BALANCING COVERAGE AND COSTS

TRANSCRIPT

[Bruce Silverman] Hey, everybody, welcome into another edition of "Managing Risk for Tomorrow, Today" with Adam Perea. I'm Bruce Silverman. Thanks so much for being with us. Today, Adam, we're going to, we're going to tackle probably what is one of the more interesting topics that we will get into and that is the hardening insurance market and alternative risk and how they can really go together. If you want to get in touch with Adam 800-979-0176. His email address is a aperea@eliterisk.com. The website is vclrisk.com. So Adam, things are very interesting in the insurance world right now talking about hardening markets, talking about alternative risk, and how businesses can really balance the two. So with that, I'm just going to throw it over to you and say, Where is the balancing act in this, you know, post COVID world that we're living in?

[Adam Perea] Yeah, you know, it's it. It's a balancing act, for sure. And every day, you know, it's trying to hit the bullseye on a moving target on a windy day. You just never know what you're gonna wake up with. And for the last few years, we've been hearing, you know, oh, it's a hard market. You know, we're gonna see some easing soon. And then something else happens, right, a named storm or COVID. And, you know, the market just keeps getting harder and harder. And, you know, you're seeing big losses and carriers and reinsurance companies paying out massive claims. And, you know, unfortunately, sometimes the answer is stop writing those policies, which really hurts a lot of businesses. The other answer can be, hey, let's charge more and give them less coverage. Right. So those are all things that that we're seeing in specifically with COVID. That changed a lot of people's policies, because they started to adjust things like communicable disease and remove those coverages. So, yeah, I mean, on a daily basis, we see the the markets changing, pulling out of markets, slimming down their coverage forms, not offering as much coverage. So yeah, it's definitely seems like a never ending story right now.

[Bruce Silverman] Is it the type of thing where the insurance agency is trying to recover from like you said, these names, storms, COVID, tornadoes, things like that, and also trying to create new products and services that are a little bit more specialized?

[Adam Perea] I don't know if I'd call them specialized, I call them more defined. But yeah, more more towards what their what their risk tolerances are, right. So so you see a lot of insurer insurance companies that are doing a number of things, right, trying to recoup these losses, but then turn around and have new product offerings, you know, to balance out, you know, the two so, you know, it's cyclical, we see these things, you know, it's it's something that we I haven't really seen in my adult lifetime, and we're going through it now. But it's cyclical, it'll come back around. And there's just a lot of things in the world that are going on that are making it difficult for this to happen, you know, we get named storm after name, storm, and, you know, those cat losses really drive up pricing. And then, you know, we get the waiting for the reinsurance treaties to come in, which really is how the carrier's decide how much capacity they have, how much they can price, you know, what they can price it at, and how much coverage they can they can sell. And we got late treaties this year, and they were not favorable. So we're expecting a lot of rate increases. And you know, there was once upon a time, shoot 13-15 years ago when I had an insurance agency, that I would cross my fingers that I only had to call my insurer to tell him it was a flat renewal or 3%. And we're getting people now calling us saying my rates doubled. You know, we're seeing 100% / 200% increases, and it's hard to combat that. You know, the other thing we see is inflation and and inflation. What that does is it drives drives more premium into the access markets. So you see the umbrella on the access markets that used to be very inexpensive? Well, with inflation, it's starting to push that premium up there and make those layers more expensive. So, you know, all the way around these insureds are getting less coverage for more money.

[Bruce Silverman] It's almost, to use probably a very bad pun, a perfect storm right now, between the name storms, the tornadoes, the other big environmental catastrophes that unfortunately, we've had a couple that with COVID Couple that with the economy, it really is a perfect storm, in a sense.

[Adam Perea] Yeah, and, you know, it's what we're seeing. And this has always been the case. But you see, the good actors, in each industry and class code are getting punished for the bad actors. And that's where we like to step in and say, you know, you don't have to be punished for being good. You know, I mean, we see things in the news now that your mortgage rates might be higher, if you have a better credit score...

[Bruce Silverman] As you were saying that, you know, I was thinking the same thing. And I've been trying to wrap my head around that concept. Because your entire life you've been taught, keep, keep your debt down, don't use a lot of your credit lines, that will make your credit score go up beyond time, all the time. And then all of a sudden, now we're seeing, you know, some people with near perfect credit scores, they're having to pay higher interest rates. And that can be incredibly frustrating, like you said, the difference between good actors and bad actors, and I'm not, I'm not discounting the fact that, you know, times are difficult and things happen in life, and that affects credit scores. But but for the people that really want to manage their their credit, and make sure that they are in a good financial position, that's a that's a tough, tough situation. And I'm sure that can't be an easy conversation for someone like you and your industry to go back and say, yeah, you've got an 829. But here's what it's going to cost you for having that 829.

[Adam Perea]  Right, you've done everything, right. You've been responsible, respectful, accountable, so we're gonna punish you for that. Now, your neighbor who has done none of those, and you know, he's gonna get a percent or two lower than us. So, you know, you have to subsidize his unfortunate events, right? And, and I'm all for helping people, right, if you need the help, let's help people 100% But that at some point, it's okay. Are you intentionally abusing the system? And, you know, we relate that back to insurance, and why are the good insurance being punished for for the for the folks that don't have as good risk management or, you know, had unfortunate years, and, you know, they they do get punished, and then when they look for alternative methods, like captives, and we can help them, then they're worried about the scrutiny from various agencies of having a captive.

So you know, it's, it's kind of like getting, you know, beat up in the ring, and then getting back to your corner and your corner, man, instead of working on your cuts, punching you more intel, it's time to go fight again. And it's like, when does it stop? You know, I'm just getting hit from every angle. So it is frustrating. Because, you know, in every industry, there's bad actors, and it only takes a few to, to put the spotlight on it. So that's where we would captive, say, hey, there is a great opportunity. And we've talked about this in length. And every every episode I've been on with you is skin in the game, right? I often refer to it as beat the bank. And what I mean by that is, if you think you can do it better than the insured, or the insurance company to go do it. That's what captains are, right? You're betting on yourself, who doesn't want to bet on themselves.

So if you think you can do it better than the insurance company, you should have the ability to try that without being in fear of being audited or slammed or, you know, you shouldn't be able to try to take control and maximize your own benefits of your risk management programs. So, you know, in this hard market, we're seeing premiums go up, we're seeing coverages come down, right, and who knows what coverages they're they're stripping based on what policy. But those insurers need a way to get that coverage. You know, I have people come to me that say, Hey, this just isn't available in the commercial market, or it's just not reasonably priced, because there's one carrier that are willing to do it. And they can charge you whatever they want, right, within reason. So you know, as we see this hard market continue, we've got to give folks the way to help reduce their overall total cost of risk. It's another term I bring up almost every time you and I spoke, and that's where I focus is lowering your total cost of risk. That doesn't mean cheap insurance. That just means giving you the control, and the ability to participate in your underwriting profit.

So you know, if you're if your premiums going up, but your risk isn't, I want to give you the opportunity to participate in that underwriting profit and get some of it back, right. If right now you're a midsize business and you write a million dollars in premium checks, you write that check, you kiss it goodbye, you're not getting it back. Plus, you're likely going to have deductibles.

So you're not just writing that million dollar check. Now you have to pay all your deductibles. Well, with our program, what if we said we can get you the same coverage, you write a million dollar check, but almost immediately, you get 500,000 of it back. If you perform well don't have claimed you get to keep that. So we didn't give you cheaper insurance. But we did lower your cost or risk because the insurance company didn't keep the million dollars, they kept the 500,000 You got the other 500,000 Take out claims, administrative expenses, cost of operation. Even if you're only two $300,000, profit to 300,000, you weren't going to get before.

[Bruce Silverman] It all comes down to a word that I never thought was going to be associated with the insurance agency. And that's creativity. And I spoken with you about this, and Jeff Kleid about this. And really, it is incredible to have professionals like you and like Jeff and your team that are creative, finding those solutions, helping businesses stay ahead of the curve, stay in business be more profitable. It now more than ever, for businesses, there are so many factors involved. And just staying in business, let alone being profitable. And for the insurance agency to be able to provide a pathway for some of those goals, I think is tremendous. And I know that you're providing a great service to your clients.

[Adam Perea] Yeah, thank you. And that's what we try every day is you know, just trying to be creative. And you know, you mentioned Jeff Kleid, not just because he's my boss, that guy's brilliant. And he really does understand insurance and gives us the opportunity to be creative and successful.

[Bruce Silverman] And I'll close this episode with this. Jeff is incredibly passionate about insurance and and that shines with with you as well. And that's why I'm thrilled to help you guys. Tell your story and tell the story of your industry and your company's managing risk for tomorrow today with Adam Perea he is Adam Perea and you can reach him at 800-979-0176, aperea@eliterisk.com, the website is vclrisk.com. He's Adam Perea I'm Bruce Silverman, and thanks again for joining us for "Managing Risk Tomorrow. Today." We'll see you on the next episode.