In this episode, Reuben and Tessa are joined by Tim Molgren from Woodlands Insurance Group focuses on the insurance problems in Minnesota and the changes happening in the industry. The main topics discussed include the increase in insurance premiums due to severe weather events and rising construction costs, the introduction of four-point inspections in Minnesota, the difference between replacement value and actual cash value in insurance coverage, the challenges insurance companies face in changing their rates, and the trends in insurance coverage in other states with high storm activity. The conversation discusses homeowners’ challenges in getting insurance coverage for their roofs, especially in areas prone to hail damage. The hosts express frustration with the current system, where some roofers push for unnecessary roof replacements to profit from insurance claims. They highlight the waste and cost associated with replacing roofs with a significant lifespan. The conversation also touches on the future of insurance coverage and the potential impact on homebuyers, particularly those purchasing older homes with outdated systems. The hosts emphasize the importance of having conversations with insurance agents to stay informed about policy changes and to ensure adequate coverage.
Takeaways
Insurance premiums in Minnesota have significantly increased due to severe weather events and rising construction costs.
Four-point inspections are becoming more common in Minnesota as insurance companies tighten their requirements for coverage.
Replacement value coverage in insurance policies allows for the full cost of rebuilding a home, while actual cash value coverage only provides the value of the home at the time of the claim.
Insurance companies face challenges in changing their rates due to regulatory processes and red tape.
Other states with high storm activity, such as Florida, have experienced similar insurance challenges, including limited coverage options and higher premiums.
Insurance carriers may implement roof schedules, higher deductibles, and other measures to mitigate their losses and control premiums in the future. Some roofers push for unnecessary roof replacements to profit from insurance claims, leading to waste and unnecessary costs.
Homeowners should consider the lifespan of their roofs and the extent of damage before filing insurance claims.
Insurance coverage for older homes with outdated systems may become more challenging to obtain.
Homebuyers should budget for potential changes in insurance premiums and down payments when purchasing older homes.
Having conversations with insurance agents is crucial to stay informed about policy changes and ensure adequate coverage.
Chapters
00:00 Introduction and Catching Up
03:00 Insurance Problems in Minnesota
10:33 Minnesota’s Weather-Related Claims
14:59 Replacement Value vs. Actual Cash Value
19:20 Challenges in Changing Insurance Rates
23:48 Insurance Trends in States with Storm Activity
27:24 Mitigating Losses and Future Premiums
28:56 Unnecessary Roof Replacements
32:15 The Future of Insurance Coverage
34:46 Challenges for Homeowners
38:46 Financing Options for Roofs
45:09 The Impact on Homebuyers
50:38 The Role of City Inspectors
51:33 Importance of Conversations with Insurance Agents
TRANSCRIPTION
The following is a transcription from an audio recording. Although the transcription is largely accurate, in some cases it may be slightly incomplete or contain minor inaccuracies due to inaudible passages or transcription errors.
Reuben Saltzman: Welcome to my house. Welcome to the Structure Talk Podcast, a production of Structure Tech Home Inspections. My name is Reuben Saltzman, I’m your host, alongside building science geek, Tessa Murray. We help home inspectors up their game through education, and we help homeowners to be better stewards of their houses. We’ve been keeping it real on this podcast since 2019, and we are also the number one home inspection podcast in the world, according to my mom. Welcome back to the Structure Talk Podcast. Tessa, great to see you. How’s every little thing, Tess?
TM1: Hey, everything is good. Long time no see. I’m excited to dive into the podcast today, I feel like we should just cut through all the… Last time we talked a while about personal lives, I think we can skip that this time. We have a special guest on today. Who do we have on?
RS: We only spent 40 minutes on it, Tess.
[laughter]
TM1: I know. Sorry listeners.
RS: 40 minutes of blather on the last episode. No, we’ve got a repeat guest today. And…
TM1: Yes, that’s true.
RS: And I was thinking yeah, we just had him on not too long ago. It actually was too long ago, it was…
TM1: It was.
RS: Yeah, Tessa looked. It was back in 2020, the summer of 2020, four years ago. My goodness. Welcome to the show, drum roll. We’ve got Tim Molgren with the Woodlands Insurance Group. Am I saying that right, Tim?
TM2: Yeah. Yeah, you’re good. Woodlands Insurance is fine.
RS: Okay. All right. With the Woodland Insurance…
TM2: A little grayer than I was four years ago, but that’s okay.
TM1: Ain’t we all.
TM2: We all.
RS: Yeah, I got a little salt and pepper on my beard as well, Tim. My daughter was just asking me the other day, “When are you gonna start dying your beard, dad?”
[chuckle]
TM1: No.
RS: Yep. I said probably never.
TM1: Embrace the salt and pepper look. You know what? It’s life.
RS: Yeah.
TM2: Exactly.
RS: Yep, it’s just, it’s called experience, right, Tim? High five?
TM2: You’re right, yeah. Every little gray hair has its own story.
RS: That’s right. That’s right. We’re gonna hear about every one today.
TM2: I’m sure.
RS: All right. So I’m super excited for this topic, I asked Tim to come on because the topic of insurance problems in Minnesota has been coming up more and more, and oh my goodness, there’s stuff to learn, I’ve got so many questions for Tim, and this came about ’cause I wanted to reach out to Tim and just bend his ear for like an hour on all these questions that I have, and then it just kinda clicked like, wait a minute, no, ask him the questions on the podcast instead and then other people can benefit from this, and I don’t need to try to half regurgitate what Tim said. We’ll just share it straight from the source.
RS: Before we get into all of these questions though, gotta give a shout out to our sponsors, IEB, Inspector Empire Builder. Nobody can exactly define what it is, it’s kind of like a coaching group and kind of a community for home inspectors, it’s not a cult. We have to remind people during our in-person conferences that it’s not a cult, we do repeat that, but it can feel a little cult-ish, ’cause people get really involved. Tess is leaning her head. Am I wrong, Tess? You’ve been into enough conferences, you know.
TM1: I feel like everyone that’s in a cult would say that exact same thing in their defense.
RS: All right. So maybe it is, maybe it is, okay.
TM1: You know what, as long as you find benefit from it and you’re not hurting anyone else, I don’t see any harm in it. And I think you shared some stories of how IEB has really helped you and Structure Tech, so.
RS: Yeah. Maybe cults get a bad name for bad reasons. All right.
TM2: Just a bunch of people that wanna hang out together, I don’t understand the problem.
RS: Yeah. What’s the problem, Tim? All right. Check out IEB, we’ll have a link to them in our show notes, awesome organization. If you wanna know more, you send them an email, “Hey, what are you all about? Give me the intro.” Attend a free something or another, you can learn tons about them, they’re a very friendly, open organization. But Tim, all right, let’s get into insurance.
TM2: Yeah. Let’s do it.
RS: Well, I’m having you on because there’s changes coming to Minnesota, we’ve kind of been almost inundated with requests from people to do special inspections for insurance companies. The latest one, we’ve been having a bunch of people ask us to do four-point inspections, and I’ve known about these four-point inspections forever because every piece of home inspection software I’ve ever used has had this template called the four-point inspection. And I know they’re big in Florida, it’s, a four-point inspection and a home inspection go hand in hand, but I’ve never really paid all that much attention to it ’cause it doesn’t concern us. We don’t have them in Minnesota, so I really don’t care. But it seems as though they’re coming to Minnesota. Tim, take it away. What is changing in Minnesota? What is going on here?
TM2: Well, I think the biggest thing that… The biggest change that we’re running into is just over the last 15, 20 years, the amount of storms that have come through and the amount of damage and the severe weather has really put a pretty big press on the insurance industry themselves to the point where they’re getting to a point where they just… The claims that they’re paying out, it’s too much than the premium that they’re bringing in, especially over the course of the last four to five years with inflation, cost of labor, cost of materials. And we’ll talk a little bit more about it, but a roof that used to be 15 grand five years ago is now $28,000-$30,000. Well, insurance premiums didn’t double, so if in fact insurance premiums didn’t double, you can see that they’re losing money.
TM2: Westfield, last year, I think it was, I saw a slide from Westfield, for every dollar they took in for home insurance, they paid out $1.47 in claims, it’s just not sustainable. And nobody is crying a river for the insurance carriers, but a lot of these four-point inspections like you’re talking about, depending on the carrier, like we’re independent. Okay? We’re not captive. All right? So what that means is State Farm, Farmers, American Family, they’re what you call captive agents, and so they can only sell those products. We’re independent, so we have a number of different carries that we can work with. I don’t think it’s any secret that some of the insurance carriers around have decided that they just wanna put a pause on accepting new business in Minnesota, especially around the Metro Area, seven-county Metro Area.
TM2: And so instead of actually pulling out from Minnesota, what they do is they make it very difficult to actually get a quote from that particular carrier, whether that be to say, okay, well, we need… We’re not even gonna give you a number, Progressive right now, if in fact you have a home with a roof over five years, they’ll do what they call a pre-bind verification, and what that means is that they actually need a home inspection dated within the last 60 days that we can send to them that they can review and see whether or not they even wanna give us a quote or any numbers. Travelers does something very similar. Travelers was doing the four-point inspection. I believe when I talked to an underwriter from Travelers, again, we haven’t done too much with Travelers for a while because they tightened up their restrictions to the point where they won’t insure any new business through a home over 40 years old or a roof over 10 years old.
RS: Wow.
TM2: And so if you have a roof that’s over 10 years old, we can’t even get a quote with Travelers, or if in fact we do, that’s where this four-point inspection comes in to play. And basically what they’re trying to say is, hey, we don’t want these States. This is not our appetite. We’ll take it if you’re willing to go the extra mile, but the point is, is that we might not even be able to give you a quote, we might not even be able to give you a number before you pay somebody to do these home inspections, the plumbing, the electrical, the HVAC, the roof, and then submit it to them and then they say, oh yeah, it looks fine. Here’s your premium, and the premium ends up being $1000 more than you were before, plus you spent all that money to get these four-point inspections. Now, there are… And I’m sympathetic to some of the other agents that are out there that may only have a couple different carriers that they work with. And those carriers are ones that require the four-point inspections.
TM2: And so they don’t have another option, and so what they’re going to do is they’re going to try to get these four-point inspections to gain the business. And that’s understandable, there’s plenty of insurance agents out there that only have two or three carriers that are working on their own, as opposed to, like myself, we’re a part of a larger network. So we have a little bit more pull than somebody, if in fact, like I own my own little shop and that was it, and so I think the tough part is, is it’ll be interesting to see what happens when the insurance industry gets to where they need to be. And we’ll talk a little bit more about roof schedules and deductibles, but they have a path that they’re taking. Once they get to that path, will it be business as usual or are they gonna start getting more strict asking, like Florida, four-point infections? Really getting really detailed on their own inspections when they do.
TM2: If in fact I move somebody, if I move Reuben from point A to point B, carrier A to carrier B, carrier B when we issue that policy is going to go out and do an exterior inspection, if it’s a higher value home they might wanna do interior but they’ll do an exterior inspection. It used to be, depending on the carrier, where it was just a drive-by, here’s a picture of the front, here’s a picture of the back, we just wanna make sure that there’s no moss on the roof, curling shingles, that there is relative… There’s no holes in the siding and things like that. Will they start getting more detailed in those things? We don’t know, but we’re kind of in… We’re past mid-way, but at some point in time, it’s gonna be business as usual, and it just depends. I’ll be curious to know how much of these things continue once the carriers get to where they need to be in Minnesota.
RS: Yeah, and I wanna talk about what goes on with these four-point inspections. So what exactly goes on with a four-point inspection? What is this all about?
TM2: To my understanding, and again, we really haven’t had anybody do them, we’re just getting told what they entail. So basically what they’re asking for is, at least when I spoke with a few of the underwriters, they’re asking for a professional to come in and do an inspection on each part of the… What’s the word I’m looking for, they have four different criteria when it comes to their homes, they have their plumbing, their electrical, their HVAC, and basically their roof. Those are the things that they’re really wanting to make sure are in good shape in order to ensure that. And so at least Travelers when I had talked to an underwriter a few months back, had said that they actually need somebody that is licensed in each of those things, and it can’t be the same person. What does that tell you? It tells you that Travelers did not want… Does not want business.
RS: We know.
TM2: They’re not gonna come out and say that, but they need a plumber to come out and do this, they need a HVAC technician to come out and do this. Well, let’s just say each time somebody comes out it’s 200 bucks, so that’s 800 bucks before you even know whether or not you want that business or not. So again, I don’t see the four-point inspection becoming a normal thing in the near future, perhaps even further down the line, but the problem isn’t the HVAC, the problem isn’t the electrical, the problem isn’t the plumbing, the problem is the roof.
TM2: And as they start tightening the, getting rid of cosmetic damage, putting roofs on schedules, which means instead of getting replacement cost, they get actual cash value, raising deductibles to get more “skin in the game” for the consumer, they’re going to really want to make sure that the roof is where it needs to be, and like I said, there’s, I mean, Auto-Owners is the same way. Auto-Owners, they want a new roof, everybody wants roofs that are new. And again, before I… ‘Cause I’m gonna talk… We’re gonna talk about contractors, we’re gonna talk about the insurance carriers, we’re gonna talk about consumers, and let me be the first person to say that they’re all implicit in this issue.
TM2: Nobody doesn’t have any dirt on their hands with this because each one wants what they want. And carriers wanna be profitable, contractors wanna be profitable as well, clients want new roofs every 10 years and to have insurance pay for it, and there’s just gonna be a lot of changes to that mentality moving forward. So to go back to your four point inspection, really, right now, they want somebody to come out and inspect the roof, and they want somebody to be held accountable because they wanna make sure that they don’t have a claim in five years. I mean, you’ve got $2500 premium. Well, five years that they’ve paid what, $12,500, and all of a sudden they have a $30,000 roof claim. It’s just, that’s what’s going on.
RS: And just touch on it real quickly for anybody who’s not in the know, difference between replacement value and actual cash value.
TM2: Sure. So with the replacement value, the easiest way to look at it is like a vehicle. Actual cash value is like auto insurance, you get into an accident with a 2010 Toyota Corolla, you’re gonna get paid what a 2010 Toyota Corolla is worth. They’re not gonna give you money for a 2024 Toyota Corolla, they’re gonna give you money for what your vehicle’s worth. With home insurance, with roof, especially for roofs, people were getting replacement cost, which means even though that roof might be 10 years old, they’re getting a brand new roof, they’re not having to pay extra to get that roof, ’cause a 10-year roof is gonna be obviously… Most roofs are 30-year roofs, so a 10-year roof is gonna be one-third cost or two-thirds the cost of a new roof, right? And so they’re not… When it comes to replacement, they’re getting a full value for that roof instead of the depreciated value.
RS: Sure. And I wanna ask you about something else that I heard recently. Maybe you could touch on this, I don’t even know where I heard it, but it was talking about how construction costs and cost of materials, just everything it takes to build a house has skyrocketed so much in the last probably four years or so, that today, if you’ve got a house that’s worth $500,000, that house burns down, and you know, that’s what you would sell it for, the house burns down. If you’re gonna rebuild it, it would actually cost you $600,000 just to rebuild that house, and I’m making up these numbers, but the point is that it’s actually cost you more to rebuild the house today than what you could sell it for. Can you touch on that?
TM2: Sure. Well, there’s two different types of dwelling numbers, to call it that, you have your market value and your replacement cost. I’ll pick on… Well, let’s just say something way out in rural Minnesota, you have the exact same house way out in rural Minnesota or in Edina, that market value for that house way out in rural Minnesota might be $225,000. In Edina, it might be $500,000. It’s the same house but the market value is different, okay? Replacement cost is how much it’s gonna cost to actually rebuild the home. So it’s never market value. Every once so obviously a small percentage, but it’s either gonna be higher or lower than what you’re paying for it. Right now, insurance is usually higher than what your market value is, the replacement cost is gonna be higher than what your market value is.
TM2: So every insurance carrier has what is called a replacement cost estimator, so you go in, you put your builds, bedrooms, bathrooms, square footage, basement’s finished, all those things and it kicks out what they perceive it’s gonna cost to rebuild the home. As long as you insure your home to that number with that carrier, you get your replacement cost coverage. Okay? And so, yeah, you’re absolutely right, there’s plenty of situations where people are under-insured but each insurance carrier has also an inflationary guard. So every year, if you go back, whoever’s listening, if they go back the last three years of how much their home was insured if they stayed with the same company, you’re gonna see that it was $500,000, then it was $530,000, next year it’s $570,000, this year it might be $600,000.
TM2: So they all have inflationary guards in there. And the majority, and I’m not gonna say all, but the majority of insurance policies have also an extended replacement cost writer, which gives you an extra 25% above and beyond, because let’s face it, not everybody wants to talk to their insurance agent every year, some people only five years, some people not at all, and at least that gives you an extra 25% above and beyond. Not every policy has it, but the majority of them do.
RS: Okay. All right. And then something else that I picked up from some link you sent me was that it’s really tough for insurance companies to change their rates. It was some special legislative session that you sent me and they were just lamenting about how they need to be charging more, because they’re losing money, but their hands are kind of tied because it’s so tightly regulated, and that when they do send a request to get permission to charge their customers more, there’s a ton of red tape that insurance companies have to go through. And it takes like, I don’t know, a year or two before they can actually raise rates to catch up. Can you touch on that?
TM2: Certainly. I mean, I’m sure a lot of people heard State Farm pulling out of like California. And those are the reasons why, is because if in fact the state, especially consumer friendly states… Did we lose Tessa?
RS: No.
TM2: Or she’s being over there. Are you… No, there she is. But yeah, I mean, especially consumer friendly states, what happens is that every carrier has to submit any type of a rate increase and fact they wanna take rate, and then it’s up to the State Insurance Commissioner. I believe it’s the Insurance Commissioner’s office that will take a look and approve or deny those rate increase. And sometimes it takes a long time. I mean, I told you a little bit about Westfield. Westfield had set their information for rate I think nine months ago. And I think they were just approved. So a lot of times it does take some time to get those rates done.
TM2: And that’s kind of some of the reasons why I think that there are carriers that kind of, we’ll call it put a pause on their new business with the extra requirements until they do get the new rates approved. But yeah, it’s… And most consumer friendly states are gonna have those issues. In Minnesota, you wouldn’t think, but Minnesota in a lot of categories ranks two or three in weather related claims. I mean, you obviously think Texas and you think Florida, you think California, all these different places. Well, we have hail, we have tornadoes, we have ice dams, all these things that are all year round and it’s, yeah, they… In a lot of carrier categories, they rank two or three in weather related claims.
RS: Wow.
TM1: Surprised by that. What are the other top two states?
TM2: Well, I had a… Let’s see. So this was from 2022. I’ll try not to touch my desk. But Minnesota had 77 tornado events in 2022, third only to Mississippi and Alabama. Minnesota had 387 major hail events in 2022, third only to Texas and Nebraska. So yeah, it’s been interesting. I mean, you look at, just over the course of the last almost 15 years, the average home premium in Minnesota in 2010 was 800 bucks. Right now, it’s $2,300. It’s…
TM1: Wow.
TM2: Yeah. I mean, that’s kind of what’s been going on.
RS: So it’s almost tripled.
TM1: Tripled.
TM2: Yeah. But then you look at the average cost of a hail claim in 2013 was $15,000, 2023 was $29,400.
RS: Wow.
TM1: Wow.
RS: Okay. It’s no wonder… Oh, go ahead, Tess.
TM1: Well, I guess I’m just wondering, Tim, if you can kind of speak to like what you’re seeing with the trends on a more national scale, because here in Minnesota, these requests for four-point inspections or for consumers having difficulty finding insurance coverage these days, it’s kind of a newer thing for us, but I feel like in other states, like Florida for example, where they’ve got hurricanes and flooding and all that stuff, finding insurance has been a challenge for a longer time.
TM1: And even insurance companies have pulled out of the state too, right? And they’re not offering insurance. So the number of carriers and providers is, you know more about this than I do. I’m just curious to hear what your take is on what you’ve seen in other states with how insurance providers are reacting to more of these global, I guess, climate change and how that’s gonna look in the rest of the country that hasn’t seen that yet.
TM2: Well, I think the biggest thing, like you had mentioned Florida, right? Nobody wants to, as an insurance carrier, nobody wants to be in Florida. I mean, we share a home with our mother and father. My mother and father-in-law are down in Florida, and they currently have slide insurance down there. Have you ever heard of slide insurance?
RS: No.
TM2: It’s just insurance carriers come in, they come out and they have a… If there’s a big loss that all of a sudden they become insolvent and somebody leaves. Yeah, it’s a mess down there. Flood insurance, they just, I think they just increased within the last year or two their elevation of needing flood insurance from 11 feet to 14 feet, 13 or 14 feet above sea level. So if all of a sudden your home… I was actually sitting in a flight down to Florida with a guy, he’s a realtor. He bought, he thought it was still 11 and his house was 12, and he pays $17,000 a year just for flood insurance because of how close he is to the water. And that’s just for the flood.
TM1: Oh my goodness.
TM2: That doesn’t count his home, that doesn’t count any wind and hail coverage that he might need. So…
RS: Holy cow.
TM2: The more events like this happen like your hurricanes and things like that, the more you’re gonna have these problems. But again, you go back, I don’t know what the answer is, I really don’t, because we all know that everything’s more expensive right now. And so when everything’s more expensive right now, that means when you want to put on an addition or you want to file an insurance claim for a roof or whatever the case may be, it’s gonna be more than it was. So you have to logically think to yourself, I can’t pay the same thing I was paying before and expect to have that particular company pay out more than what they were paying for. And again, nobody’s crying for the insurance carriers. I mean, they’re complicit in this scenario by offering these replacement cost coverage policies and things like that, and then all of a sudden they wanna take them away.
TM2: Well, of course, consumers are gonna say, “Wait a second, I don’t understand. I get a new roof paid for by insurance every 10 to 15 years. What do you mean I have to pay for my own roof?” And the mentality needs to change. I have conversations with a loan officer that Reuben knows as well as I do, and we talk about the fact that there’s a lot of home maintenance things like roofs, like windows, like siding and things like that that people don’t budget for anymore. And because they just automatically assume that there’s gonna be a hailstorm, so at some point in time, I’m just gonna have that done. Well, that time is over and we have to kind of figure out what it is that people are going to, kind of how they’re going to adapt to that.
TM2: But what you’re finding is states that have a lot of storm activity or just natural disaster activity, wildfires in California, all those things, you see the insurance carriers taking a step back and saying, this is what we need to charge. This is what your deductible will be. I mean, you look at Minnesota in the next three to five years. If I could project, let’s just say Minnesota in the next three to five years, they go to a roof schedule for everything. So instead of getting replacement costs on your roof, when you take out a policy with Auto-Owners, AAA, Safeco, whatever the case may be, they automatically put you on a roof schedule. So if your roof is four years old and something happens, well, you have to pay for… You have to get a new roof, but you’re gonna pay for four years worth of that depreciation, right?
TM2: Deductibles, Progressive just came out, I had this in our networking group this morning, that Progressive just came out that in the middle of August, they’re going to a 2% wind and hail deductible. So if your home is insured for $500,000, your wind and hail deductible is $10,000. So it’ll be interesting to say, okay, premiums have doubled, your deductibles have gone from $1000 to right now, $2,500. By next year, it’ll probably be $5,000 as your average deductibles in the next year or two. And you’re on a roof depreciation, so you’re not paying out any more claims.
RS: Yeah.
TM2: Once the insurance carriers get to that point where they’re not paying out as much because of the schedule, because of the higher deductibles, will the insurance premiums go down? I don’t know. They’re already there. How many times do you see people roll back stuff, right? Now all of a sudden you’re paying double you used to and getting half the coverage because of this transition over the course of the next five years. I don’t know, it’ll be interesting to see how everything shakes up.
RS: Well, I just gotta say, I for one am glad that this is happening. I have always thought that it is just awful the way we deal with this. I’ve been at the houses where the roof, in my opinion, the roof is perfectly fine. I mean, I can’t even tell that there’s hail damage. There is tons and tons of life left in this roof and I’ve got a roofer out there who’s insisting it needs to be replaced because they wanna get this job and there’s big money in it. And they’re going, “Oh, this is damaged, this is damaged, you need to file a hail claim.”
RS: And it’s like, we all pay for that. This is awful. And when we’re replacing these roofs that are still perfectly fine, perfectly capable of doing their job, they’ve just lost 10% of their life, I think it’s awful that we’re tearing this all out and redoing it and there’s no free lunch. We all pay for this. And these are the changes that are just bound to happen. And I’m glad they’re happening. I’m glad it’s gonna be, hopefully, putting an end to all of these, just in my opinion, worthless roof replacements.
TM2: Well, just…
TM1: And I’m glad you’re saying that. I think it’s… You know, some people may not understand that perspective. They’re looking at it from their own perspective of, oh, shoot, now I’ve gotta pay all this money for insurance and I don’t get a new roof after hail comes through. But you’re right, it’s like, let’s take a step back, let’s think about the good of everybody and also the good of the planet. I mean, think about all the waste that we’re creating ripping off all these roofs that are still functional.
RS: Oh, my goodness, yes.
TM1: So it’s gonna catch up to us at some point.
TM2: That was one of the things I was gonna mention was there’s tons and tons and tons of perfectly good shingles sitting in landfills because people… Because of cosmetic scenarios, little pock marks here, little pock marks there, oh, you need a new roof.
RS: Yep. Little dings here and there, it’s like I’ve never seen a roof leak because of hail damage.
TM1: Yeah.
RS: It’s… Go ahead.
TM1: I haven’t either. No, so I’m just saying, back to the discussion about kind of what the future might look like, it sounds like here in Minnesota, there are more insurance companies that are taking a step back. They don’t wanna provide coverage anymore. But it sounds like if you’re working with a insurance person such as yourself, you can kind of shop around and there still are options for you. There still are options for homeowners to find the insurance that they need or the coverage for their home. There’s more than one provider or two providers. Do you think over time though, that’ll… We’ll lose some of that diversity in the market and there’ll just be a few larger providers and carriers available?
TM2: I don’t. I actually think that over the course of the next three to five years, you’re gonna see more because you’re gonna get to that point where they’re profitable. I mean, I hear this a lot from a few people in our company, which is on the other side of hard is profit, right? So if they can get through these changes and get to a good program, get to a good policy, a good plan, then they’re gonna start making money again. And then once they start making money, then people want to get back into Minnesota, right? And so they’ll want to… You’re gonna find more options. I mean, we went from having 15 carriers down to probably seven or eight. But just like you said, I mean, people leave and then people come back. Integrity didn’t leave Minnesota, but they made it very difficult to get a claim or get a… Oops, excuse me. They made it very difficult to actually get a quote. However, I believe within the next week, if not already, Integrity has sent a memo saying, hey, we are back in business.
TM2: We’re ready to go. However, we have somebody that already had Integrity that we just found out has a $10,000 deductible. And so that’s one of the things that they’re going to be doing. They were able to revamp their programs and decide, hey, this is the criteria that we’re gonna get back into Minnesota for. And so people leave and then people come back. So yes, you do have some other options over the course of time, and we’ve been really lucky that not everybody has gone or we’ve always had an option, knock on wood. But I think as soon as everybody just takes a step back, takes a look at what their claims ratios are, what they need to do when it comes to their roofs. The people that I feel the worst for are the people that have roofs that are 15, 20 years old, and they did not file the claim that everybody else did.
TM2: They said, you know what? We’re good. This roof, there’s nothing wrong with this roof. But all of a sudden, their premiums are going up exponentially. We just had somebody go from $3,400 to $4,800 because they have an older roof. And they’re starting to get put on schedules and there’s just not a whole lot of options right now for those types of people. But as soon as some of these programs roll out in the next few years, I think it’s gonna be a lot easier to find coverage and a lot more affordable for the people that have older roofs. And honestly, I was talking to our Progressive person, and we were just kind of brainstorming the other day and we said it would be nice to have some sort of a discount, call it the responsible consumer discount, where if you put a roof on on your own, you get a good discount off of your premium. And that way there you got… Because you put the roof on, right? They didn’t have to pay the claim.
RS: Well, there is something like that, I know Tim, because my wife and I just replaced the roof on our rental duplex, and she reached out to… My wife reached out to you just like, “Hey, we just replaced the roof. I don’t suppose there’s any difference in policy?” And you came back to her, “Yeah, you save 500 bucks a year for doing that.” And it’s like, oh, wonderful.
TM2: Yeah. I mean, updating roof age is always gonna lower premium. I’m talking something even more substantial to say, hey, I didn’t file that claim. I took the initiative because there was a problem and I redid the roof because it needed it. And now I’m a responsible consumer because that’s what I’ve done.
RS: Yeah. People should be replacing their own roofs. You should be paying for that when they reach the end of their life.
TM2: Unless there’s a significant issue, right? I mean, there’s claims, there are significant claims. If in fact your roof has water intrusion, if you have missing shingles, there are some things that happen that are legitimate and significant, but having a couple of door dings on your car doesn’t mean that you should get your whole car repainted.
RS: Yeah.
TM1: Do you think the real estate industry is educating their clients and their buyers more specifically about kind of how this world is changing and how that will, how they, how a home buyer would need to budget for these changes in insurance? Because I’m just thinking about all the older housing stock that we have, especially in the Twin Cities area and outside of it. And we’ve got houses that are 100 plus years old that have wiring that it’s original from the 1920s and plumbing that’s original and all these other systems that of course can fail and create problems. And so it seems like this would impact a lot of people’s ability to purchase these homes if it’s gonna be reflected in changing premiums and down payments and stuff.
TM2: I’m not sure about the realtors. I do think that a fair amount of the loan officers, the lenders, just because they’re dealing with so much more than just the price of the home, are more in that educative mindset of, hey, keep in mind these are some things that could be done. Somebody had mentioned to me the other day that said, hey, perhaps there might be a scenario where banks start to escrow for people’s home insurance deductible now, along with taxes and the insurance premium which is something else that’s out there. Somebody told me that in Iowa, somebody is… There’s a company, I haven’t done any research on it, so I’m getting it as third hand. So, but there’s a company that sells deductible insurance for 100 bucks a year or whatever it is.
TM2: So if in fact you have a claim, they’ll pay your deductible. So there’s some people that are out there that are, whenever there’s a problem, there’s always people looking to find solutions. I honestly… You look at windows, windows get damaged just as much as roofs do, right? And you don’t hear so many people talking about, oh, insurance needs to repair my windows, no. You know, people get their windows redone and people get their windows financed through the window company. I think that’s what you’re gonna see a lot more of, is people that need roofs, especially on the retail side, not the insurance side, where there becomes more of a financing option for roofs rather than let’s just send it through insurance and cross our fingers.
RS: Sure. Okay. And you know, Tim, for somebody who’s buying a house today, what do you think would be the red flag, stuff to look out for, to say, hey, look, it might be really tough for me to get insurance or it might be really expensive?
TM2: Yeah. Well, any type of an older home in Minneapolis is difficult, just for the things that you talked about. Number one, you have the higher population, so more of a opportunity for something bad to happen. Not to mention you have the older wiring, you have the older plumbing, a lot of times there’s things, knob and tube, nobody wants that stuff, fuses, nobody wants that stuff. It’s very difficult to find carriers that’ll actually take those things. That, and there’s something that a lot of people I think don’t know that they have, but they do, which is called functional replacement costs.
TM2: And what that just means is that if in fact you have one of these older homes built in 1906 that has beautiful crown molding and you know, older oak and all this good stuff, functional replacement costs. If you have regular replacement costs, they’re going to try to replace it as your home is. Functional is, hey, we’re not gonna go that far in-depth. We’re going to try to find something like this, but it may not be solid wood or whatever the case may be. They’re going to make some, I don’t wanna call it cut corners, but they are gonna make some decisions as to what they decide to do with the quality and the craftsmanship.
TM1: They won’t have the craftsmanship or quality. Yeah.
TM2: But, you know, anybody that calls me for a home quote, my only two questions to them is, is your basement finished? And what is the age of your roof?
RS: Okay.
TM1: Why do you ask that question about basement?
TM2: Well, When it comes to home insurance, at least for the carriers that we work with, you’re looking for square footage above grade. So a lot of times, I can go online and I can go to Zillow, I can go to Realtor, I can go all these things, and I can find out the square footage above grade, I can find out bedrooms, bathrooms, year built, I can see pictures of the house, all that stuff. But a lot of times, it doesn’t tell me if the basement is finished or it may say it’s partially finished. Well, what does that mean? 50%, 75%, 25%? So we’ll wanna know whether or not that, what the percentage of that basement is finished and then the age of the roof.
TM2: That’s the other big thing. And you know, I mean, lenders are gonna have to get on board as well because there’s gonna be a lot of situations where roofs that are 20 years old can’t, we can’t find replacement cost coverage for them. And all the lenders, whenever we send over the homeowner’s insurance information, always put on there, make sure you notate that it’s replacement cost coverage, replacement cost coverage. Roof replacement cost coverage for a roof that’s 20, 25 years old is going to cease to exist. So what are you gonna do? Not put a loan on that? I don’t know what the answer there is.
RS: Got it. Got it. And I remember us touching on that four years ago saying it can be tough to get the insurance that a lender is going to require.
TM2: Yes, exactly.
RS: Yeah, okay. Got it. All right. Well, Tim…
TM1: I’m just processing this ’cause I feel there’s not a… I mean, it seems there’s such an older housing stock here in the Twin Cities area. You know, a lot of the older housing is more affordable because of these older systems. Just seems like it’s gonna be more and more difficult just for people to own a home, affordable… We have an affordable housing problem too. It’s kind of just what I’m thinking. And there’s a lot of upcoming challenges with all these insurance things too. It’s not just Minnesota, I feel like it’s the whole country.
TM2: Yeah. And I mean, you look at this, you look at Minnesota and then you look to our neighbors to the east in Wisconsin, and they’re not having any problems. You know, I mean, every time we talk about, we’re like, hey, why is this person, we’re raising deductibles here, we’re putting a pause on this from all these carriers. Then you hear, hey, what about Wisconsin? And they’re like, oh, business as usual in Wisconsin. So for whatever reason, I don’t know if in fact the severe weather isn’t as severe in Wisconsin, I don’t know if in fact they have looser restrictions when it comes to the insurance pricing and different things. I guess I should do a little bit more research on that. But there’s plenty of states out there that are profitable that aren’t having these natural disasters and such. I mean, again, we’re talking about at the very worst, a state that’s in the top five for payable claims. That means there’s a lot of other states that aren’t that these carriers are profitable on.
RS: And…
TM1: Don’t you think that might price some people out of this market then, first time home buyers? Like, they’ll be looking to move to states that have, that they can get insurance and it’s affordable?
TM2: Yeah. Well, I mean, you look at… Again, I was having a conversation. I mean, the taxes, you can go off on a tangent about Minnesota taxes and such, but I mean, I looked at it and said if you take a look and say, hey, guess what? Our taxes and the insurance are $12,000 a year. That’s $1000 a month just for your taxes and insurance. That has nothing to do with principal and interest or anything like that. I mean, how many loans did you have when you first bought houses that were 1500, 1600, 1700 for just the home itself? So now you’re gonna pay $1000 a month just for your taxes and your insurance. So yeah, the answer is absolutely correct. And I don’t quite know how you how you combat that. We’re gonna have to go communal. We’re gonna have to go cult style to go full circle, we’re gonna have to go cult style living.
[laughter]
RS: Oh, my gosh. Tim, anything else that that I forgot to ask you about that you wanted to bring up on the show today?
TM2: The only thing I would say is make sure you have conversations with your agents. There are plenty of changes that are happening with all different carriers every single day. And not many people open their insurance information and read through their policy and make sure nothing has changed here and there. Surprises suck, especially if in fact it’s because all of a sudden, your deductible is 10 grand and you weren’t expecting that. So have conversations once a year, even once every three years, whatever the case may be, just to make sure you’re where you need to be. Because it’s definitely a hot button topic right now. It’s a hard market, which means that things are constantly changing. You know, there’s restrictions going in and out and all over the place.
TM2: So I would say make sure you have a conversation there. And then when it comes to your roof, it’s a difficult conversation. But just understand that there’s plenty of things when it comes to home maintenance and your roof is part of it. We all know what an insurance claim should look like, but I think over the course of the last 25 years, it has looked like a little cosmetic damage, here’s a couple of dents in your gutters and now we need to replace your gutters when it’s, the gutters are just fine. So, I mean, that’s just an example of just we’re gonna have to get behind the understanding that it’s no longer a free roof every 10 years.
RS: People shouldn’t be quite so entitled.
TM1: Right.
RS: Yeah.
TM1: You know, one last question I have, actually this is for you Reuben. I’m wondering, after this discussion with Tim, are you going to change the way that you write reports at Structure Tech or that the home inspectors report on some of these older systems? ‘Cause at this point, I mean, I think you comment on the age of systems, but are you gonna make it a bigger point to try and educate the potential buyers on maybe some of the challenges of finding insurance companies to cover some of these systems that these older houses have?
RS: Not really. I mean, we do mention that when we find knob and tube wiring, we tell people it can be a challenge to find insurance ’cause we’ve shopped it out. We usually mention that when we find fuse panels, we say a lot of insurance companies don’t like this stuff, but for the most part, trying to figure out exactly what an insurance company is gonna say is just, it changes too fast and there’s no way that we can keep up with it. So unless we’re really certain that something’s gonna be a problem, we’re not gonna be talking about it, ’cause the rules just change too much. And underwriters have their own rules that change from company to company. So, probably not. Although I will say we do offer four-point inspections now. That’s a service that we have listed on our website and we’ve worked to develop a whole template and inspection method just so we can offer these four-point inspections ’cause we’ve gotten so many requests for them.
TM1: Yeah. Okay. Thanks.
TM2: That’s really good. You know, that and the other last thing I was gonna mention is especially for the realtors that listen or consumers looking to purchase a home, you gotta figure out the age of the roof. The days of just calling in and going, “Yeah, I think it’s over eight years old.” “Yeah, it’s about 12.” Insurance carriers are gonna start making people sign affidavits as to what they’re saying that the age of roof is. They’re gonna start trying to pull permits, they’re gonna try to find that out. And it stinks, Reuben ’cause I know you’re a do it yourself guy, and so am I.
TM2: But you know, I remember sitting up on my roof with my dad in the 80s putting on our own roof, and I mean, those days are kind of almost gone because you put on a new roof, I mean, God forbid you forget to pull a permit to do something like that. And it may be a new roof, but there’s no proof of it and nobody’s going to give you the insurance on a, “Well, I think it’s somewhere right around here.” I had a client like that just recently where I said, what does it look like? They’re like, “We don’t know and the people that we’re buying it say they don’t know either.”
RS: Yeah.
TM1: That one happens a lot.
RS: Well, and the takeaway there is, I mean, if you are gonna do the work, if you’re gonna replace the roof covering yourself, the law does say you need to pull a permit for it. So just follow the law. Go ahead and pull a permit. As the owner occupant, you can pull a permit for your own work. There’s nothing wrong with that. And the whole reason the city is coming out to inspect it is to make sure you did the work right. It’s not to ding you on nitpicky little details, they’re there to help you.
RS: And a lot of people get the idea that the city inspector is just there to ding them, but they’re there to help. This is what your tax dollars pay for is to help make sure that this stuff is done right. So I am a firm believer in pulling permits for work you’re doing. Now, if I’m gonna replace a light fixture, am I gonna pull a permit? Probably not. Seems like a hassle, but replacing a roof covering? Absolutely. I wouldn’t dream of doing that without pulling a permit today.
TM2: Agreed.
RS: Yep. Cool. Well, Tim, thank you so much for taking the time to come on here. Really appreciate all the insight you shared.
TM2: Yeah, pleasure.
RS: This is very helpful information. And I gotta get you on more than once every four years. We gotta do refreshes on this topic a little bit more often.
TM2: Now that I’m gonna see you every week, we’ll be more top of mind.
RS: Exactly. Cool. Well, for any of the listeners, if you got questions for us, questions for Tim, Tim, how could people get ahold of you?
TM2: Sure. Well, our phone number is 952-657-7016. Our website, you can go to themolgrengroup.com, M-O-L-G-R-E-N or email is my first name, last name@ipnagent.com. A lot of information I know, but I’ll shoot it over, maybe you can throw it in the comments or something.
RS: Yeah, we certainly will. Cool. And if you want to email us, me and Tessa at the show here, email us at, it’s podcast@structuretech.com. So thank you all for tuning in. Tessa, good to see you as always. Tim, thanks for joining the show. Appreciate it. Have a good rest of the day guys.
TM1: Thanks, Tim.
RS: Take care.
TM2: You too.