Homeowner's Insurance Trends and Tips for Agents, with Jennifer & Andrew Williamson

Interactive Transcript

spk_0 Welcome to Kansas City Real Talk, brought to you by KCIR.

spk_0 I'm your host, Alex Garing.

spk_0 Guys, I'm really excited about this episode.

spk_0 We are going to be talking about insurance rates and premiums and what we are experiencing

spk_0 both on the local market but also on the national level.

spk_0 There is no question that the insurance industry has changed quite a bit recently.

spk_0 And Andrew Williamson and Jennifer Williamson with American Family Insurance are coming on today

spk_0 to talk to us about all of it.

spk_0 This is a do not miss episode and you're about to learn a lot about the insurance industry.

spk_0 Let's go get Jennifer and Andrew.

spk_0 Welcome back to Kansas City Real Talk, brought to you by KCIR.

spk_0 I am here with Jennifer and Andrew Williamson with American Family Insurance.

spk_0 You guys thank you so much for joining us today.

spk_0 I want to start out by giving you guys an opportunity to tell us a little bit about you all,

spk_0 your experience as a husband and wife team, how you guys got started in insurance,

spk_0 your entire life story in less than five minutes.

spk_0 Go for it.

spk_0 I want to hear.

spk_0 I'll start.

spk_0 So I worked for an American Family Agent when I was in college.

spk_0 I went to K State.

spk_0 I worked on an internship program for about six months and then he hired me on to stay until I graduated college.

spk_0 And after I graduated college, he introduced me to a manager in Kansas City, which is my hometown.

spk_0 And I started a scratch agency 26 years ago.

spk_0 Is a scratch agency tell us what that means?

spk_0 So basically that means I have no policies, I have no clients, I have to build it from the ground up.

spk_0 From scratch.

spk_0 There we go.

spk_0 Got it.

spk_0 Yeah.

spk_0 Which is really hard to do.

spk_0 Yeah.

spk_0 And then me and my husband, my husband worked for a communications company doing sales,

spk_0 traveling three weeks out of the month.

spk_0 And we were wanting to start a family and didn't want our children raised in daycares.

spk_0 So he quit his job and came to work in the office with me in 2006.

spk_0 Wow.

spk_0 So yeah, we went to work in together for 19 years.

spk_0 And actually when he started working with me in the agency, my mom was our office manager at the time.

spk_0 So he worked with his wife and his mother-in-law.

spk_0 Oh my goodness.

spk_0 Thank you.

spk_0 How many years, man?

spk_0 Yep.

spk_0 And about what?

spk_0 You're after you started the agency, our first son was born.

spk_0 Wow.

spk_0 In 2007.

spk_0 Yep.

spk_0 November of 2007.

spk_0 And we actually took him to the office with us for about the first year of his life.

spk_0 That's so funny.

spk_0 You know, I talk often about when my first daughter was born.

spk_0 She's seven now.

spk_0 But I was in sales and I brought her with me everywhere.

spk_0

spk_0 And it was so rewarding and wonderful.

spk_0 And my clients were always so accepting of it.

spk_0 And loved her as much as I did.

spk_0 It was so fun.

spk_0 Yeah.

spk_0 It was so fun.

spk_0 So tell us a little bit about what's happening broadly in the insurance market right now.

spk_0 Obviously we've heard a lot about natural disasters.

spk_0 You know, so like on the national level, we hear a lot about Florida.

spk_0 We hear a lot about California with wildfires.

spk_0 We don't hear a ton about Midwest.

spk_0 People think about tornadoes and all that.

spk_0 We hear about Oklahoma premiums going up.

spk_0 But can you talk a little bit about what the insurance industry as a whole has been experiencing in the last year?

spk_0 Two.

spk_0 Yeah, some American family doesn't do business in Florida.

spk_0 California.

spk_0 If you drew a map of the U.S. and looked at the coastline, we aren't in the coastal areas.

spk_0 We touch a little bit of Georgia.

spk_0 We're in Georgia, so a little bit of the coast there.

spk_0 And then Pacific Northwest, Washington and Oregon.

spk_0 But the wildfires that you hear that have all of the media descending on their towns when major wildfires occur are not directly impacted by American families dollars.

spk_0 What people don't recognize, and most people is the reinsurance companies.

spk_0 American family buys insurance to protect us from catastrophic health storms, tornadoes, wind storms.

spk_0 When we're paying billion dollar losses, we start dipping into our reinsurance companies.

spk_0 There are few reinsurance companies globally.

spk_0 When California happens, when the wildfires occur, when the hurricanes in Florida happen, flooding in Louisiana, those reinsurance premiums for every insurance company increase.

spk_0 It takes probably a year or two cycle for those premiums to start to increase.

spk_0 But indirectly, we all contribute a little bit more in premium when those sort of catastrophic losses occur.

spk_0 From a reinsurance standpoint.

spk_0 Just in that statement alone, I realize quickly that I know way less about insurance.

spk_0 I already figured I didn't know much, but now I feel like I know even less.

spk_0 So when you talk about reinsurance, I want to make sure I understand reinsurance is a policy that the carrier holds.

spk_0 Can you explain that a little bit?

spk_0 You said that American family also holds reinsurance policies for these smaller carriers around the country.

spk_0 We buy, locally there's a company called Swiss Re.

spk_0 They're not based in Kansas City, but they have regional headquarters in Kansas City.

spk_0 It's called Swiss Re.

spk_0 It's from Switzerland, and it's reinsurance.

spk_0 That's one of the largest reinsurance companies.

spk_0 The American family buys a product from them to help protect us from hillstorm that happened in March of last year.

spk_0 My house was affected by a massive hillstorm that rolled through town.

spk_0 Thousands and thousands and thousands of homes roofs were destroyed, grudges, a little tornado in western Shawnee.

spk_0 Small little thing didn't cause tremendous damage.

spk_0 They dipped into, because those are catastrophic dollars.

spk_0 You think just that geographic area alone in our neighborhood and the surrounding areas around us.

spk_0 My claim was $44,000.

spk_0 There are 600 homes in my subdivision.

spk_0 Every home in my subdivision needed a new roof.

spk_0 Every home in western Shawnee from that 435 to Dusoto, K10 to the speedway.

spk_0 Every home in there was probably damaged.

spk_0 They're going to dip into the reinsurance premiums.

spk_0 One part of the problem too is that the reinsurance companies are changing their guidelines and making their guidelines more strict for us to get reinsurance.

spk_0 Therefore we have to change our guidelines to follow.

spk_0 Wow.

spk_0 Nice segue into deductible things.

spk_0 Coverage things applicable to roofs.

spk_0 Let's go there in a second.

spk_0 I do think this is a new concept for the majority of our listeners.

spk_0 Just to make sure that the blueprint is clear, I as a homeowner have an insurance policy through a company.

spk_0 That insurance company has a policy protecting it from large scale calamity.

spk_0 If I have a large loss or my whole neighborhood has a large loss, then the company that I have a policy with is going to file a claim with the reinsurance company that they have a policy with to make sure that they remain solvent.

spk_0 Yes.

spk_0 How many large scale?

spk_0 Large scale.

spk_0

spk_0 Large loss.

spk_0 Yes.

spk_0 So entire neighborhood experience, a Hale storm or a large tournatic event, something like that.

spk_0 Then those reinsurance companies are engaged.

spk_0 And how many reinsurance companies are there in the market?

spk_0 Maybe half a dozen.

spk_0 Half a dozen.

spk_0 So you've got about six companies that could determine what's going to happen for rates for everybody else.

spk_0 We see all of these different insurance companies, but if these companies increase their reinsurance rates, then you all have to increase the rates that you pass on to everybody else to make sure that those products, you know, or to make sure you're protected.

spk_0 And also to make sure that the homeowner's protected because without that reinsurance policy, you guys might not be able to pay the.

spk_0 So there may not be enough money in the envelope to pay claims.

spk_0 And the biggest problem we're seeing is if you think about it, like you'd have a tornado maybe once every seven years, seven to ten years, right?

spk_0 Well, now we're having tornadoes, and Hale storms, like every year.

spk_0 Right.

spk_0 And so the problem is insurance companies.

spk_0 It's hard to predict rate.

spk_0 Like if you have a tornado and then you've got seven years to collect premiums and invest to make up that difference for a large tornado or a large Hale storm, we don't have that anymore.

spk_0 So I don't want to get to like some kind of a conspiratorial space like that's not me.

spk_0 That said, is it, is it possible that in addition to there being maybe some, some additional Hale, is it also possible that with a surge in door to door middleman roofing companies, we've just seen a lot more people encourage to file Hale damage claims.

spk_0 Add a more frequent clip.

spk_0 Is that accurate or not so much?

spk_0 I should, that the impact to the frequency of claims occurring because of door to door sales people in my experience, and I take a lot of phone calls, I do a lot of reviews with clients.

spk_0 That's a very, very small piece of our claim exposure.

spk_0 Got it.

spk_0 More often than not, you know when a Hale storm hit.

spk_0 I mean, March of last year and then 2017 had another one.

spk_0 You know when your home is damaged by Hale most of the time.

spk_0 Where it starts to pick up though, sometimes the neighbors see in their neighbor getting a new roof.

spk_0 There's a roofing company in the front yard.

spk_0 Well, that roofer comes knocking on the door.

spk_0 Well, this one was covered by Hale and by their insurance policy.

spk_0 I can get the same done for you.

spk_0 Well, that's not entirely accurate and truthful.

spk_0 But I wouldn't say that that's a big part of the claim checks that were right.

spk_0 Okay.

spk_0 Most of them are just known catastrophic Hale storm events that almost every, but there's also a defining line.

spk_0 There's a point where that Hale stopped and the neighborhood next to it didn't get the damage.

spk_0 So it's not every home in Kansas City was destroyed by this Hale storm.

spk_0 Right.

spk_0 They are regional, but I wouldn't say that the door to door folks are have caused a tremendous impact in that.

spk_0 I think the impact is that, you know, most people wait for a Hale storm to hit, to get the insurance company to replace the roof.

spk_0 Instead of viewing it as this is my responsibility when the roof has got damage or it's old, they just replace it.

spk_0 Instead, they're waiting for a Hale storm to come and then the insurance companies are paying that bill.

spk_0 Yes. I think that's accurate.

spk_0 And so that's also contributing to the problem is that, you know, people aren't taking responsibility for that.

spk_0 And they're just waiting for the Hale storm to hit.

spk_0 Sure.

spk_0 And so now that's why you're seeing changes in policies because in order for insurance companies to stay in business,

spk_0 our clients have to take some part of responsibility and taking care of their home.

spk_0 All right. So now let's segue into talking about deductibles because from what we're saying, we're seeing the, you know, 2% of the value of the dwelling.

spk_0 Right. And anywhere from 1 to 2%.

spk_0 I think the lowest premium, or the lowest deductible for wind and hail that I've seen is $5,000.

spk_0 Basically, I haven't seen anything lower than that.

spk_0 What's happening there?

spk_0 So we talked about the reinsurance companies who put stipulations on us as to what you can and can't do moving forward.

spk_0 If you want to buy this policy or must, there needs to be a little more skin in the game from your standpoint.

spk_0 So they're dictating to some degree our need to change our deductible options and our limit to replacement cost coverage.

spk_0 In my 20 years of agency and up until the last six months, we didn't have to have discussions about percentage based deductibles.

spk_0 Actual cash value roof coverage endorsements because the age of your roof is X number of years old.

spk_0 The ours was simple $1,000 deductible minimum replacement cost coverage.

spk_0 Unless it's a wedge a roof or a dual a roof.

spk_0 There were some, some criteria differences.

spk_0 But this is a new discussion that we're having in my reviews with people.

spk_0 1% is the new normal of your coverage.

spk_0 2% isn't as common, but we do have some certain carriers that I'm quoting against are doing 2%.

spk_0 That's a, you have a $500,000 house.

spk_0 I mean, the average home in Johnson County is probably that or more.

spk_0 I think you mentioned 700 for new home construction is the average cost of new home in Johnson County.

spk_0 If you put in a 1% or a 2% when in hell deductible, that's a $14,000 deductible for a hell storm.

spk_0 I've seen some of 3%.

spk_0 So that's a factor and it's driven not by our desire to do that.

spk_0 It's dictated by other factors that are beyond our control.

spk_0 Well, not too long ago, like less than 10 years ago, you could replace a roof on a pretty sizable house for less than $14,000.

spk_0 Sometimes 8 to $10,000.

spk_0 If you were working with a company that had its own crews, you really could get a pretty reasonable deal on a good quality roof.

spk_0 It was just fine.

spk_0 And now, I mean, we must be honest, prices have also gone up to an extraordinary degree.

spk_0 And so if the deductibles were all stuck at $2,500, but the price of roofs were going up, basically they've doubled in the last six to five years.

spk_0 In the last four, three or four things.

spk_0 That's kind of wild.

spk_0 The insurance company has until recently, until these new policies have kind of taken effect, they have been covering 100% of that increase in material and labor cost.

spk_0 Including the replacing a 22-year-old roof that was damaged because of hail, but had it been a more recent newer shingle that hail may not have destroyed that roof in its entirety.

spk_0 We're treating like a maintenance policy.

spk_0 There you go.

spk_0 If your house needs painting because the sun has beaten down on it for seven years, no one thinks, well, I'll just wait until it gets really bad, and I'll file a claim on my homeowner's insurance.

spk_0 It's wear and tear.

spk_0 No one thinks that their house is going to be painted from their insurance policy.

spk_0 Sure.

spk_0 Everybody thinks that their roof should be replaced from their insurance policy, regardless of how old it is or the condition that that roof is in.

spk_0 One of the things that we experience in sales as well is we might, in real estate sales, there might not be any real issue with the roof that is causing anything that anybody would experience in the home.

spk_0 We're not seeing leaks and other things.

spk_0 Yeah, we're not seeing any leaks or anything like that.

spk_0 We get under contract.

spk_0 The inspector comes.

spk_0 They walk the home and they say, you got a little bit of hail damage up here.

spk_0 Well, historically, what that is meant is, oh my gosh, we're going to talk to the seller about filing an insurance claim.

spk_0 Then they do nine times out of ten.

spk_0 It was approved buyers getting a new roof to start out their home ownership journey.

spk_0 That is more or less what we were experiencing even though there wasn't really an issue with the roof itself.

spk_0 But there was an insurance and an insurability problem for the next buyer.

spk_0 I want to talk a little bit about that piece of things too.

spk_0 One of the things that we're experiencing are insurability issues after closing.

spk_0 We might find somebody to insure the property based on everything that they know.

spk_0 There are stories in the marketplace.

spk_0 I've had people in my office experience this as well where a month later, a 45 days later, the insurance company,

spk_0 we'll send somebody out to take a look at the home to make sure that it is what was disclosed to them.

spk_0 Then the policy changes dramatically.

spk_0 Can you talk to us a little bit about that process, why that's happening, and what you guys are experiencing in that regard?

spk_0 When we quote new business, when someone has sent to us and we're quoting their new purchase that they're buying,

spk_0 one of, if not the first question we ask, is how old is the roof on the home that you're buying?

spk_0 Well, I don't know.

spk_0 There needs to be some level of knowledge as to the person who's selling the house should have some idea when that roof was replaced.

spk_0 If they weren't the ones who did it, when they bought the house nine years ago, there should be some answer other than, I have no idea.

spk_0 Sure.

spk_0 If you have no idea, then we're going to put it probably 15 or 20 years old, and then you're going to get ACV.

spk_0 If the roof is nine years old, you just hurt yourself in that transaction.

spk_0 And ACV is actual cash value.

spk_0 If the roof is questionable, we'll go out and take a look at it to make sure we think it's insurable before we insure the policy.

spk_0 So we don't have situations like what you're talking about, where we insure something, and then they go out and say, oh, sorry, this roof is an insurable, we're going to cancel you.

spk_0 So you guys will go out before closing and before writing that policy.

spk_0 I don't want to write a policy that's going to be canceled in a month.

spk_0 Does it do anyone any good?

spk_0 Doesn't do you any good?

spk_0 No, nobody.

spk_0

spk_0 Buy any good.

spk_0 It doesn't have any further.

spk_0 The source does not.

spk_0 Of course.

spk_0 The one thing that, of course, is donning on me while having this conversation.

spk_0 Our real estate contract says that insureability has to be determined during the inspection period, which is by default 10 calendar days.

spk_0 And that, it occurs to me, it would be very difficult for you guys to be able to get somebody out during that time period to determine the insureability of that roof.

spk_0 So that's probably something that, definitely the realtors that are listening, they need to be aware of that potential discrepancy in the contract versus our process.

spk_0 And also, we probably need to be looking at the real estate sales contract that we use to make sure that buyers are better protected there.

spk_0 Go ahead.

spk_0 And have a good resource as a realtor.

spk_0 You should have a reputable, knowledgeable insurance professional that you work with.

spk_0 If you call and say, look, I've got this roof, I've got this house.

spk_0 It's on the fence about, I don't know if the condition of it, if it's going to go through.

spk_0 Can you go look at the thing before we get too far into the thing?

spk_0 Do you think it's going to be insurable?

spk_0 Do I have an opportunity to negotiate a new roof or new paint or some of the wood rot that needs to be repaired, that sort of thing?

spk_0 And I've done that over the years for countless people.

spk_0 I've probably done it a hundred times in my 20 years where I'll just go look at it.

spk_0 It's local. I'll hop in the truck and go look at it.

spk_0 And I'm not the one who makes the final determination.

spk_0 But I've done it enough to know that'll be fine or it's going to need a new roof.

spk_0 So I don't want to go down to path where we're talking about the pros and cons of specific business models.

spk_0 But it does occur to me that a lot of people are talking to insurance brokers.

spk_0 And I do question, and I'm curious as to your thoughts, do insurance brokers...

spk_0 Are they...

spk_0 Is it as easy for them to make sure that a roof is insurable as it is for an individual policy writer and carrier?

spk_0 Yeah, I mean an insurance broker isn't entirely different than what Jennifer and I are.

spk_0 Okay.

spk_0 We're just captive agents. We all these American families product.

spk_0 A broker will sell for safe coal, for liberty mutual, for a variety of different carriers.

spk_0 Each carrier is going to have different underwriting guidelines pertaining to the roof, pertaining to deductibles.

spk_0 And they'll know what their sweet spot is for the carriers that they want to work with.

spk_0 I would think that an independent broker would have the ability to go look at a home and do their own visual inspection, just the same as I would.

spk_0 Having said all of that, American family, we have direct relationship with our underwriters.

spk_0 We have a pretty streamlined process.

spk_0 A broker, they probably don't have fantastic relationships with their underwriters and they're just putting data into the system and generating a number and hope that it goes through.

spk_0 I see. I see.

spk_0 That would be my only thought on that.

spk_0 I wanted to go back to when we were talking about ACV or saying actual cash value.

spk_0 How is that determined?

spk_0 So I understand that a lot of our deductibles now are going to be based.

spk_0 They begin. There's a depreciation schedule.

spk_0 When does that kick in and how does that work most of the time?

spk_0 I'll try to keep it as simple as possible. The answer is it depends.

spk_0 Okay.

spk_0 But for new business opportunities, it's 10 years in Kansas.

spk_0 The age of the roof needs to be 10 years old or newer to qualify for full replacement cost coverage.

spk_0 If it's in excess of 10 years, there's a schedule that says at your 11, you get this much ACV coverage.

spk_0 It decreases by 4% each year down to 25%.

spk_0 That's the, it stops at 25%.

spk_0 The reality is if you've got a 1% when in hail deductible and you've got 25% coverage, there's not a whole lot of coverage left for the roof.

spk_0 Sure. And a lot of people aren't even going to file that claim at that point, right?

spk_0 Unless there's, you know, the hail damage dented the siding of my house.

spk_0 It dented my garage doors. It destroyed my deck. It damaged my paint.

spk_0 When ours hit last year, I got my deck repainted. It destroyed things other than the roof.

spk_0 That's another important thing to talk about though.

spk_0 Go ahead.

spk_0 People should always call their insurance agents before they file a claim to make sure that it is something that's covered.

spk_0 And you know, determine, okay, my deductible is this.

spk_0 And I've only got this much coverage. Is it really worth filing a claim?

spk_0 So I think there's a little bit of misinformation maybe out there about this piece.

spk_0 I think a lot of people are maybe afraid to call their insurance agent because they believe that when they call their agent, a claim will be filed.

spk_0 It's an exact opposite. There we go.

spk_0 If they call the 1-800 number, that claims representative is only going to file a claim.

spk_0 They will never answer a, what if question or how, how would this, their only job is to open up a claim and let the adjuster make that determination.

spk_0 My job is to advise, to gather the information, to have an honest, sometimes painful.

spk_0 Well, what do I pay for?

spk_0 I'm just, you made the call. This is the proper thing to do.

spk_0 It's not worth filing that claim or go ahead or you're not sure if the roof was damaged enough.

spk_0 I have roofing referrals. I can send them out. They'll take a look at it. They'll give me their report and then we'll make a decision then.

spk_0 If it's, if they say it's worth replacing, let's go ahead and open up a claim.

spk_0 There we go. So that's an important thing. Call your agent.

spk_0 Call your help to your ankles. Just call in the claim.

spk_0 Sometimes it's obvious. It's obvious.

spk_0 It's the one-if scenarios that I want people calling me for.

spk_0 Sometimes people file claims and then they realize, oh, it's not covered.

spk_0 Well, that still shows up on their claim report as a zero paid out claim.

spk_0 Which still affects them.

spk_0 And also what we see more often than not is a seller called that out.

spk_0 It was called it in.

spk_0 It ended up being a zero payout.

spk_0 And then they think to themselves, well, I didn't get anything, so I didn't really

spk_0 file a claim and they don't disclose it.

spk_0 But then the buyer finds out when the clue report is run and all of a sudden their insurance

spk_0 agent is talking to them about it.

spk_0 So that's a really important thing to talk about.

spk_0 Thank you so much for bringing that up.

spk_0 I want to talk a little bit about what's happening here locally.

spk_0 We've talked a little bit about the macro market.

spk_0 I want to know because obviously we've seen premiums come up here locally as well, right?

spk_0 I think there were up a lot higher in Oklahoma.

spk_0 I saw a chart recently that showed that Oklahoma was seeing the highest premium hikes, obviously

spk_0 Florida and California, but in the Midwest, Oklahoma was the largest one, but we were not

spk_0 far behind the second or third.

spk_0 Yes.

spk_0 I think Missouri was even a hair worse maybe than Kansas, but we're pretty equal when it

spk_0 was running rough.

spk_0

spk_0 So obviously we're seeing premiums come up.

spk_0 That said, people are able to find premiums that are a little bit lower with rates that

spk_0 seem almost impossible in comparison to what you might see from other carriers.

spk_0 Can you talk to us a little bit about that and what those market dynamics are?

spk_0 We've seen it historically too, so maybe some historical reference on that as well.

spk_0 That's a tough question to answer because we're captive agents.

spk_0 I don't shop against some of the smaller rural regional carriers.

spk_0 Sure.

spk_0 But if it's too good to be true, there's something in that policy.

spk_0 If it's thousands different, there's something in that policy that isn't the same as what

spk_0 the higher value policy is and you're probably not going to find out until you call in a claim.

spk_0 And then you find out that that's not part of your policy.

spk_0 You looked at a dollar.

spk_0 How much is my premium?

spk_0 Not.

spk_0 What is my coverage?

spk_0 What is my deductible?

spk_0 What is my roof coverage?

spk_0 What am I actually covered for?

spk_0 When you focus on, I just need this number to be this so I can get the deal closed.

spk_0 That's where you run into trouble.

spk_0 I have a good example of that.

spk_0 I had one where I had to end a quote for someone.

spk_0 It was a rental property, but we were like $500 more.

spk_0 But there was differences in coverage, but he didn't care because he wanted to save

spk_0 the $500.

spk_0 Well, six months later, he's got a pipe that burst, $5,000 in damage and not covered.

spk_0 And it would have been covered on our policy.

spk_0 So he saved 500.

spk_0 But lost five.

spk_0 But lost five, Graham.

spk_0 Yeah.

spk_0 So that's just some of the things that we see where there's little things in policies

spk_0 that are different.

spk_0 Sure.

spk_0 So you can save a buck, but it might cost you a long run.

spk_0 One of the things that I experienced personally that I'd love to hear your comments on, I was

spk_0 with a carrier for a while because I was just getting a killer premium.

spk_0 I mean, it was a great premium.

spk_0 And it seemed like great coverage as well.

spk_0 And basically, everybody that I sent it to to shop said, oh, it's a, you got to do it.

spk_0 Like, sorry.

spk_0 I wish I could beat it, but stay put and you got to do it.

spk_0 But they left the market the next year, which was fine.

spk_0 It's not like I was upset.

spk_0 I didn't have any like extreme loyalty to them or anything like that.

spk_0 But of course, I saw my premium, you know, more than double.

spk_0 So what happened with these companies that enter into the market, throw these low premiums

spk_0 down and then leave?

spk_0 What are the dynamics there?

spk_0 What is that?

spk_0 Why is that even a profitable thing to do?

spk_0 I'm not well first in that.

spk_0 That seems like something that the Kansas Insurance Commissioners should be a little more

spk_0 intuned with allowing companies, regional carriers to come in by the market, not pay claims,

spk_0 and then leave the market.

spk_0 I don't know how that business model works.

spk_0 I'm not here.

spk_0 Here's my question to speak much to that.

spk_0 This re-insurance that you were talking about.

spk_0 Are all insurance carriers required to carry re-insurance?

spk_0 I would think that the financial rating companies that we partner with, I mean American

spk_0 family, as an AM best rated and has been for decades, insurance company that proves

spk_0 to the consumers that we have the funds, we manage our money well, and will be there for

spk_0 you if catastrophe happens.

spk_0 AM best has certain requirements that we participate in in order to prove our financial

spk_0 stability.

spk_0 Those other carriers may not follow that rule of thumb and maybe don't purchase re-insurance,

spk_0 which when you have Greenland Kansas, years ago, Greensburg, Greensburg, there are a lot

spk_0 of regional small carriers in that western part of the state that you've never heard

spk_0 of that went bankrupt and solvent.

spk_0 Then the state has to come in and pay those claims.

spk_0 That's also part of our premium is paying money into the Kansas Fair Plan that exists

spk_0 to pay claims when other companies don't have the means to pay claims when catastrophic

spk_0 damage like that happens.

spk_0 Well, I know there's about 25 companies who have pulled out of Kansas.

spk_0 Oh, yeah, it's gone bankrupt.

spk_0 Yes.

spk_0 And it's not even small companies.

spk_0 There's a large one in California that is pulling all policies out of the market, like

spk_0 38,000 policies in California and they're going to be pulling in all other states.

spk_0 And it's a company that everyone listening knows.

spk_0 So if we're talking about these small carriers where they suffered and really the

spk_0 homeowners suffered catastrophic losses in a large geographic area and then these carriers

spk_0 went bankrupt or belly up.

spk_0 How do we want to put it?

spk_0 In that kind of a situation, why weren't they able to use the reinsurance or it was

spk_0 a just assume that they didn't have insurance?

spk_0 They may not have insurance.

spk_0 There we go.

spk_0 Interesting.

spk_0 Now where the Kansas Fair Plan has to come in.

spk_0 And the issue that those clients will have is that if they've got a few claims on their

spk_0 record during the time they were with that carrier and then that carrier pulled out of the

spk_0 state, now they're shopping for insurance with multiple claims on their record and they

spk_0 may not qualify for policies with other companies and then they have to go to the Kansas

spk_0 Fair Plan.

spk_0 Sure.

spk_0 And it's expensive and not good coverage.

spk_0 Plus, you've got multiple claims in your record and you're now dealing with probably

spk_0 companies that do have to include reinsurance which is going to increase premiums and have

spk_0 stricter deductible policies.

spk_0 Right.

spk_0 You have taken what used to be a huge tin lane highway of choices to pick from and now

spk_0 you're down to two.

spk_0 Wow.

spk_0 This company A or the Fair Plan because of your claims history.

spk_0 Is there a way that a buyer or a homeowner can identify if reinsurance is part of their

spk_0 policy?

spk_0

spk_0 So the fact that reinsurance, because I know that it's not the same because I know that

spk_0 like I know that one is provided at the federal level and reinsurance is apparently a private

spk_0 policy, right?

spk_0 But it seems a bit like FDIC backing a bit, right?

spk_0 And I know that it's not, but like at some level of protection that if your company doesn't

spk_0 have enough money to pay out all of the claims that somebody else is able to step in and

spk_0 finish the job, right?

spk_0 And this on these reinsurance policies.

spk_0 It seems like if reinsurance isn't there, that's something that should be disclosed.

spk_0 Well, so I think the important thing for clients is just to look at the financial stability

spk_0 rating of the insurance company they're going with.

spk_0 That will tell you whether that company is able to pay claims.

spk_0 Understood.

spk_0 And truthfully, the frequency of which those things happen is not that great.

spk_0 It's becoming more, more frequent.

spk_0 But if you're choosing a company that you've heard of, that everyone has heard of, any brand

spk_0 that you see advertising is going to have reinsurance coverage.

spk_0 Yeah, they're in a good rating.

spk_0 They're Fortune 300, 200 companies.

spk_0 They're a best rated.

spk_0 They can spread risk all over the country in different ways.

spk_0 It's more the smaller rural, regional, never heard of.

spk_0 And that's where some of the brokers, if you're shopping rate, a broker has access to

spk_0 those companies that none of us in this room have ever interacted with or heard of.

spk_0 I think an important thing for clients to do is maybe research how insurance, how that

spk_0 insurance company pays claims, right?

spk_0 Because sometimes I think that when you see a lower rate, sometimes it's because they're

spk_0 not necessarily paying out claims.

spk_0 I see.

spk_0 As well.

spk_0 Understood.

spk_0 American family pays claims as well.

spk_0 Right.

spk_0 Okay.

spk_0 Last topic, and then I've got a final question for you guys as well, but I'm curious about

spk_0 your predictions, right?

spk_0 So do you expect we've seen premiums go up and we've seen deductibles go up.

spk_0 Do you think that we're stable now or do you expect that premiums will continue to

spk_0 rise or do you expect that they might drop?

spk_0 And let's talk like the next 12 months.

spk_0 Are we reaching a point of stability or are there more changes coming?

spk_0 I think within the next year we will stabilize.

spk_0 Okay.

spk_0 I don't anticipate major underwriting changes, deductible changes.

spk_0 I mean, American family choosing to go from a flat deductible to a 1% was a massive

spk_0 change in our sales approach and our relationship with our clients.

spk_0 They don't make changes like that lightly and frequently.

spk_0 So when the powers that be decided to make those changes, they knew the impact that that

spk_0 would have.

spk_0 Or not, I don't predict massive changes to our underwriting criteria any time soon.

spk_0 We've had two or three years of rather impactful rate variations.

spk_0 I think assuming Mother Nature leaves us alone for a while and we don't have massive catastrophic

spk_0 health storms, then American families also a very conservative company in regard to its

spk_0 finances.

spk_0 If the data says we have to take rate to make up for these losses, we do as little as

spk_0 we can to that rate increase.

spk_0 But if it says we have to, then we usually do.

spk_0 There are some competitors who try to buy up business during that time.

spk_0 But then the problem with that, here's this great rate.

spk_0 Well, some companies, yeah, some companies that you're later are going.

spk_0 Well, in some companies, they actually determine here's what rate you should take and a lot

spk_0 of companies don't take the rate that they should take.

spk_0 So maybe it says you should take 40% rate increase and they might take 10.

spk_0 And then they're just in a worse position a year from now.

spk_0 And so because of the nature of how that part of the industry works, do you expect that

spk_0 some of those that are.

spk_0 They're going to catch up.

spk_0 Those are going to catch up.

spk_0 So while some of the national carriers maybe have stabilized, people should expect that

spk_0 some of the carriers that you're saying that are lower right now, we should expect them

spk_0 to increase just based on that.

spk_0 I think even a few of the national carriers haven't taken the rate that they needed to.

spk_0 And I think they're going to need to play catch up.

spk_0 Okay.

spk_0 I think American family has gotten ahead of the game and we're going to be in a good position.

spk_0 And not sure everyone will be.

spk_0 And that can be painful for you guys in the short term.

spk_0 It is.

spk_0 But long term.

spk_0 Long term mobility.

spk_0 It's what everybody's going to experience.

spk_0 And there we go.

spk_0 We've been doing it 25 years.

spk_0 This is the height for us.

spk_0 We will start to see it.

spk_0 We're starting to see it already in some of our coding.

spk_0 Our auto rates are stabilized.

spk_0 We're seeing a rate decrease coming on our auto premiums.

spk_0 But our homes, I feel like again, we took right earlier than others.

spk_0 Right.

spk_0 They're catching up to us.

spk_0 And we're calling every client 45, 60 days prior to renewal to schedule a meeting to explain.

spk_0 Here's what's happening.

spk_0 Here's your options.

spk_0 If you want to try and lower your rate, you can do this deductible.

spk_0 Here's some things that we can do.

spk_0 And not every insurance company is doing that.

spk_0 Of course.

spk_0 And I will say one more thing about the roof thing.

spk_0 My earlier question was the answer is it depends.

spk_0 My policy is a very old American family policy.

spk_0 I don't have the 1% when and hell deductible requirement.

spk_0 Clients who have been with American family, I would imagine state farm and I'll probably

spk_0 have similar policies that are older policies that they no longer write new business in,

spk_0 that are grandfathered in, if you will, with a different sort of policy deductible option.

spk_0 But any new business has been rewritten or written in the last six years.

spk_0 It's more common to see 1%.

spk_0 But if you're sellers and buyers, I don't have that.

spk_0 You shouldn't be surprised.

spk_0 Because they're 40% of our clients don't have 1% deductible.

spk_0 Got it.

spk_0 Okay.

spk_0 That's an important clarification.

spk_0 Well guys, this has been so informative.

spk_0 I really appreciate you both.

spk_0 I want to be respectful of your time.

spk_0 Thank you guys so much.

spk_0 I think this is going to be a really beneficial episode for our members and for our listeners.

spk_0 Thank you.

spk_0 Appreciate you having us.

Homeowner's Insurance Trends and Tips for Agents, with Jennifer & Andrew Williamson

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