Insurers Take a Harder Line on Reported Property Values
[00:00:00] Dan Wentz: [00:00:00] This is the policing you first podcast. I'm Dan Wentz and this podcast features news and insights from CRCs fast knowledge base of 2000 plus associates who write neccess of $8 billion in premium annually. And we're giving you insider access to what's happening in our company and the types of insurance we place on this edition of the podcast.
David Pagoumian: [00:00:22] I learned at a very young age, my wonderful mother. She taught me the lesson of honesty and. So from that spring boarding into everyday life, [00:00:30] when we work on these large accounts or small accounts, this is somebody's passion, they're building their business. And so if we get the data wrong from the very first step of getting the data right on, then it just has this rippling effect downstream.
This is the placing you first
Dan Wentz: [00:00:48] podcast, please. Property insurance rates, rising buyers may wonder if lowering the values they report to them. Sure is might help to lower premiums today. We're going to [00:01:00] explore this strategy with one of our CRC property specialists, David Hagopian's on the conference with us today.
He's the president of the CRC red bank, New Jersey office. David specializes in property placements and of course is an active member of our property practice advisory committee. So a great person to talk to about this. David, how are things going for you? It's been a while since we talked.
David Pagoumian: [00:01:19] Hey, Dan. Yeah.
Thanks sir. Thanks sir. Thanks for good. You know, there's a lot of gratitude, you know, in our family that we can work from home and provide meaningful solutions. Uh, you know, [00:01:30] I always think of us as the first responders to the economy. Yeah. The products that we provide, not as brave as the first responders putting on scrubs each day, but nevertheless, still meaningful work.
And so from that regard, things get heavy. Sometimes you just sort of reflect on the, the gifts that we have and. It becomes a lot softer to absorb for sure.
Dan Wentz: [00:01:51] Well said. Okay, well, let's set the stage for this conversation here today. Can you give us a quick recap of property insurance rates and you [00:02:00] know, what's currently happening in the property market?
David Pagoumian: [00:02:02] Yeah, sure, sure thing. So right before COVID-19 we were aiming into a, we were in a fallout, hard market. Micro hard market, as it relates to certain classes of business, habitational certain coastal classes. And then you dump COVID-19 on top of that. And this is something that even the pros have never seen before.
Right? So you have CEOs of all these big companies saying we've never seen anything like this, you know, so add that to someone who's been in the business five, 10 years. That's that's [00:02:30] heavy, real heavy. Oh, look at the end of the day. For the most part, the market's still very viable and deals are happening.
But it's happening on their terms, Stan. I mean, you can try your best to come in with a better data view and, uh, you know, provide, you know, more knowledge or risk improvement processes. And you might whittle it down a little bit, but you're still gonna get stung in this market.
Dan Wentz: [00:02:51] So rates are going up increasing.
Yes, sir. And, uh, buyers are looking to lower premiums. Of course, one of the strategies they're exploring is lowering [00:03:00] the values they report. This may have worked in the past. Is that a good strategy now?
David Pagoumian: [00:03:05] No, this was never a good strategy. You know, that this goes back to wow. The beginning of insurance, when everyone realized that.
On your values to determine what your premium is. So, yeah, just a quick history on it. You know, there were times where the DFM operator in particular would accept the client reporting of value of their personal property or their building valleys at 90%. So if it was a $10 million [00:03:30] building, they would say, Hey, if you want to report it at 9 million, that's fine.
But that was reporting the values accurate, right? So you would have to report them highly accurate. And then you can discount it by 90%. Well, that sort of got lost along the way. And I think certain people took it to a little bit farther, then it was intended. And so as a result of all of that, and as the losses started coming in, there was just flight to quality back in the underwriting dens of, of these big companies where ITV became a big priority all the way up to the top of the [00:04:00] corporate ladder.
And so training on the writers to identify ITV issues and also using software that we will get into in a little bit. So it's become a very big, a very big priority for the C suite at the big companies.
Dan Wentz: [00:04:14] One of the things that insurers are doing is writing hard limits. Can you give us a little bit of an explanation about that and how that plays into this?
David Pagoumian: [00:04:21] Just recently, a couple of years ago, there was some big hurricane step produced, $50 million losses on values that were reported at 20 million. Right. And [00:04:30] I'm, I'm, in some cases I'm minimizing it. So what the industry has done and what they have done with more, uh, discipline today is they've said, okay, you've reported these values.
We're going to limit are liability to the values reported. So if you reported a $30 million building location, we're going to pay you 30 million of insurance and not 35, not 40 million, whereas in the past, uh, you know, and, and it's still, you still can today. Uh, eliminate it, that restriction on the bigger programs you [00:05:00] have to have pretty good values and a really good story to make that happen.
And so, while I'm not suggesting that the hard limits are everywhere, it is becoming a lot more commonplace, at least in the initial, on the writing. Of an account.
Dan Wentz: [00:05:13] So software is gaining some traction, I guess it's always been around, but now it's, you know, you've got artificial intelligence and all kinds of wonderful things happening with data and, uh, software.
How is software playing into this?
David Pagoumian: [00:05:26] Yeah. I mean, software's changing everything. I mean, look at us right now. Damn. You know, [00:05:30] I feel like I'm right there with you at this moment, you know, so yeah. You know, As wholesale brokers, right? As we've been elevated to bring more to the table, we're naturally embracing the software.
That's out there to help us to determine what an insured should consider purchasing and what their limits should be and sort of what their retentions to be. So in terms of software is concerned, you know, if you it's so important to set the stage properly with the right values, If [00:06:00] you don't have that strong foundation and execute the basics of getting the values right from the very beginning, the software results are gonna be impacted accordingly, and you won't be able to properly evaluate your risk.
We won't be able to properly price your risk and the on the rider will surely penalize you. For not properly providing the accurate data. So software is taking over everything. Right. And it's just a matter of us as making sure that at the software's one properly.
Dan Wentz: [00:06:27] Okay. So property submissions [00:06:30] in the time, the age of Corona virus COVID-19 is there anything that buyers should be considering on their submissions with coronavirus, with COVID-19 and all the changes that are happening?
David Pagoumian: [00:06:41] Yeah, so, I mean, Particularly as a, in regard to business income, a big part of business income is payroll. We encourage those classes that have been shaken and stirred the most from COVID-19 the restaurants, theaters, you know, and, and other classes that they really look at [00:07:00] their business income worksheets and provide the current state of affairs as respects to their income so that they're not penalized for paying premium on it.
And making sure that. Once you bound the program that there's, check-ins every 30 days for acceptance of where the values are climbing to and on the writer's agreement that they will add that on. But putting that aside, I think speaking on behalf of our property group, the property advisory board members, and also the rest of the CRC property [00:07:30] folks, you know, our group corporate wise, it really does go the extra mile as it relates to scrubbing the data upfront.
Right. So we're really big in this process of. Scrubbing the data and that's a value added help helping the client to determine, Oh, we see something here that an on the road is going to have an issue with. And so if we don't correct it now, then it's going to cause issues down the road. And so correcting it now and addressing it at that moment so that when it does go into the so-called software, that things are done.
Accurate and that we can bring the [00:08:00] credits that the clients are looking for as it relates to their premiums.
Dan Wentz: [00:08:04] Well said. Uh, what about insureds that have exposures to catastrophic natural? Hazards is modeling, playing a key component. What all is that affecting?
David Pagoumian: [00:08:15] Yeah, absolutely. I mean, the models were born from catastrophe, right.
And so, uh, naturally they are going to be used as a number one tool in a lot of the insurance companies, including on our end. You know, we're starting to take a look at it, [00:08:30] the writings that we do with certain partners, right. Because we want to understand in the aggregate how much we write with them.
Capturing that data allows us to have a better understanding of how that insurance company is participating their capacity into our great country. If there are changes that we can adjust to those changes, but in terms of an individual risk is concerned. If you're a risk in Pensacola and you were, you know, hit by.
A hurricane and that went through there pretty hard. You might have reported your values at 20 million and you might've [00:09:00] been right. It might've been $110 square foot, you know, habitational complex 20 million foot. It probably took you all us. 30 to 35 million to complete the job because of the demand surge, that area was hit really hard and really narrow.
And so there was just tremendous demand to this particular area that drew in. the surge in that demand. I E construction materials and labor. Just makes sense. I know a post event storm or catastrophe, that's that [00:09:30] much more important to think of, not only just in getting your property back up and running, but also from an operational standpoint, if you're a, a food manufacturer or any other type of manufacturer, if that area is crippled pretty bad, you have to look at the other areas that could potentially make up for that.
And so. Yeah, there's a lot of posts scenarios that the cat models can help you play out by determining so we can. So for instance, what CRC broker would do is we would run that analysis and say, all right, you know, you reported 30 [00:10:00] million or 20 million of values at this point. But with demand surge, the Armageddon scenarios coming out to 25 million, 27 million.
And so that's where we work with the clients too, to be able to look at the binocular view of what a potential catastrophe could have to their area
Dan Wentz: [00:10:15] safe to say accurate data. It really will help with the marketability of a submission, right? I mean, you're, you're going to be trying to get the best prices and, you know, the lowest premium providing that accurate data.
That's. Paramount, right?
David Pagoumian: [00:10:29] Yeah, [00:10:30] absolutely. I mean, I, you know, I learned at a very, very young age, my, my wonderful mother, she taught me the lesson of honesty. Uh, and, uh, you know, from that spring boarding into, you know, everyday life, right? I mean, when, when we work on these large accounts or small accounts, you know, the, these are somebody's, you know, this is somebody's passion, right.
They're building their business. And so if we get the data wrong from the very first step of. Of getting the data right on, then it just has [00:11:00] this rippling effect downstream. I have seen some classes with some instances where people come in and they try to play games. Like for instance, sometimes, okay. An agent of ours would say, Oh, the other agent said, we're reporting.
Value's too high. And so while that has been used as a strategy in the past, right. So you would come in and say, Hey, the reporting, your value's too high. We think we can shave 30 million off for you, your values that would result in the $50,000 return premium [00:11:30] or a 50, 50,000 less premium on your renewal.
And so that strategy was used, right. And it was sort of on the corner street strategy, right. It wasn't true. Let's bring our own value to this particular situation. It was let's try it again. Bam balls or the situation, right. So, uh, long story short, fast forward to today where you really can't, you can't play those games cause on the right.
Is it going to penalize you? But more importantly, it's convincing our customers that don't let us take care of [00:12:00] the ability to get the proper credit, get the values right. We'll demonstrate where it's masonry. Noncombustible where you've got good spread of risk, where you've got really good. Well, secondary modifiers, all of that in the aggregate will help us chip down your premium.
And not only that in the event, you do have a catastrophe. You're going to get paid the right way. There's not going to be any of this holdup because you know, you reported the values wrong because when a big loss has happened, [00:12:30] you know, everyone runs to their corner, right? So the insurance company is gonna run to their corner.
But if everything's solid, if the terms are laid out solid, if the values are John impeccably, you're going to have it a superior result. Right.
Dan Wentz: [00:12:42] Right. And you're still gonna have those bargains shoppers. So what are some tips you could give or some advice you give to get the most cost efficient coverage,
David Pagoumian: [00:12:51] you know, with respect to the bargain shoppers.
I think everyone's looking for a bargain. Right. But I understand what you mean about that. Right? So, I mean, there [00:13:00] are instances where, you know, look, you see a nice size account. They want to report the values this way. Uh, and it's fully documented and, you know, yeah. We have to help customers find solutions, even if that's the way they want to roll.
Right. So for those most like most of the times what we see happening is we see the insurance companies internally truing up the value. So you can report something at $60 a square feet, but you know, are good on the writer, friends, Theresa she'll just take that $60 and make [00:13:30] it $80 a square feet on her end.
All the documentation will be done adequately. The only other thing that I can think of in that instance to try to sway the other side, if they're dead set against, uh, sort of on the recording is just to let them know that you know, that you know, what you're looking for is basic vanilla product, and you're not going to get much extra creativity in terms of extra coverages.
There tends to be more of an acceptance to provide manuscript policy language. For those [00:14:00] insureds that are providing more accurate values. If you're not providing accurate values, they think of putting you on the vanilla, basic forms. And so, you know, if that's what you want vanilla basic, then we could, we could like the rest of them, you know, you know, provide that.
Dan Wentz: [00:14:15] You've mentioned it a couple of times so far. What value does a CRC broker add to a buyer who's working a property submission?
David Pagoumian: [00:14:22] I mean, look, I, I, from, uh, you know, the simple answer to that is that, you know, we work together as a one complete team and I look, I know [00:14:30] that's cliche, but we are one complete team for those that want to be part of it.
You know, there's, there's people out there in our organization, that's surely know what they're doing. And that, or picking up a lot of the perimeter things that we're doing and taking that and running full steam ahead with it. But I think, yeah, it all starts with this knowledge base that we have as a group and how that's starting to get into a simple software and data that we have.
You know, you talk about the ready platform, the ready platform combined with our cat cat [00:15:00] analogy analytics department that Collin runs, you know, and that property practice group that Angela's team is behind. I mean, you got all of these. It's like a triangle, right? You've got the leadership, you've got the software and in the middle, you know, you know, you're sort of protected if you just execute the basics.
Well, so that's a long way than an answer, but I would say in summary, it's just the ability to really execute the basics. Well, when it comes to our business, And feel like you've got company in doing that? [00:15:30] Absolutely.
Okay.
Dan Wentz: [00:15:30] That's David Pagoumian and he's the president of CRC red bank, New Jersey. You can find him online@crcgroup.com as well as all of our property brokers from CRC group, our brokers from other disciplines as well.
They're all listed up there and have their contact information. If you want to reach out to somebody, uh, David, thank you so much for joining us today and providing that great information.
David Pagoumian: [00:15:52] Thank you, Dan. Appreciate it. Have a great day placing you first
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