Special guest Tim Molgren with The Woodlands Financial Group joins the show to share some fresh insights into the world of homeowners insurance, hail damage, and insurance claims.

Homeowners insurance costs have risen at an unprecendented rate here in the Midwest, and garbage hail-damage claims are at the root of this problem. Insurance companies are beginning to fight back against this, and they’ve drawn a line in the sand at the 15-year mark for the age of roof coverings. Not only does this affect existing homeowners, but it makes it much more difficult to purchase a home with a roof that’s more than 15 years old.

We’ll definitely have Tim join the show again, as he shared some fascinating information.

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.

Bill Oelrich: Why should you get a new roof just because you have an old roof that’s about ready to go out and hail comes and you get a brand new roof? Is that what happens or no?

Tim Molgren: Yeah, yeah. For the most part, it could be that if in fact, you have a roof that is damaged because of hail and the roofer, whoever your contractor is and the adjuster come to an agreement, what the damage was and what needs to be replaced, then that’s what happens. You get a new roof.

[music]

BO: Welcome everybody. You’re listening to Structure Talk, a Structure Tech presentation. My name is Bill Oelrich alongside Tessa Murray and Reuben Saltzman as always, the three-legged stool here at Structure Talk. And on today’s episode, we are talking insurance, home insurance specifically, with Tim Molgren. Correct?

TM: That’s correct.

BO: And Tim, welcome to the program. Can you just take a quick second and introduce yourself, who do you work with, what do you do, how long you’ve been around and give us your credentials.

TM: Thanks for having me, Bill. Again, my name is Tim Molgren. I’m a branch owner of agency called the Woodlands Insurance. Woodlands Insurance’s been around since 2010. I’ve been in insurance since 1999. So quite some time, but our particular branch has been around since 2010. We’re independent. It just means that we have a number of different carriers that we work with instead of being captive like farmers or a State Farms. It’s been around for a while, and it’s an interesting topic that Reuben and I had talked a little bit about to the end of last week.

BO: So Tim, you’ve been in the business since ’99. What brought you to the insurance business?

TM: Oh, nobody really stands up in their third grade class and says, “I wanna be an insurance agent,” when they grow up. It’s always something that people fall into. In my particular case, my mom actually worked for what they call a third-party administrator. So she did claims for medical… Different medical carriers. After, I was talking to Tessa a little bit ago, I was on the Radio Wisconsin for a little while. And after that, I decided to head back to Minnesota. I really wasn’t sure what I wanted to do, so I started doing customer service for her employer. They also did some COBRA benefits, which is that insurance that you get if in fact you have to leave work for health insurance and such. I moved to Florida in ’96 and really didn’t have much to do and found a job in insurance and have been there ever since.

BO: Awesome. So, are you… Do you work often with home and hail claims and in weather damage and that kind of stuff? Is that something that’s always in the forefront of an insurance agent’s mind?

TM: Well, I wouldn’t necessarily say that’s in our forefront, but it’s definitely the white elephant in the corner, but the tough part for agents and people that work in an agency is a lot of times you become the go-between between the carrier and the insured. And so, especially when you have these types of situations where you have hail damage or any type of a claim, and the insurance carrier may not see the same thing that other people may come out to your door, knock on your door and go up on your roof and say, “I see this.” And so it becomes a little bit of a difficult conversation to have because inevitably, the insured is gonna want a new roof because they were just told that they had a bunch of hail damage and maybe the insurance carrier doesn’t see it that way. And so now you become that go-between. And the tough part for us is, if in fact there’s no coverage for that or there’s not enough damage or they don’t see any damage, then that insured feels like they’re with the wrong insurance carrier, and it can be a situation where you’re losing clients when really nothing went wrong.

Reuben Saltzman: Tim, how does that happen? And this happened in my neighborhood where I moved into a neighborhood, every home on the street had architectural shingles. They had all had their roofs replaced. The house I bought was the one house on the street with the asphalt three-tab shingles. They never got their roof replaced. Every house got a new roof. One, I’d like to say they won a new roof, except for the people that I bought the house from. How in the world does that happen?

TM: Well, a couple of things could occur. Number one, they could be with a carrier that doesn’t assess the damage. All the different carriers assess damage differently. There are some that you just know they’re just gonna go ahead and buy the roof, and then it is what it is. And then there’s others, some carriers, I won’t name names, but you have to have in a 10-foot square area, like 34 different pockmarks. And a lot of times that just doesn’t happen. And so in that particular case, that carrier is not gonna buy that roof, or the homeowner just decided that it was too much work to file the claim. And they just said, “You know what… ” they decided to be Reuben and say, “You know what, there may be some hail damage here, but the roof is still okay, and there’s no reason for me to be filing a claim because of it.” So you can say that, “Okay. Well, my neighbors have hail damage, but why wouldn’t I?” That’s really not gonna be the case, but different carriers have different way of assessing their claims.

RS: To jump in on your point there, Tim, I just gotta say, this house that I don’t live in anymore, it was built in ’98 and the same original three-tab shingles are on that roof today. This is 22 years now, and there have been many hailstorms. There have been… The same houses had been hit by hail numerous times on that street and had their roofs replaced over and over again. Yet this house right next door, my old house still has the exact same roof, but it still doesn’t leak. It just really drives home the point that all this hail, it does not destroy roofs. It removes a little bit of life. That’s it. This is what people freak out about, drives them nuts.

Tessa Murray: Reuben feels very strongly about that.

[laughter]

BO: He’s wondering if he could clarify his position, wasn’t sure really where you were coming in at.

RS: I think we’re just going off the rails with all of this. This is why we call it winning a new roof. I used to joke with my neighbors about how, yeah, I’m gonna go outside and go do the hail dance ’cause I gotta win me a new roof too. This will be wonderful, but we’re all paying for it? Tim, do you remember when you used to get free stakes when you got your windshield replaced?

TM: All the time. And obviously, that doesn’t happen anymore.

Tessa: Free stakes?

RS: Tessa’s too young for this. Tim, tell her more.

Tessa: I missed out on a free stake?

TM: Yeah. Yeah. So there were a few glass companies out there that in fact, you got a new windshield from them, then you would get a free box of stakes. And so that was their way of promoting their windshield company. Just a bunch that have that type of a promotion, where you would come out and you would be like, “Hey, use our windshield company and you get the free box of stakes.” What they were finding was, it wasn’t a free box of stakes. Unfortunately, that windshield, the price of that windshield went up. The insurance was paying for the price of the now more expensive windshield, which in turn moves that premium back to everybody else. And they cut that off from doing that.

RS: So you’re saying there’s no free stake?

BO: No free stake.

RS: There’s no such thing as a free stake either?

TM: Well, and what I was telling you too, Reuben. Back in 2010, on average, when we were doing a home insurance policy, for a home that was 250,000. Okay? So a normal home insurance policy, we were anywhere between $800 and $1000 for premium. Now, 10 years later, you’re right around $1300-$1500 for that same policy. So it’s that big of an increase. That’s 50% increase over the course of time, and it’s all because of two little words, which is replacement cost. And that’s what insurance are having issues with.

BO: Can you tell me about that replacement cost? Because when I was in the home inspection world, people all the time joked, I’m like, “Your roof is… It’s probably 15 years on or something.” And they’re like, “Well, we’re just gonna pray for hail.” “Nah,” and I just said, “Okay, whatever.” But why should you get a new roof just because you have an old roof that’s about ready to go out and then hail comes in and you get a brand new roof. Is that what happens or no?

TM: Yeah, yeah. For the most part. To me, if in fact you have a roof that is damaged because of hail, and the roofer, whoever your contractor is and the adjuster come to an agreement what the damage was and what needs to be replaced, then that’s what happens. You get a new roof. And there was a lot of conversation a number of years ago about matching, because again, you may have a lot of damage to the south side of your house, but you may have zero damage to the north side. And so what was happening a few years back was insurance started looking at it and saying, “Well, we’re only going to do a replacement of the South side of the roof.”

TM: Well, the problem with that is, is that they weren’t able to match those shingles to what the North side looked like. And so now, all of a sudden, you get a situation like the roof molar like you say, where you have two different colors of shingles. And so that was brought up and there was a lot of people that said, “Okay, well.” The insurance hated the fact that this was gonna be their outcome, and almost didn’t even want the roof in the first place, and of course then had issues with their carrier. And so now there’s a lot of carriers that are instituting a new endorsement called matching, where you actually have to pay more for your insurance, not a ton more, but it’s an endorsement, to match whatever happens, should there be a problem with the roof with hail.

BO: So back to the two words…

TM: Yeah.

BO: Can you say them again?

TM: Replacement cost. So there’s two types of ways to insure your belongings. You have replacement cost, or what they call ACV or actual cash value. Consider something like an auto, like your auto claims are gonna be actual cash value. If you have a 2011 Jeep Cherokee, they’re not gonna replace that, if in fact something happened, with a 2020, which is really what we’re talking about here.

RS: That is such a good analogy. You said 2011, let’s just say a 2001 Jeep Cherokee. You total it, and now the insurance company gets you a 2020 Jeep Cherokee. That’s what we do with roofs. Right?

TM: Yeah. That’s exactly correct. They’re not looking at the depreciation of things. The real issue that we’re running into right now, ’cause of replacement cost, is the actual mortgage lenders, because the mortgage lenders, they want to make sure that their loan is… We’ll call it insured, for lack of a better term. They have replacement cost on the house that they’re taking a loan out on, because they wanna make sure, if in fact there’s a problem, that home owner isn’t stuck with a $10,000 bill, they don’t want to fix whatever is damaged, now all of a sudden, if in fact they leave, now the bank is stuck with fixing that $10,000 roof because the insured just decided not to fix it at all.

TM: And so what we’re running into is, right now, a lot of these insurance carriers, because these mortgage lenders are requiring replacement cost, a lot of these insurance carriers are now coming back and saying, “Well, wait a second, wait a second. We don’t wanna be paying for all these roofs all the time.” Because when do you think these roofing claims came about? When people were trying to sell or purchase their home, “Your roof is 15, 20-years-old, we need replacement cost. Maybe you should go ahead and file a claim.”

TM: Well, now, all of a sudden, you’re sitting there, with the insurance carrier, filing a claim, for a house you’re about ready to sell because you need to have a new roof in regards to it. So there’s a lot of that going on. To combat that, recently, what these insurance carriers are doing, is they’re putting a limit on how many years you can have replacement cost, and a lot of them are going to 15 years. So if in fact your roof is more than 15 years old, they start depreciating it on a sliding scale.

TM: Well, that’s gonna cause trouble with these mortgage lenders, when you’re going to buy a house. So let’s say, for instance, you go to buy a house and your roof is 20-years-old on that house you’re buying. Well, all of a sudden, you go from having, from us, 15 different carriers that we can use to get your replacement cost on a roof, down to about three. Buying power is a lot less than it was, if in fact that roof was 10 years old. And the lender is going to require a replacement cost, and if they don’t get it, then they’re basically not going to give you the loan or they’re gonna put some additional impact on.

RS: So Tim, this is a very interesting point because I’m just starting to think this through as you’re describing it, on all of the disclosure forms that homeowners fill out, there’s this question on there that says, “Is the roof eight-years-old or more?” And I have no idea where that came from. To me, it seems like a useless arbitrary number, but you keep saying 15. This seems like a really important number. What if that question was asked on all these forms ’cause it seems like that’s just become a standard in the insurance industry, is 15 years, right?

TM: Yeah. From right now, that’s that break-even point, is that 15 years. I’m not sure why they put eight years. I don’t know where that came from either. Because when I’m going through the different appraisals and stuff, when we’re looking at people, insuring people that are buying a new home, I see that too. Basically, what we do as an insurance carrier is like, “Okay. If it’s eight years or newer, then, ‘Hey, ask the realtor when it happened.'” If impact factors are more, then what we’ll always say is, “Hey, we really need to know when that roof was put on ’cause if it’s over 15 years old, we may not be able to use some carriers.” And there are some carriers right now… We have a client right now that has a 20-year-old roof. I drove by it and that roof looks like it’s about a four-year-old roof. It’s beautiful.

TM: There’s no granules coming down, it looks like a great roof, and we do have some carriers that don’t look at roof age, they go out and do an inspection and if fact, the roof looks good, then they’re good to go. But again, those are few and far between right now and I bet you dollars to donuts within the next five years, those same carriers are gonna have a 15 year limit. Which they sure don’t have damage to your roof or there’s no leaking, like you were talking about anything other than cosmetic, you shouldn’t be insuring cosmetic things, you should be insuring the structure itself.

TM: You know what, I was gonna say there was one of the inspectors on our team recently did an inspection on a house with an aging roof, and I think it was one of the comments on the summary page, it’s functional, but it’s aging. And the people that were buying the house, their insurance company came out and did their own independent inspection of it, got on the roof and said, we’re not going to insure this roof. Does that happen a lot?

TM: Not a ton. It does for older homes, because that’s what’s gonna happen if in fact you have a 20-year-old roof, they’re gonna look at it and say, “Okay, we don’t automatically include replacement cost on this roof, so we’re gonna really wanna make sure that this is a good roof to be able to insure. However, if in fact the roof is less than 15 years old, a lot of times they won’t, because even if in fact… Unless you’re driving by and you’re seeing moss on the shingles and curling shingles and things like that, really something that you’re looking at going, “Okay, there’s a problem.” In that particular case, obviously, they’d come back and say the roof is in disrepair, but if it’s a roof that’s within 15 years, you’re buying a replacement cost policy, so that’s what you’ll get. And a lot of times there’s carriers that if in fact you have a roof that’s 2014, some carriers don’t even come out and do an inspection anymore, just because there’s so many inspections that are gonna be done, they’d rather focus their efforts on the ones that they really wanna inspect and kinda leave the ones that are newer properties alone.

BO: What if you had a regular, say, drone inspection completed by a third-party company, could this said third-party company just kinda slide these inspections over to the insurance company just to make sure we’re tracking and they’re seeing that your roof is not aging properly or it doesn’t have hail damage, or is there a way that we can work better together to keep the cost of this down than currently we’re doing?

TM: You know that’s a good question. There’s been plenty of times where we’ve come out and taken pictures of different houses and from different angles, and especially if in fact… I’ll give you a perfect example. We were working with a carrier that’s really based South in Florida. You know how a lot of homes in Minnesota have that steel almost rain barrier, where it comes down then it diverts, rain diverter, I guess, and over the front doors and the sliding glass doors and such. Well, what was happening was these carriers were thinking those were shingles that were curled up, and so they…

RS: Oh, my goodness.

Tessa: That’s terrible.

TM: We were declining homes because of that, and we had to go… I had to actually send them pictures of rain diverters that I found on Google saying, “This is a rain diverter… ” You’ll see where they’re at, it’s right over the front door, it’s right over the sliding glass doors, so we’ve actually sent pictures and like that to try to make our case.

RS: And Tim, real quick. I think we call that kick-out flasher, I think that’s what you’re referring to.

TM: Yeah, exactly, but it’s just whatever it is that diverts that water away from the front door.

Tessa: And definitely not shingles. [chuckle]

TM: Exactly. But to answer your question, Bill, you can send them all the information that you want, but if they wanna go out and do an inspection, they’ll go out and do an inspection.

BO: That just seems like a game we’re playing, and I guess I’m wondering, when did this game really ramp up?

TM: If you’re asking me, my opinion is the storms in 1999 is when everything started. It’s odd because that’s when I started in insurance, but I was down in Florida at the time. There were storms in ’98, 2000 and 2001, and they were all like what they call cap storms, which is really big hail, all that stuff. My wife actually worked for a roofing and siding company, and that’s when all of these roofing and siding companies came in and started negotiating with the insurance carriers for what the amounts were gonna be that they were gonna pay, and they started working and dealing with the adjusters directly. At first, what would happen is you as a homeowner, you’d actually if infact you had a claim, you’d actually call the insurance company first and then find a contract. What was happening is all these contractors were going out saying, “Wait a second, I see it. Why don’t I meet with your adjuster and we’ll go ahead and see if we can come to an agreement.”

TM: And that was happening a little bit. It’s a tick and attack. One second, the roofers are coming up, and there’s plenty of high quality roofers, but there’s a lot of storm chasers out there as well. But you know what, they would come up with something and the insurance would come up with something to refute it, and then they’d wanna do something different and the insurance would come back and do something. And then mortgage companies decided that they needed who to make sure that their risk was insured at replacement cost, so they were requiring that, which the roofers knew and so they knew that the majority of the roofs out there were replacement cost, so what better way to get a full roof than to have the insurance companies pay for it.

BO: I have so many questions. I think we could go on for literally three hours if we wanted to.

RS: I know, we’re gonna have to have you back on again, Tim, ’cause we’re running out of time on this one, but I do gotta ask you real quick for people out there, if they are in that situation or somebody… Their insurance company comes out to their house, sends them a letter and says, “Hey, we visited your house and guess what? You either need to replace your roof or we’re dropping your sorry butt.” What advice would you have for them? Would it be smart to shop around for a different insurance carrier at that point?

TM: At that point in time, it might be your only option, or you could just go ahead and have it as an actual cash value policy, which again, I am of that same mindset as I listen to your Facebook post, this morning, Reuben, about, you know what, it may just be a case where, “Hey, you know what, you’re right, it’s a 15-year-old roof. I don’t get replacement cost, that’s just the way that I’m going to go ahead and insure my home now.” ‘Cause keep in mind, if in fact you have an actual cash value home versus replacement cost, your premium every year’s lower too, because it’s less expensive to insure your home if you’re depreciating the roof than if in fact you didn’t.

TM: So there might be some people that just say, “You know what, that’s okay. It’s a 15-year-old roof, my premium is gonna go down by 250 bucks a year, I’m okay with that.” But on the flip side, if in fact you wanna continue with the replacement cost, like I said, there are carriers out there that will do that, but just keep in mind, insurance is there to make you whole, insurance is there to repair the damage done by these storms. It’s not necessarily there to make it better, and that’s what replacement cost on a roof is doing is you’re taking your roof that’s 20 years old and making it brand new and that’s not what insurance is there to do, and that’s where your higher premiums are coming from.

RS: Sure, makes perfect sense.

BO: Tim, this is good stuff. Before we wrap up though, can you tell everybody how to get a hold of you if they have more questions or if they want a quote or…

TM: Yeah, you bet. So our website is the themolgrengroup.com, and Molgren is spelled M-O-L-G-R-E-N. So the themolgrengroup.com, you can reach us our phone number is 952-657-7016. My email is my first name, last name, timmolgren@ipnagent.com and IPN and stands for Insurance Producers Network, that’s kinda like our parent company, but timmolgren@ipnagent.com.

BO: Very good. Tim, how many in terms of percentages in the insurance world, how many independent brokers are there compared to a shop that only sells say, State Farm or American Family?

TM: Captive agents, that’s a good question, I don’t know the answer to that. My guess is it’s probably pretty close to half and half, just because there is more people that work for State Farm and Farmers, American Family, Liberty Mutual, but there’s less of them. And so on the independent side, there’s more carriers to work with, but you’re not working independently for each one. So I would say you’re probably pretty much 50-50 down the road, but if State Farm is one of the largest insurance carriers out there for both auto and home. So on the captive side, they do hold a substantial part of the market, but the independent side there’s just a lot more options.

BO: Sounds great. Thanks, Tim. This is good and we’re gonna have you back to talk more. I can attest to State Farm, I’m in the middle of a claim with them now, and they’ve been really, really pleasant to work with. It’s been a good experience, not something I would complain about. So…

TM: I tell people all the time, there’s plenty of places out there, if you Google State Farm sucks, you’re gonna get just as many as you Google Travelers sucks and any place else. A lot of times it just depends on the adjuster you’re working with to make the experience, not necessarily the carrier.

BO: Awesome. Well, I think we gotta wrap this one up, but Reuben, just get Tim’s schedule again.

RS: It’ll be fun.

BO: Thanks, everybody. You’ve been listening to Structure Talk, a Structure Tech presentation. My name is Bill Oelrich alongside Tessa Murray and Reuben Saltzman. Thank you for listening, and we will catch you next time.