people are getting creative. I mean, they they forget that, you know, within our professional sphere of what we do for our clients, it’s not always just about pushing a product, right.
00;23;57;19 – 00;24;20;06
Kevin Brooks
It’s about talking about strategy for mitigation or prevention. And with the wildfires out west, again, for for the folks that are fortunate enough to have that as a, you know, a possibility, they’re taking advantage of it for the rest of us mortals. Chip. It’s tough. There’s a lot of state run companies that are coming into the picture now because private companies, especially out West, do not want to write business there.
00;24;20;11 – 00;24;44;14
Kevin Brooks
You know, we started off our call by saying these are not philanthropic organizations. And if they can’t make a buck, someone else needs to step in. We’re seeing that with the wildfire hazards out west, and we’re seeing a lot of that in the southeast, particularly in Florida, with the state run, company insurer citizens is, you know, writing more homeowners policies than they ever had in their previous, you know, 40 year history because private markets are just not interested.
00;24;44;16 – 00;25;10;22
Chip Arenchild
Yeah, we have the fair plan out here, and it’s the exact same situation, right? It just keeps evolving. They’re never intended to take the volume that they’ve had to take. So it’s amazing to think how important this coverage is to the individual that the homeowner, the personal lines client that has these assets they want to protect and things they should be thinking about and why they need to be dealing with a professional who knows these coverages and knows where to look, knows that you have multiple markets to look from.
00;25;10;24 – 00;25;39;00
Chip Arenchild
Sometimes you’re not just captive to one of the direct riders. I also think it highlights the benefits of being part of, agency with risk pro net that you have. If there’s a problem in another part of the country, you can call on an agent like you just described working with the agency in Southern California to get advice and be able to give your client accurate information as to what’s really happening on the ground, doesn’t mean they’re going to like the advice, but at least you really know what what’s really occurring throughout the rest of the United States and not just in your backyard.
00;25;39;02 – 00;26;00;15
Kevin Brooks
Yeah, absolutely. It’s it’s a tough spot to be in. You know, we we want to do I really believe, in my heart that especially within our group at risk pro net, we want to do what’s right by our clients. You know. And if that means to refer them to someone else within our network that has a more intimate knowledge of their geographic area than we do, then that’s what we are, you know, expected to do.
00;26;00;15 – 00;26;15;12
Kevin Brooks
And we should, you know, you mentioned it’s we don’t always have good news to give to our clients, but if you go to a doctor and you have an issue, you go to a doctor and you have cancer, you want to, you know, they want to shoot you straight. Hey, you have a problem. Here’s how we can fix it.
00;26;15;12 – 00;26;40;28
Kevin Brooks
Here’s what I would recommend. You know, and I’m not believe me, I’m not kind of trying to give you the comparison between my profession and a doctor, because certainly there’s plenty of notable differences, but I think that is one core component of what we do that we need to take our role as professionals and advisors seriously and be ready to have those tough conversations and conversations that maybe other folks that are not as experienced within this space wouldn’t be ready or willing to have.
00;26;41;01 – 00;26;59;10
Chip Arenchild
Right? Well, Kevin, I think you do a fine job. You illustrate exactly how important it is to have a professional working on your behalf. When you buy an off the shelf product, or you just accept what someone gives you and they say, yeah, it’s covered. It’s really that old buyer beware, right? And so right now, it’s always encourage you to work with a professional that can help you out.
00;26;59;13 – 00;27;20;21
Chip Arenchild
The other thing it highlights for me as we have this conversation is I know we’ve just barely scratched the surface and we really just focused on property. Yet I would have to imagine, we’ll have to do another show to talk about some of the other things that consumers are facing, whether it’s the gig economy and they’re driving for Uber or something like that, or their kids or their Vrbo, and how that ties into their insurance program.
00;27;20;27 – 00;27;33;08
Chip Arenchild
I’d love to have you back for another conversation about some of the other consumer trends that we’re seeing out there with personal lines, and how they impact you and what you do in your day. I think that could make for an exciting topic as well.
00;27;33;11 – 00;27;51;13
Kevin Brooks
Hey, I would appreciate the opportunity. Believe me, these are all, topics that you just mentioned that we’re we’re well-versed in and we’re having plenty of, again, these difficult conversations with our clients, but, but meaningful conversations, you know, discussions that need to take place. And, hey, you let me know, and I’ll be back. Chip. No. No worries there.
00;27;51;16 – 00;28;06;22
Chip Arenchild
All right? We’ll we’ll we’ll set it up. Well, you know, knowledge is power. And what we’re trying to do with this podcast is just simplify things a little bit. So if you listen to it, you have a chance to at least understand what the issues are. Some things you can do and some simple steps. You can go to the show notes afterwards and take a look.
00;28;06;22 – 00;28;22;21
Chip Arenchild
They should be broken out for you as well and just encourage everybody. Take charge of your program. Work with a professional to get it done. Look for a risk pro Net agency member to help you get it done. So Kevin, thank you very much for being with us, and we’ll be back in touch to cover on some of these other topics.
00;28;22;24 – 00;28;26;16
Kevin Brooks
Hey, my pleasure. Chip. Thank you for having me.
00;28;26;19 – 00;28;45;04
Chip Arenchild
We hope you enjoyed this episode of Know Your Risk in Insurance Coverage with Risk Pro Net. For more information about Risk Brunet, please visit our website. You can follow us on Facebook and Twitter for insurance insights from everyone at risk. Pro Net. We want to say thank you for tuning in and see you next time.
