Ep. 503 A Proactive Approach to Insuring Commercial Property
Rancho Mesa's Alyssa Burley and Jeremy Hoolihan, Partner and Account Executive of the Janitorial Group, discuss how business owners can take a proactive approach to insuring their commercial property.
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Director/Producer: Alyssa Burley
Host: Alyssa Burley
Guest: Jeremy Hoolihan
Editor: Jadyn Brandt
Music: "Home" by JHS Pedals, “Breaking News Intro” by nem0production
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Transcript:
Alyssa Burley: You're listening to Rancho Mesa’s StudioOne™ podcast, where each week we break down complex insurance and safety topics to help your business thrive. I'm your host, Alyssa Burley, and today I'm joined by Jeremy Hoolihan, Partner with Rancho Mesa. And we're going to talk about taking a proactive approach to ensuring commercial property. So, Jeremy, welcome to the show.
Jeremy Hoolihan: Hi, Alyssa. It's great to be here and I understand congratulations are in order. You guys surpassed 500 podcasts for StudioOne.
AB: Yes, we did.
JH: Very exciting.
AB: Yes, I think this is going to be episode 503.
JH: Perfect. Yeah. All right, glad to be here.
AB: Well, so over the last few years, we've dealt with California wildfires and they've had a dramatic effect on insurance marketplace. Will you explain to our listeners how the recent losses in California have affected the commercial property insurance marketplace?
JH: Yes, Alyssa. Well, I'd say wildfires over the last several years have affected the California marketplace specifically to the insurance industry. It's been devastating. There's no other really word to describe it. In fact, just the recent LA fires alone, they expect to pay over $30 billion in losses.
AB: That's crazy.
JH: That's crazy. I mean, so you can understand that not only for the building owners, but the insurance companies, the reinsurance companies, all of those people are really being affected significantly. And what it's really caused is some insurance companies to leave California altogether, others to really reduce the areas that they're interested in writing property insurance for, and obviously it's affected the policy holders and the amount of premium. And in many cases, it's left many people with the only option to go into the FAIR plan, which essentially is the coverage of last resort.
AB: All right. So, from an underwriter's perspective, if you're at a carrier, you're the underwriter, what are their top concerns when writing property policies here in California?
JH: Okay, so I've been in the industry a little over 20 years and up until like the last couple years, I don't recall insurance companies, pretty much on a regular basis, requiring pre-inspection. So obviously with larger properties, with larger values, that's a given. But in certain cases where there's minimal amount of property coverage, we're having underwriters require an inspection before they're even willing to offer a quote. So I would say to the folks listening, expect pre-inspections.
And some of the things that you can look for on the front end is just trying to be the best of the best. Some buildings are built in a way that there's only so much you can do, but there are a lot of things you can do.
So easy things like brush clearing. So if you have high brush around your building, make sure that that's cleared at a distance that will reduce the likelihood of a fire touching your building. The other things that underwriters are really focusing on are fire zones. And so those fire zones have really changed over the last few years with climate change, urban expansion and really high tech AI modeling that provides a more accurate prediction of where fire hazard zones exist. Many places that in the past might have been kind of a mid-level risk are now right in the heart of a fire zone. So underwriters, they have these charts and they're really scrutinizing and following those charts. And in the cases of some building locations where they were able to be insured by, you know, multiple carriers with multiple options, now you could have one or no options other than the FAIR plan. So that's really changed a lot.
I would also say just the construction type of the building. So you have underwriters in the past that might have been willing to write, for example, a wood frame building in a moderate fire zone. You know, now they're probably not going to be looking at those types of risks. So they're really looking at less combustible type buildings, concrete tilt, buildings that have sprinklers, things of that nature to really reduce their level of loss. I'd say the other really critical piece that I'm seeing is carriers really looking at building updates. So if you have a building that's older than 20 years, you 100% should expect that the underwriters and the carriers are going to require that your building's been up to code or up to date.
So things like roofing, electrical, HVAC, sprinklers, if that building's 20 years old the underwriters are going to expect that those areas have been updated within the last few years in order for them to even be comfortable looking at providing insurance.
AB: All right, so what do you recommend property owners do to proactively make their buildings more attractive to those underwriters?
JH: Well, I've got a few examples here. So one I mentioned, property maintenance, that's critical. So Again, roofing, if your roof is older than, you know, 15, 20 years, you know, making sure that you do regular inspections on it to make sure that there's no leaks.
Electrical systems, one of the big campaigns right now in the insurance industry is related to a specific brand of electrical panels called Zinsco.
AB: Yeah, I’ve heard of that.
JH: Yeah. So, unfortunately, I guess they've been known to spontaneously combust, whether that's, you know, there's too much power going to the to the grid or it could just be spontaneous, like I said. So I've had underwriters not only non-renew but cancel a policy midterm after doing an inspection and finding out that they have a Zinsco panel.
So if you're a property owner with that panel, I highly recommend that you get that replaced immediately because it does pose a fire hazard to your building.
Plumbing, you know, updating your plumbing system, you know, the fear of water damage claims are always there with insurance carries and those can be pretty significant.
Next is just the HVAC system, making sure that you're upgrading your heating and air system to help avoid fire and mold risk as well as creating a more efficient system.
And then the fire suppression system. You know, that can have a huge effect if, you know, if a fire occurs and helping reduce loss. So, you know, keeping that up to date, having regular inspections is pretty critical and that's going to often times persuade an underwriter potentially to write and quote your business.
In addition, risk mitigation features so fire alarms, flood protection, security systems, all of those which will help reduce you know future loss is all something that underwriters are looking at. So again back to my point earlier insurance carriers are being very selective and they're looking for the best of the best and if you're preparing your building and you're taking great care of it, you're oftentimes going to be the one that they choose over other buildings.
AB: So I guess in the grand scheme of things, it's maintenance, maintenance, maintenance, making sure that your building is maintained. You're doing everything that you can to mitigate any of those risks and try to do it before you're going through that underwriting process. Do it now before you're trying to renew your policy because number one, you want to get renewed, right? You don't want to receive that horrible notice letting you know that you're not going to be renewed. But then two, you don't want to be canceled mid-policy either.
JH: Right. 100%. And what's also critical along with all those is documenting it, right?
AB: Yes.
JH: So if you have inspection reports, making sure they're up to date, maintenance logs, permits, certificates, to make sure that upgrades to your property and permits are compliant and that you're able to provide that evidence in the in the event that insurance company wants to see it.
AB: Yeah absolutely we love documentation on things like that.
JH: Exactly.
AB: All right well Jeremy if listeners have questions about ensuring their commercial property what's the best way to get in touch with you?
JH: You can reach me at 619-937-0174 or my email address is jhoolihan@ranchomesa.com.
AB: All right. Well, Jeremy, thank you for joining me in StudioOne.
JH: It was great to be here, Alyssa. Thanks a lot.
AB: Thanks for tuning in to our latest episode produced by StudioOne. If you enjoyed what you've heard, please share this episode and subscribe. For more insights like this, visit us at RanchoMesa.com and subscribe to our weekly newsletter.