Kevin Davis: 0:00

Maybe once a year before insurance come up, we just look around and we look around and see what may give rise to a claim. And then we say, Okay, guess what we've noticed we noticed defense not doing it. We noticed some of the trees may be coming to closer. And we may know that the elevator is not working as well or there's things so we know what's going on because we know that we can't stop all claims from happening. So by doing a risk assessment, we want to do one thing and minimize the likelihood of a claim.

Announcer: HOA Insights: 0:33

Common Sense for Common Areas, exists to help all 2 million volunteer board members nationwide have the right information at the right time to make the right decisions for their future. This podcast is sponsored by for companies that care about board members, association insights and marketplace, association reserves, community financials, and Kevin Davis Insurance Services. You'll find links to their websites and social media in the show notes.

Robert Nordlund: 1:01

To celebrate your support for our show, I've got a fun announcement to share. HOA insights now has its very own merch store. Our team has whipped up some hats, mugs, T shirts, and more that we think volunteer HOA board members are gonna love. We also offer dozens of free zoom backgrounds. If your board is meeting online. These fun zoom backgrounds are a must check out the HOA board member merch shop at board heroes dot sellfy.store. That's board heroes dot s ELLFY dot store or use the link provided in the show notes. Well, hi there. I'm Robert Nordlund of association reserves am

Kevin Davis: 1:46

Kevin Davis of Kevin David Insurance Services. And this is HOA Insights where we promote common sense for

Robert Nordlund: 1:52

common areas. Well welcome to Episode 58, where we'll be speaking with insurance experts and regular co host Kevin Davis about what board members can do to lower their insurance costs. Before we get going. I want to encourage everyone to check out last week's episode 57 a great discussion with regular co host Julie Adelman about the changing dynamics at an association specifically retiring a committee when its season of usefulness has passed. If you want to catch that episode or any prior episode, you can listen from our podcast website, www Hoa insights.org. Or watch the podcast from our YouTube channel, you'll find a link in the show notes. Or of course, you can subscribe to the podcast from any of the most popular podcast platforms to get every episode delivered right to your phone or mobile device. Now on the topic of episodes, we're going to do another live stream program for upcoming episode 61. On July 8, it'll be an Ask Me Anything episode with myself, Kevin and Julie will all be on the program to answer your questions. So mark your calendars for 3pm pacific time on July 8. Click on the YouTube link in the show notes below to visit the live podcast YouTube page. And then click on the Notify Me button to make sure you get notified when the podcast is about to begin. Now as we regularly do we're going to start this episode with an audience question. So if you have a hot topic, crazy story, or a question you'd like us to address in an upcoming episode, leave us a comment on one of our YouTube videos. Leave us a voicemail message at 805-203-3130 or send us an email at podcast@reserve study.com. So Kevin, Bill from Florida asked, Is there anything we can do about insurance costs? Our insurance premiums are rising at a crazy rate. So Kevin, what do we tell Bill? And so many other board members who are probably feeling the same way?

Kevin Davis: 3:55

You know, it's the number one question I get asked all the time as our rates are still going up, they're getting higher and higher. With the good news is that the rates are stabilizing. However, the bad news that is still too high that you won't see these drastic now I can't say you won't see because we don't know for sure. But you should not see these big huge rates that we've seen before. But it's still too high. So Robert, what I want to do today is talk about how we can start changing the way we view insurance overall, instead of panicking and saying, Well, what are we going to do about it? We have to rethink things, okay, to the point where let's look at how to go to an insurance carrier and say guess what, we are a preferred Association. We have done the right things in our association. So we demand a lower rate, you know, you're not going to have the kind of losses that you've been seeing maybe on a condo down the street or two blocks over because we understand the risks associated community associations, and then we demand Lower rates.

Robert Nordlund: 5:00

So what you're saying is it's not out of your hands, you can do something about it. And it's not just complaining. It's kind of say competing, you're competing for that low rate. That's,

Kevin Davis: 5:10

that's what you want to do. You want to be that person that says, Listen, we've done the things that we are supposed to do. We do a risk analysis. And we're not mean at risk analysis. I don't mean the complicated. It's I own a house, I walk around my house every once in a while to make sure that there are things going on that made that give rise to a claim. I look at my roof to make sure my roof is okay. I look at the trees and make sure the trees are not growing too wild. Yes, that may cause damage

Robert Nordlund: 5:40

that my dead dead dead branch that's going to fall on your roof for perfect.

Kevin Davis: 5:44

I tell you right now something new. I have a grandson. That's a year and a half now. Walking. So now guess what? My Ruth love

Robert Nordlund: 5:55

it look at no sidewalk. Yeah,

Kevin Davis: 5:57

exactly my sidewalk. I have fooled that hadn't had a fence around in 30 years, because 30 years. Yeah, so what happens now my risk analysis has shaved. And we want to do to association members. Okay, we want to turn that knob up and say, Okay, we understand the risks associated with living and community associations. And we want to lower the risk, minimize the risk. So for example, my one and a half year old grandson, you know, still have access to the, I could put a fence around it and lock all the doors. But as long as that pulls there, there is a risk of him falling into it. As long as there's a pool there, right? The only thing get rid of I get rid of the pool 100%, then there's no risk. So all we can do is minimize the risk we can eliminate all together.

Robert Nordlund: 6:41

So your building is your building, you've got if it's a high rise, you've got to lobby, you've got planters around it, you've got a parking, either around on the outside or underneath elevators, you've got all these things, maybe an exercise room, maybe a pool, those kinds of things. They are what they are. But your question is, or your your point is do what you can to present yourself as an attractive client to an insurance company. So that means taking a look around as if you were an insurance agent, again, not professionally, but just just being doing the smart things and saying, hey, what can we do? Oh, gee, we have a we have a leaky faucet over there. And we've always put up with that. Let's not put up with that. Let's get that fixed. 100 bucks, get that fixed, or those kinds of things. We're talking about it

Kevin Davis: 7:32

perfectly as we're talking about. But we're doing it I went through a little bit differently than you do now. And I do my home. Right now. It's informal. What you say is, oh, well, we walk around, I saw the leaky faucet, or we see the railings and not as tight as should be. And we got to do something about it. Let's just not closing a tailgate that doesn't exactly. Let's do something more formal, maybe once a year before insurance come up. We just look around and we look around and see what may give rise to a claim. And then we say Okay, guess what we've noticed we noticed the fence not doing it, we notice some of the trees may be coming closer. And we may know that the elevator is not working as well, or there's things. And so what we're doing now is we're calling our insurance person annually, we do this kind of a risk assessment. Okay, so we know what's going on. Because we know that we can't stop all claims from happening. So by doing a risk assessment, we want to do one thing and minimize the likelihood of a claim. Every insurance person we want to hear what we've done is minimize the likelihood of a claim. I

Robert Nordlund: 8:36

like that the building is what it is. But it's not a matter of just waiting and crossing your fingers and hoping that it's not going to be bad news, you can participate in the process and be proactive. And even if you have a sister building, right next years different Association, you want to be the more attractive option to the insurance company, you want to say we are looking at taking care of ourselves, we are fixing things here. And there we have a proactive maintenance plan. And by golly, we're doing all we can so that our risks are lower, and therefore our potential for claims are lower. And isn't it pretty true that when you can lower your risks, then your premiums will follow?

Kevin Davis: 9:20

Yeah, not only will it will follow, again, we wanted to to say I deserve a credit, because all every insurance has credits available credits and debits based on your exposure. So what we're saying here is that listen, we're a board of directors that we do an annually risk analysis. And again, you have maintenance inspections, you do that you have reserves that you have all these different things that says Guess what we are preferred account because we have these things right now, but now we're saying put all together once a year and say we've done a risk analysis, okay. The things that we've done, we do every reserve study and guess what? We're we have a funded reserve Study, you know, it's fully funded, weeds all the things we're doing because we want to reduce the risk. We know we didn't have reserves that he that means that roof was coming up and we're not prepared for it, guess what you the likelihood of your claim having a claim is greater. So all we're doing is saying putting all the information you have together once a year, don't make it informal, and say, This is what we're doing. We know. Okay, that our association is just more informed, we're more informed. And this one risk analysis should save us a little bit money, our insurance, because we know that the likelihood of a claim can occur. But we want to minimize the likelihood. Yeah,

Robert Nordlund: 10:39

you got me thinking now, we did an episode was a while ago with Ariel Hansford for service residential. And she was talking about emergency procedures. And just the simple things like maybe doing a fire drill or having an emergency procedures notebook at the front desk that someone has a formal review of it every year. And boy, I'm thinking, if you're telling that to your insurance agent, and they can take that information to the underwriter all of a sudden, that starts to make you polish your halo there at the association. Exactly.

Kevin Davis: 11:12

We attend a lot of seminars, they every board should have an emergency, they should have maintenance, they should add inspections, put it all together and say guess what, insurance agent, these are all things we have. And once a year, we review them to make sure that everything's up to date. Now, we're not saying that you have to, you know, identify every single exposure, the leaky faucet or the railing and let the insurance agent know you letting them know one thing that you understand that there's a likelihood of a claim occur. And we do a risk analysis so that if there is a claim, we willing to reduce the frequency of claims. So if that water, that water keeps leaking, guess what, if we don't fix it, it's going to create a problem. And then we fix it. And then all of a sudden, it creates another problem because we put a bandaid on it as opposed to correcting it, which is a lot of things that we do is that we put band aids on instead of spending a few more dollars to get things corrected, so that it leads to the frequency problem that we see. And so we tell the insurance agent, guess what, we put something in place, so that, yes, we will see claims. But we want to reduce the likelihood of our frequency of events, so that water leakage won't keep coming back over and over again, with a hot water heater, that burst is on unit number eight on a sixth floor is not going to wasn't on the seventh floor and the sixth floor. So we've done things in our maintenance to make sure that doesn't happen over and over again. So as a result of that, instead of putting$100,000 deductible for Water Damage, maybe a $50,000 deductible, instead of 50,000. I want to 10,000 deductible because we've done a risk analysis, and we understand the

Robert Nordlund: 12:48

Yeah, I get my my brain is just spinning here, risk I got two thoughts that are coming together. One is your behavior matters. It's not a matter of again, waiting and hoping that the bad news isn't too bad. But your behavior matters. And the good thing is that we've told board members in the past or you've heard from your manager, or your attorney or even your maintenance man, the good things people have told you in the past, start doing those things. And they're not just good, they potentially can really pay off and unthinking the old carpet that you've been tolerating, it's a little frayed. And the maintenance man cuts off the loose threads, don't be doing that anymore. Get the fresh carpet, you've got the money in reserves, minimize your risk, do the right thing and be able to tell your insurance agent that you've done those kinds of things, you're on top of things. And that's going to pay off. So there's that connection between doing the right things and making it financially worthwhile. Maybe

Kevin Davis: 13:48

because right now, what's happening is that insurance rates are up because of one reason, there's a lot more demand and supply. So there's not a lot of people who were writing insurance, you know, in California farmers a State Farm or restricting coverage, they don't want to write because they have looking at things out there and saying we can't make money. And the reason why we can't make money. So we look at applications. And we're seeing they're not having reserves, they're having reserve studies and they are having reserves that he gets what they're not collecting enough money, and then inoculate. If they are collecting the money, they that making repairs. And so we're seeing these things that all of a sudden, you know, we put debits on accounts, because they're not doing the things that you should be doing. So every time then we raise the deductibles. Okay, we talked about the water damage, okay. Historically, we had one deductible now we have every water damage claim as separate deductible, because from an insurance point of view, we are reducing we minimize the likelihood of a claim and therefore you are being punished for it because we're not picking up claims you want to be picked up because you're getting penalized because you're not doing that proper work you should be doing.

Robert Nordlund: 14:50

Yeah, Kevin, that is fantastic. And I want to come back to that and talk about credits and debits. But let's take a quick break for an hour. Do I need to hear from one of our sponsors?

Paige Daniels: 15:01

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Robert Nordlund: 15:33

And we're back, Kevin, I want to come back to that idea that the insurance premium is not just set and or I should say set in stone, but you participate by the things that you do. So tell me more about credits and debits. Sounds like they have kind of a neutral line. And the things you do well for the association are going to lower your premiums or if not this year, years into the future. And sounds like you have a legacy effect if you're doing all the right things.

Kevin Davis: 16:00

Yes. But what happens is there's a baseline that we start from, and then we add credits and debits. Now what happens is because the uncertainty out there, you know, we are more afraid than we were before we see more debits and credits. Because when we go out there and look at Association, we're seeing things and again, a perfect sample is a reserve study, that reserve study is so important, and that you fund it and you use it because we're looking at that, okay, the number one problem we worry about is maintenance. If you don't if you maintain that association, you minimize that event of a loss. But also to is not just maintenance, but you said emergency preparedness, what happens if there's a major fire, what happens there's a hurricane, you know, what happens is a flood will all those natural disasters, when are you prepared? If you're not prepared? Is it gonna cost thistles it will cost the insurance company a lot of money. And that's what we talked about in terms of severity. Right now we notice there's a frequency problem in association, the biggest problem that we have is severity. That means those big claims that we don't know when that can happen, and we're seeing right now you're gonna have the worst hurricanes in Florida, because of what is a warmer, that means now, from an assurance point of view, it's hard to get credits out there, when we know we're gonna be paying a lot more money for natural disasters. So we'll see more debits. However, if as Association says, Okay, we have taken care of the frequency problem by doing certain things, you know, we know and we have emergency preparedness, so that there is a hurricane, this is what we do. So the likelihood of there being just property damage, but only loss of life or damage to individuals, because our emergency preparedness is going to be lesser. So therefore, you we should be able to get a credit for something like that. And then all of a sudden insurance says, You know what, you're right, we can apply a credit, because you give me a reason to apply credit, right now, we have no reason to apply credits, because, you know, the natural disasters out there are so big. And you look at a drowning, and I'm talking about my grandson, you know, made this my heart more so than anything else. Yeah. But there's people out, you know, we know, if there's a drowning in a pool. Okay, we know it's gonna cost millions of dollars. So that's another error for insurance to worry about, we worry about the severity of a claim. And so what you want to do is, again, it goes back to how do I minimize the severity of a claim? Well, that self locking gate that you just talked about earlier, if you say, Guess what, these these gates are reinforced and up to date, they have to code, they're not they haven't been there for the past 30 years, we have a newer gate, you know, or the rugs, we talked about it, you're talking about changing the carpet inside there. That way this is you'll have a significant claim, you won't have something that causes millions and millions of dollars for the association, we start talking that way, then all of a sudden, we say and guess what, I have a reason now to apply credits, because you understand that there's a frequency problem. And it could be a severity problem because of where you live. But you were aware of the severity of it, you let me know you're aware of it. And these are the things you're doing about it. And all of a sudden, I'm saying, Okay, this is this is pretty good association. I feel more comfortable by writing that. So the thing I haven't used a lot, I think I've done the old book whereby I can start using credits, I get my credit book. Yeah, but we haven't used a number of years. Yeah,

Robert Nordlund: 19:22

you keep saying give them a reason, rather than just sitting there and waiting for a punch to the face. There's all these little things you can do. And I I'm imagining the board members are thinking but that's going to cost money to get that new gate we got to bid on that last year was going to be $500 because we've got to get a welder in and all that kind of stuff. But I'm thinking that with the stories I hear about people saying that their insurance premiums went from$50,000 a year to $100,000 a year. Big numbers like that. Boy if you can that put a $500 Gate in like you say nothing you can do about the ocean temperature. So there is going to be some hurricanes in Florida, there's going to be some ice storms in Colorado or Texas, there are those kinds of things. But if you can knock that $100,000, premium down to $90,000, or$80,000, boy, that is money well spent.

Kevin Davis: 20:15

And all you need to do is give me a reason. Give me a reason that you that you understand. And it takes that risk analysis. Once a year, you put all that information together and say, Here you go, guess what we've done this year, to reduce the likelihood of a claim, all we want to hear is that this is what we've done to reduce the likelihood of a claim. And once you say that to an insurance person, you go, Okay, now as a you a preferred client of mine, because now I am going to my insurance provider and telling them that all my clients here have done certain things to reduce the likelihood of a claim. So I want to give credit to all my clients. It's I'm a specialty insurance person, it who who does nothing like condominiums at all my clients have a risk analysis they do once a year. And guess what, I have 30 associations. So now all of a sudden, boom, now I'm going to choose one insurance provider and say, All 30 associations need a better rate than everybody else, because they are focusing on loss prevention, they're recognizing they can't stop that hurricane, they can't stop that wildfire. But what they do have emergency procedure that when it comes, the loss of life will be a lot lower than somebody else's it Yeah, the place may burn down and may be blown away. But the people there could be safe. Yep. You know, and I think that is important. property is property, you can repair the property. But one thing that loss of life, and the board's ability to say, Guess what we've done should be able to get me again, that 10% discount off $100,000 start someplace, you know, start and then another discount here discount there to the point now, and that's why you will see a certain some associations are paying 100,000 And some will pay 75,000. And they said we're gonna say we're doing the same thing. No, the difference is that we understand that there are risks associated, their losses can happen. We can't reduce loss all the way. But we can minimize the likelihood of a loss.

Robert Nordlund: 22:11

Yeah, you can fix your sidewalks. You can inspect the water heater hoses, you can inspect this, you can get things replaced on schedule through your reserve say you can all think and all these little things that add up you can have the emergency procedure at the front desk or the manager or a emergency number or something like there's so many of these little things that boy if you can get them added up. That can be a lot in, in my family say that's a check in the good column

Kevin Davis: 22:41

is another one we don't talk about enough is security. Okay. Like we there are certain, like for community associations that less than three storeys, we know that likelihood of a crime will be occur in anything three stories or less, where high rises, we don't see those as much. So what happens is that you get a debit, if you were automatically three stories or less, because we know that even with a crime area or not in a high crime area, the likelihood of you having crime is greater than than the high rises. So we can say that guess what, we have security. We have up to date security. We have you know that little you know that new thing they have where they can watch people and so cameras, the cameras? Yeah. So we are more secure than the ones next door? Could we understand the importance of security right now? Our association, you know, they understand it. And so we are introducing more security apparatuses in our association to limit the likelihood of a claim. We don't want people coming from the outside and robbing us and burglarizing us and and harassing us. So we've updated our system. Crime is a big issue right now, when it comes to community associates add insurance and we're looking at it and go, Okay, they get dinged just because they live in a daze three stories or less. And they get dig in automatically. But if you come and tell us that way that we shouldn't be dinged. Okay, because we do x, then all of a sudden, I can say, okay, great. Let's apply a credit. There's so many things that insurance people do automatically, because we know by just the law of large numbers that this is has more risks and more exposure than this, this

Robert Nordlund: 24:21

and that. Yeah. And now I'm thinking, if I was a bad guy, if their parking gate is open, I can slip in. And so get those things fixed. And I'm also thinking at champion tower south, isn't it true that the largest contributor to the settlement fund was the security company because the enunciate errs weren't working? Or they hadn't been tested? Something like that? That

Kevin Davis: 24:47

could be it. But the shutdown was such a unique thing with everybody paid the most they ever could pay. But what happens is that if that security did do their job, right, the likelihood of them being in a situation would not be As great as all, it's as simple as that, if we all do our job to the best of our ability, not even do extra, just say, Hey, listen, we understand his risk associated. And our job is to minimize the risk not only because of insurance, because the resale value that people are gonna be happier who live here, you know, we may get along a little bit better, we may like each other a little better, if all of a sudden that gate is there and go, well guess what the gate finally been fixed, you know, I feel a little better, you know, I want to sell my unit. And now I'm I'm walking around saying, look how secure this place is, you know, you bring your children and guess what? That gates there. And so those are things, it just increased the value of my unit, you know, nothing else. increased the value unit case you rate itself versus the one that doesn't have the self locking closing gate, or the ones that just have, you know, the the trees overlapping and dead trees, everywhere you're doing not only for insurance, what you're doing is makes that association Runs a little better.

Robert Nordlund: 25:59

Yeah, so I keep hearing you say, all the things that you do are either going to save you money or make you money, that and we are we seem like we are so cash conscious. But boy, thinking about your grandson, if you can eliminate the trip and fall hazards, if in the asphalt, those potholes, again, where they're going to fall on their bicycle and skin their knee or break an elbow or something like that, all the things that you would want to do to improve the physical appearance of the association, those things are going to come back to you in property value and potentially lower premiums. And so again, doing the right thing, doing the good thing is also turning out to be a good financial decision. That's it gets any better than that. Okay. Well, Kevin, as always, it's great talking with you. So any closing thoughts to add at this time? Okay.

Kevin Davis: 26:48

The key thing is this, all we want to do is one thing and minimize the likelihood of a claim. If you're talking to insurance people, we understand how important that is and what we've done to minimize the likelihood of a claim. When you say that insurance people start smiling and we want to get you that credit.

Robert Nordlund: 27:02

Fantastic. Well, we hope you learned some HOA insights from our discussion today that helps you bring common sense to your common area. And I'm thinking maybe even save you some money so remember to mark your calendar for July 8 are asked me anything live cast, check the show notes for details on how to sign up. We look forward to having you join us for another great episode next week.

Announcer: 27:26

You've been listening to HOA Insights: Common Sense for Common Areas, you can listen to the show on our podcast website, Hoainsights.org, or subscribe on any of the most popular podcast platforms. You can also watch the show on our YouTube channel. Check the show notes for helpful links. If you like the show and want to support the work we do, you can do so in a number of ways. The most important thing that you can do is engage in the conversation. leave a question in the comment section on our YouTube videos. You can also email your questions or voice memos to podcast@reservestudy.com Or leave us a voicemail at 805-203-3130. If you gained any insights from the show, please do us a HUGE favor by sharing the show with other board members that you know. You can also support us by supporting the brands that support this program. Please remember that the views and opinions expressed by the podcast do not constitute legal advice. You'll want to consult your own legal counsel before making any important decisions. Finally, this podcast was expertly mixed and mastered by Stoke Light Video & Marketing. With Stoke Light on your team. You will reach more customers with marketing expertise that inspires action. See the shownotes to connect with Stoke Light.