Independent Day

No, today’s title is not a typo. Following our nation’s Independence Day I’m calling this newsletter “Independent Day” to celebrate the benefits of an independent agency like Desert Insurance Solutions.

A Little Insurance History

Insurance has been around for a long time. The first known insurance policy was written on a Babylonian monument. Then in medieval times European guild members would pay into pools to cover losses from fires and robberies. After the Great Fire of London in 1666 coffeehouses emerged as places to do business and one in particular specialized in marine transport which was booming related to the New World. In that coffeehouse entrepreneurial businessmen rented boxes and sold ship owners insurance in the event their ships did not return. The name of that coffeehouse was Lloyd’s which evolved to what is known as Lloyd’s of London today. And finally, in 1751 America’s first life insurance company was started by Benjamin Franklin.

Common Theme

Insurance has been around for years but at its core shares a common theme: a community sharing risk so each member is protected from loss and disaster. Here’s an example of the concept: let’s say you are in an HOA of one hundred $1mm homes. You expect to lose one house per year so each member ponies up $10k, then uses the $1mm collected to rebuild the lost house. That’s a simple form of insurance!

What Could Go Wrong?

Maybe this HOA “insurance plan” works for a few years then one of your careless neighbors builds a new house up in the trees near a wildfire zone. Another uses cheap washer hoses and leaves for the summer without turning the water off. So now you lose two houses per year, or you lose one but it costs $2mm to rebuild. Unless the HOA increases everybody’s $10k “premium” the program will no longer work.

Back To Reality

That is essentially what is happening in California right now. In my last newsletter I wrote “Carriers are being squeezed because regulators control their pricing, and losses plus inflation are driving their costs.” Since writing that the squeeze became untenable for two of the largest carriers in the country, so now State Farm and Allstate are no longer writing homeowner’s insurance in California. Existing policyholders are not being non-renewed yet, but it’s not out of the question as AIG recently set that precedent. Not exactly what I would call “like a good neighbor” or “in good hands”.

What Can I Do As An Independent Agent?

Unlike State Farm or Allstate, I’m an independent agent who can secure insurance from multiple carriers. I can access “non-admitted” carriers from other states which are better able to price for higher risks. I’m constantly scanning the market for which carriers have risk appetite. I’m licensed in all states so can conveniently package multiple homes. I’m an expert in all insurance product lines: personal, commercial, professional, health and life. And I work for you, not the insurance company so I can help advocate claims without a conflict of interest.

What Can You Do As A Smart Consumer?

  • Sweat the big stuff. You should set up your insurance program to comfortably cover catastrophic risk with good contracts and generous limits while you essentially self-insure the little things via high deductibles.
  • Avoid small claims and late premium payments. Many insurance carriers have limited appetite for risk and will be happy to exchange a questionable customer for a better one. Don’t give them a reason.
  • Manage your own risk. With auto, never text and drive. And with your home, protect against water leaks. Water leak claims are epidemic right now, and they are particularly bad in vacant vacation homes where the leak can persist for weeks or months. Have a plumber inspect hoses/fixtures/water heaters, consider a leak detection system and turn off your whole house water when away for extended periods.

You can help celebrate my Desert Insurance Solutions “Independent Day” by responding to this e-mail with any comments, questions or concerns. And if you know of anybody who needs help navigating insurance, feel free to send them my way.

Make it a great day!