August 16, 2024 • 55 mins
Home insurance. Yeesh! For most folks, it's somewhere between a necessary evil and a snoozefest. If you're like most homeowners, you have insurance on your property -- policies issued to, in theory, protect you when things go wrong. But what happens in a world where disasters move from possibilities to annual certainties? What happens when the insurance companies themselves can't afford to do business in the face of constant natural disasters? In tonight's episode, Ben, Matt and Noel tackle an emergent crisis: a world where no one can afford continual, chaotic Acts of God.
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Episode Transcript
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Speaker 1 (00:00):
From UFOs to psychic powers and government conspiracies. History is
riddled with unexplained events. You can turn back now or
learn this stuff they don't want you to know. A
production of iHeartRadio.
Speaker 2 (00:24):
Hello, welcome back to the show. My name is Matt,
my name is Noah.
Speaker 3 (00:27):
They call me Ben. We're joined as always with our
super producer Ball, Mission Control Deck, and most importantly, you
are you.
Speaker 4 (00:35):
You are here.
Speaker 3 (00:36):
That makes this the stuff they don't want you to know.
Skirt Skirt. Today's episode is about something a lot of
people might find boring. It's a peculiar type of product.
It's something you buy out a necessity instead of for fundsies,
something that mainly just adults get. It's something everyone worries about.
(00:58):
And the weird thing is it's one of the it's
one of the only things that the more you use it,
every single time you use this thing that you paid for,
it gets more expensive.
Speaker 4 (01:10):
Oh I know, this one's from the Lord of the Rings.
This is a Gollum riddle.
Speaker 5 (01:12):
It's the wind, It's time Wait, it's a timeshare silence,
It's it's.
Speaker 4 (01:19):
It's a million.
Speaker 3 (01:21):
Nelson's on the road again. Uh yeah, it's you nailed
it No, uh sort of, it's it is. It's like
a ridiculous situation because it does feel like a riddle,
doesn't it? Like how the hell could this one thing
have all these attributes we described? Who wants to do it?
For anybody who hasn't read the title? What are we
talking about?
Speaker 2 (01:42):
Insurance? But specifically insurance for your your stuff, your house.
Speaker 5 (01:48):
Your house and all the stuff contained within it. Yeah,
around it, you know, out out buildings, whatever, you know,
all that.
Speaker 2 (01:58):
Stuff any one that happens to come on to your property.
Speaker 3 (02:02):
Right yes, now in most cases that is, that is true.
But I mean think about how weird that is. Like
these are cold open I want to go too long.
But you know, if you went to a shoe store,
you bought a pair of shoes, you wore out the
shoes over time, you went back to the shoe store
and they said beat me here, Paul, They said, hey,
you buddy, now your next pair is twice as expensive.
(02:23):
You would never go to that shoe store again. But
that's exactly how home insurance works.
Speaker 4 (02:27):
Right. I wish I.
Speaker 2 (02:29):
Could do they sell shoe insurance. I would do that.
Speaker 5 (02:32):
It's technically covered. It's technically covered if it's in your closet.
Speaker 3 (02:37):
That's why you park your car and a house during
a storm.
Speaker 5 (02:39):
We'll get to it in a bit, but Ben, I
think that metaphor, I guess is more appropriate than you
might even think the idea of, like dang, well, if
that were the case, I guess I'd never wear those shoes,
would I?
Speaker 3 (02:50):
So home insurance in particular, this is going to strike
a chord with a lot of us listening tonight. There
is a storm on the way, both metaphorically and literally, and.
Speaker 2 (02:58):
We'll take a ride on that storm when we get
back from a word from our sponsor.
Speaker 3 (03:09):
Here are the facts writers on the storm. What is
home insurance?
Speaker 4 (03:14):
We described it.
Speaker 3 (03:15):
It's a sub category of property insurance, and you guys
nailed it because full disclosure. You know, homeownership can be
tough for a lot of people in our generation and younger,
especially these days. And some of us are homeowners. In
the audience tonight, many and some of our hosts rough homeowners.
(03:36):
And it's kind of pain in the butt, but it
does make sense, right, Like you know, a small a
small mistake can be very expensive, very quickly.
Speaker 2 (03:47):
It can. It can be devastating too, especially if it's
not even a mistake if it's an act of God
or nature or the universe, however you want to think
about it.
Speaker 3 (04:00):
Yeah, we've known each other for a while, and you guys,
I've both been homeowners at various times, and when we're
just hanging out or chatting before after a show or
even not work related, we hit on some of the
same things. For most people in the US, if you
were a homeowner, your home is your largest financial asset.
(04:22):
That's simply the stats, and repairs are inevitable over time.
Your water heater goes out, I'm like, I'm trying not
to point fingers at this one, but I remember, yeah,
Matt's Okay, can I say it. Matt's water heater went.
It was a whole.
Speaker 2 (04:37):
It didn't go out, it started leaking, and I didn't
know it was leaking, and it leaked water in black
nastiness all over my floor and into my crawl space,
and I didn't discover until way too late, And thankfully
I had some pretty good homeowners insurance.
Speaker 4 (04:53):
You know.
Speaker 5 (04:53):
As funny as I moved in to this place and
almost immediately my sump pump, which is another expensive piece
of equipment, just basically exploded and just leaked foul you know,
poop water. Basically a some pop if anyone doesn't know,
is a thing that you know, pumps the stuff from
a downstairs bathroom or drain or whatever, like I've got
(05:14):
laundry stuff in the basement to the upstairs where it
then goes out, you know, and drains with the rest
of the stuff from the house. I tried to make
a claim for this and it was denied, so I
just paid for it out of pocket, and it kind
of established a pattern for me where rather than filing
an insurance claim anytime something goes wrong up to a
(05:35):
certain point it's like catastrophic and I couldn't afford it,
I just paid for it myself and then take a
tax right off, because you could take a tax right
off for improvements to your house. And it's a lot
easier to do that than it is to contend with
the insurance companies because it's a lot of stuff that
you have to file, a lot of you know, boxes
you have to tick, and chances are you're gonna get denied.
Speaker 3 (05:57):
And there's a lot of waiting and do you have
to always remember, look, we've got a private insurance is
a huge employer in the US. We're not attacking the individuals.
We are describing some problems with a broken system. One
of the questions I had in another life when I
worked in what you could call insurance, was who do
(06:18):
the adjusters serve? Yeah, it's not you, that's the company, right,
I mean water, heater roof replacements, which inevitably happen over time.
Not to mention like you were describing Matt so called
acts of God, natural disasters, bad weather, even non catastrophic
bad weather like falling trees, flooding, vandalism, a thousand other things.
(06:42):
It's tough for a lot of people to have that
much liquidity, that much cash in hand with a snap
of their fingers. And that's where insurance comes in.
Speaker 5 (06:51):
And you know, and like the afore mentioned sump pump situation,
that's a two thousand dollars replacement, which is right on
the edge of what.
Speaker 4 (06:58):
I could afford to pay out of pop.
Speaker 5 (07:00):
And rather than deal with it, you know, it can
can test the denial of the of the of the claim.
I just went ahead and dealt with it and ate it.
And then again you can like get that back in
the form of a tax ride off at the end
of the year, so it does kind of balance out,
But it really makes me think about how insurance isn't
really you can't just feel. They say insurance is selling
(07:22):
piece of mind, but I don't buy that. I don't
think it gives me any piece of mind at all.
Maybe for like a catastrophic thing like you're talking about,
being like a tree falling on your house or an
active god, but even that piece of mind is just
somewhere down the line. Maybe you'll get some money back
and you'll get some coverage for what you've paid into
that system. And I guess we should really quickly to
summarize a couple of the different types of insurance that
(07:45):
apply to homeowners here.
Speaker 3 (07:47):
Yeah, and a big part of this is the window
of time. It's something you've been familiar with if you've
ever worked freelance, and invoice can take as long as
ninety days, but all your other living expense is don't
pause for ninety days.
Speaker 5 (08:03):
And while you might get reimbursed for some of that,
it's not going to happen immediately.
Speaker 3 (08:07):
So often there's new Often people don't have the wherewithal
to wait a full year right for that advantage and
I love that you point out types of homeowner insurance
so the industry calls it HOI. There's actual cash value
policy that factors in depreciation, inflation, all that stuff. So
(08:27):
like if you have an old water heater, then you
get paid some percentage of that original cost. Then there's
a replacement cost policy just says hey, if your water
heater goes out, then you get a new one that
is about the same for this current era or this
current year or whatever. You also have to get different
(08:48):
types of coverage for your home right Like when Hurricane
Katrina hit, a lot of people found their insurance claims
denied because they didn't explicitly have have protection for floods
or flooding, which is just the terrible thing to hear.
You've got to assume that anything in your policy that
is not specifically covered may not be covered at all.
Speaker 5 (09:11):
Well, and a lot of that stuff's buried in the
fine print. And we're not lawyers, we don't always know
exactly what we there's a certain assumption that these organizations
are there to help you out and we're not here
to completely malign the insurance you know industry a little bit,
but I mean, you know, there is an expectation of like, well,
(09:33):
surely they tell me if I need that, but no,
they surely will not.
Speaker 2 (09:38):
Well and as an individual, add ons to insurance like
flood protection, specific types of fire protection or whatever, you know,
that fine print stuff that can be so cost prohibitive
when you're looking at different home insurance policies and when
you're already especially if you're in the process of buying
a home, which is a laborantine thing that your mind
(10:02):
has to navigate through, hopefully with the help of somebody
that kind of knows what they're doing. When you get
to the home insurance part of that, it is it
reminds me of the funeral game a little bit, where
you're you're already kind of broken down, You're pretty vulnerable
in that state already, and you just kind of want
(10:22):
to get it done. And you also you almost all,
I don't know in my in my experience, you go
for the minimum, like, Okay, I think I'll be okay
with this because it's it's expensive no matter where you are, and.
Speaker 5 (10:35):
At that point, you're just trying to get your monthly
payment down because you know, typically it gets factored into
your monthly payment, and most people can't afford to pay
that full premium in one fell swoop, so you factor
it into escrow or whatever. Where you're it adds a
couple hundred dollars a month, and you're already house poor
from making a massive down payment, so you want that
monthly payment to be as low as possible.
Speaker 4 (10:55):
Therefore, you're much you're willing to overlook.
Speaker 5 (10:58):
Well, surely I don't need the the volcano insurance, right,
there's no man, I mean, there's no active volcanoes near
my house.
Speaker 4 (11:05):
Right.
Speaker 3 (11:05):
Most people listening tonight do not have a Honda Odyssey
add on to their home insurance policy, and that leads to.
Speaker 4 (11:14):
Things ascess though you probably should.
Speaker 3 (11:15):
Yeah, just look at the stats. But then also, you know,
I'd love that you mentioned Escro account without getting two
in the weeds. For most homeowners, you're going to have
a mortgage, and your mortgage and these associated costs like
homeowners insurance that goes into an Escro account that your
lender pays all the stuff out through that through that account. Look,
(11:38):
there are a lot of people, you know, to that's
point about having the lowest possible denominator or the bare minimum.
There are people who would prefer to have no insurance whatsoever.
You know, they're like, I don't have a case on
my iPhone. I live, you know, by the code of God, playing.
Speaker 2 (11:54):
Dice, dude. But see, I always thought Ben that it
was a requirement for like for I thought, just if
you own a home, you have to have homeowners insurance.
The way if you have a vehicle and you want
to drive with a driver's license, have to have auto insurance.
Speaker 5 (12:11):
Well, but the only requirement is for the bank. The
bank is protecting their investments. You don't have to have
it if you own your house out right. I don't
believe you do have to have it. It might very state
in the state, but okay, you do not.
Speaker 3 (12:23):
There is no in the United States. There is no
state nor federal there's neither state nor federal law requiring
you to have homeowners insurance. But if you have a mortgage,
you don't totally own your home yet, so the banks
or the lenders will require you to get that insurance
as part of the deal. And that's all, like you
(12:46):
guys said, that's all so that the bank can be
made whole if your home is destroyed or if something
bad happens. All right, folks stap in our fingers.
Speaker 4 (12:55):
Wake up. That's it.
Speaker 3 (12:55):
That's all the background getting to the other stuff. You
need to know this, and please do send us your
home insurance war stories as well. The price you pay
here's why this is on a conspiracy show. The price
you pay for home insurance depends upon where you live.
And now, to steal the line for Fox News, more
than ever, those prices are changing. They are not going down.
(13:19):
Everything shows us that the strangeness dare we say a
bit of conspiracy here, is only going to accelerate. It's
only going to get worse, and much sooner than we
would all perhaps like to think.
Speaker 4 (13:32):
So let's put a pit on that.
Speaker 5 (13:34):
Think about that for a second, only take a quick
ad break, and then we'll come back and get right
into the weeds, but not too weedy.
Speaker 3 (13:46):
Here's where it gets crazy. It's been an open secret
in the industry for years. Costly climate catastrophes have driven
up the cost of home insurance across the United States,
specifically in certain areas, and in some of those areas,
they've driven these insurance companies out of the market completely.
(14:06):
The industry already has a euphemism for this. These moves
are called insurance corrections.
Speaker 5 (14:13):
Mmmm.
Speaker 2 (14:15):
Wherever we heard that before? That time correction? Yeah.
Speaker 5 (14:18):
Stock I mean it's the same thing, dude. It's currency,
it really is, and there's a market for it, and
it's based on conditions, you know, much like the stock
market is, and sometimes things are underassessed and or their
speculation that has.
Speaker 4 (14:32):
To do with certain weather events. It's all predictive.
Speaker 5 (14:35):
It's like betting on futures in the stock market. It's
very interesting that that same term is used, but I
think very appropriate.
Speaker 2 (14:42):
Well, lest we forget Ben already said this in the episode,
these are for profit companies every time, no matter what,
they are for profit. And if they can't make more
money with you paying them every month for nothing happening,
then they're having to shell out because stuff's actually happening.
Then the there's no business.
Speaker 4 (15:02):
Yeah.
Speaker 3 (15:03):
And in June of twenty twenty three, sixty million Americans
in just California and Florida found themselves scrambling for protection
because they would imagine this. You buy a house and
your bank says, okay, congratulations, you're in the homeownership class.
Welcome to Florida, California. You need to get homeowners insurance
(15:25):
until you're done with your mortgage and you can't find
a company that will give you a policy, or even worse,
you've lived in California, you've lived in Florida for a
number of years, you still have your mortgage, and you
get a you get that annual letter from your insurance
company and they say, hey, we're not going to renew
(15:45):
your coverage. You had a good run. Go try someone else,
but not Farmers, cause we're we're getting out of dodge.
Speaker 2 (15:53):
Like that's nuts. And there are also stories of people
being handed a what like a forty percent increase or
or even way higher than that.
Speaker 4 (16:04):
Eighty.
Speaker 2 (16:05):
I think I didn't I didn't see eighty. But I
think you're we're talking where all of a sudden you're
gonna just renew your homeowner's insurance and now it's it's skyrockets,
and you realize, oh wait, I actually can't afford that.
What do you do?
Speaker 3 (16:20):
Yeah, it's not better either, You're not paying more for
something better.
Speaker 5 (16:24):
Well, no, And and I think I maybe have mentioned
in the past that I had a bit of a conundrum,
and I'll get to what ultimately the resolution that was
a little later. But my homeowner's insurance policy was canceled
because I didn't receive or acknowledge some notification that probably
came in the US mail. And again, I mean, it's
my own fault and consider it, like chalk it up
(16:46):
to an experience as a you know, relatively new homeowner.
But you have to interact with them because the terms
can change, because if you don't like acknowledge the terms
of change, then they cancel it. So I mean, maybe
I'm misunderstanding the way that works, but that's my understanding
is that because I didn't reach out with this renewal period,
(17:06):
they just canceled it, you know, unilaterally. And then my
mortgage company took it upon themselves because it's a term
of my mortgage to have homeowners insurance, and they signed
me up for a policy of their choosing that was
a good four hundred dollars extra a month and I
just like totally ate that for way too long because
I was just so frustrated with the whole process.
Speaker 3 (17:27):
Yeah, and that's unfortunately a very common story for a
lot of people, even before these climate crises started driving
people literally out of house and home. And in defense
of these insurance companies, you know, getting mad at them
for being for profit is kind of like getting mad
(17:47):
at dogs for barking and pooping. It's part of what
they do. It's arguably why they're around.
Speaker 2 (17:54):
It's how the system works. It's it's why they will
cover when your entire roof blows off during tornado, because
there are enough other people also paying for that tornado
insurance and it's expensive.
Speaker 3 (18:09):
Yeah, and it's all a numbers game, you know. Some
of the most I think some of the most high
up intellectual mathematicians are underwriters. They're the ones who figure
out how much your premium is. A premium is just
sort of the dumb word the industry uses for those
(18:29):
payments you make monthly or annually or bi monthly or whatever.
They don't want to turn people away if they can
help it, because that's their business model. They need customers,
so they don't want to say no, but sometimes for
their own survival as a company, they do have to
say no. The numbers. It all goes back to the numbers.
(18:51):
The numbers are inarguable. Maybe we talk a little bit
about just how crazy things have gotten in California and Florida.
Speaker 4 (18:59):
Correct.
Speaker 5 (19:00):
In California, there were eight disaster events from twenty twenty
to twenty twenty four that caused between twenty billion with
a B and fifty billion in damages can buy. I
think wildfires, y'all think of like total loss of property
in like Malibu. For example, a good friend of ours,
I'll just keep them private, but a very close friend
and colleague of ours had a family member who entirely
(19:23):
lost their home in Malibu that they'd lived in, you know,
for I don't want to say a generation, if not longer.
And that is a common story, you know. Yeah, you're
running a little bit of a risk living in California,
a place where wildfires thrive like that and their rock
slides and things like that and erosion. Certainly, so that
makes sense that it would maybe cost a little more
(19:44):
because the damages and potential events are much likelihood is
a little higher there, but still in Florida. On the
other hand, thirty severe storms or hurricanes from twenty twenty
to twenty twenty four caused between one hundred billion and
two hundred billion dollars in damage.
Speaker 4 (20:04):
One of these, of course, was.
Speaker 5 (20:05):
Hurricane Ian, the third most just catastrophic costly storm in
United States history so far, and again, this a lot
of this has to do with the fact that these
things are becoming more and more common because of climate change.
Speaker 3 (20:24):
And this is coming from our good friends at NOAH.
So this is a nonpartisan, non political source. This is
just a bunch of boffins and eggheads.
Speaker 2 (20:35):
And that's the National Oceanic and Atmospheric Administration. And this
is just one extra thing.
Speaker 4 (20:41):
Be guys.
Speaker 2 (20:41):
I want to throw Texas in here too, because I
found some interesting stuff on them. And as we were
going through the research, I kept thinking back to twenty
twenty one. Do you guys remember when there was a
big storm in twenty twenty one and power was out
for a long long time. I think it was Ury
was like a winter storm Ury, and the Texas grid
(21:04):
failed basically and there was like it was only I
think it was ten billion dollars worth in losses like
insurance losses for that one storm across all of Texas.
And if you look at the numbers again from NOAH
with Texas, there are an average of four natural disasters
in that state that occur every year, but between twenty
(21:28):
nineteen and twenty twenty three they suffered an average of
eleven over one billion dollar events every year. Like that's
imagine as a state shelling out eleven billion dollars a
year knowingly because of natural disasters, and then as an
insurance company, you know that you've got all of these
(21:48):
people that you now have to serve to repair all
of these homes. I don't know that. It just seems
unsustainable to me.
Speaker 3 (21:56):
It reminds me how recently we encountered the hottest day
ever recorded on Earth. It was a Sunday in July,
and it was only the hottest day ever for about
twenty four hours because the next day was hotter. So
the two hottest days on the planet, number one and
(22:17):
number two, happened consecutively this year, which shows us the
pattern is escalating. It's untenable, as many people in California,
Texas and Florida can agree even just looking at their
home insurance bills. You know what I mean, Like, no
matter what your political ideology is, the money moves and
(22:38):
you can tell what the mathematicians are thinking by looking
at the bill.
Speaker 2 (22:43):
Well, yeah, and all they have to do is pay
a little bit of attention and go, oh, we guys,
we need to raise our rates by a lot. And
when I say a lot, I mean a lot.
Speaker 4 (22:56):
Yeah.
Speaker 3 (22:56):
Twenty twenty three, the average homeowner insurance premium then Florida
is six thousand dollars a year, not thick thousand dollars.
That would be.
Speaker 2 (23:06):
Fair, Robin, thick thousand dollars dollars.
Speaker 3 (23:11):
I mean, but that's that's way above average right in
the US. I mean, it's definitely higher than Georgia.
Speaker 4 (23:16):
Correct.
Speaker 2 (23:17):
Yeah, think about that being the average. That means some
people are paying way more than that.
Speaker 4 (23:21):
Right, Yeah.
Speaker 3 (23:22):
And then just this year twenty twenty four, the average
went up two thousand, seven hundred and seventy dollars. The
average home insurance in Florida now is eight thousand, seven
hundred and seventy dollars a year, and it'll probably be
higher in twenty twenty five.
Speaker 2 (23:39):
Yeah, it'll have to be until it just goes away
in twenty twenty eight. I'm just joking Florida, I mean,
not homeowners and sure, okay, let me you know.
Speaker 5 (23:52):
Says by everybody remembers that tool song about sea you
down in Arizona Bay. I mean, Florida and California are
two of these locations that they're beautiful and they are
lovely places to live but there are some somewhat apocalyptic future,
you know, kind of doom saying things associated with them.
Speaker 3 (24:11):
One hundred percent one hundred percent. And you know, as
more and more private companies exit these areas, more and
more people enter state run alternatives. Kind of like how
if you can't afford private medical insurance, you may have
you may live in a part of the country that
allows you to participate in a government plan. And California
(24:34):
has something called the Fair Plan Association. Florida has something
called the Citizens Property Insurance Corporation, And as of just
last year, that Florida state run company alone held the
homeowner policies for one out of eight of every household
in Florida.
Speaker 2 (24:51):
That's a lot more than I would have expected. But
it does make sense, man, watching just watching the news,
watching the weather recently, especially when you see the kind
of storm that we just had. And I can't tell
you the name of it because I'm I didn't keep
up that well with it. But the storm that formed
in the Atlantic pretty swiftly became a hurricane and then
swept across and then went all the way up the
(25:13):
eastern seaboard of the US, and people from Florida all
the way up to Upstate New York got flooding, like
terrible flooding. When that kind of thing is feeling more
and more like a regular occurrence, it's not good. It's
not good for anybody who's gonna have to pay homeowners
insurance agreed.
Speaker 3 (25:34):
Yeah, and it's not good for the companies either. I mean,
there are it's such a headline. It's such red meat
for a headline, right to divide people or to alarm people,
to say climate change is pushing home insurance. But there
are other factors at play. The story is not as
simple as headlines might imply. So one of the big
(25:57):
things that people hadn't thought about. I don't know if
we all thought about this as well before we started
researching is the role the pandemic played, But maybe not
in the way we think. There was a great interview
with a guy named David Blades, which first off, is
a really cool name.
Speaker 4 (26:15):
Like a magician or something. I mean game.
Speaker 2 (26:18):
He's like a he's a bouncer.
Speaker 3 (26:20):
I picture of talking. Yeah, I picture he's like specializes
in knives and butterfly knives and switchblades. So he's talking
to NBC. Yeah, he's talking to NBC, and he's just
like he's got his hand on a desk and he's
popping the knife in between his spread out fingers or something.
But he he said that we need to look at
(26:41):
us construction cost because before the pandemic, from twenty sixteen
to twenty twenty, those costs increase between like one and
three percent, which seemed very reasonable, moderate what you could expect.
But let's give the let's give a quote directly from
David Leads.
Speaker 2 (27:00):
Okay, this is a direct quote, and I'm just gonna
put this here because I think I accidentally made a
skip over his actual credits. He's the associate director for
Industry Research and Analytics at am Best, which is a
global credit agency in data group. Okay, so he said,
with this increase, you're talking about a very moderate amount
of inflation. He says, Yet during and after the pandemic,
(27:24):
supply chains were disrupted, real estate prices skyrocketed, and interest
rates surged. As a result, construction costs soared thirteen point
four percent in twenty twenty one and nine point three
percent the year after. So combine that's twenty two point
seven percent. I think, if I'm doing my math correctly,
(27:45):
I may not be, but that amount of construction cost
increase is that makes so much sense?
Speaker 4 (27:53):
Ben?
Speaker 2 (27:54):
Why why would construction costs increase homeowners insurance?
Speaker 3 (27:58):
Ooh yeah, that's or Dennis Reynolds moment. That's the thing
where like we haven't thought about that. When construction costs rise,
so does the cost of literally any repair. So a
home prices surge in the beginning, but then anytime you know,
the water heater breaks, anytime you've got to replace the roof,
(28:18):
anytime a Honda Odyssey hits the side of your house,
it's going to cost at least twenty something percent more.
And this means that the insurance companies have to start
jacking up their rates to a certain threshold. But they
don't have infinite tolerance. At a certain point, they have
to ask themselves, well, it's not just a matter of
(28:41):
whether or not we can turn a profit here, but
can we act? Can we literally afford to do business
at all in these areas where we know hurricanes are
not a possibility but a certitude, you know, a certainty.
Speaker 2 (28:56):
Too, that is that is indeed nuts. And I'm just
gonna take it really quickly to my water heater situation
because that was right in pandemic times, and that's when
construction costs were going way up because the prices of
wood were going way up, and they had to replace
quite a bit of wood in the floor of my house,
and it costs them way more than they expected the
(29:17):
insurance company to even do the job. So I ended
up having to I don't even know how I navigated it,
but I had to pay extra money basically at that
time because of my deductible or whatever it was I had,
plus some other thing and I can't even remember, but
it was. It was because of those construction costs.
Speaker 5 (29:35):
And the interesting thing too, is, like I think, I
see you guys are linked to this YouTube video on
building integrity, just a YouTube channel, and the guy that
I think runs that, he's like a consultant in cases
of insurance fraud, but you know, in terms of fraud
perpetrated by insurance companies. And one thing this dude pointed
out that I definitely verified is relatively common. Is this
(29:58):
idea that you know, since these are for profit organizations,
their money that they receive that are profits, they don't
necessarily even have to like put those aside in the
hopes that you know, like this is this is held
for you right where it's not like the same as escrower.
That's money that you pay through your mortgage company they
(30:19):
hold on to for you, and that then is you.
So the money that you pay your insurance company, they're
not like tucking that away. And there could come a
time where maybe so many claims are coming through that
the insurance company isn't profitable that year, but they only
apparently have to like balance the books in years where
they don't make their bottom line. So it's just a
(30:42):
really interesting balancing act because of this whole for profit
nature of it, and the fact of the matter is
it really just isn't designed to protect you. And there
were all these video clips I was watching of like
insurance adjusters coming out and hanging out with a roofer
who shown them that this roof needs to be replaced
(31:02):
by ripping out these shingles seeing see look the nail
holes here is all warm, and the insurance just is like, no,
you're being too aggressive with that. That's not how you
do that. You don't pull it, you don't rip the
nail out like that. You're not even trying.
Speaker 2 (31:13):
Guy.
Speaker 5 (31:13):
He's basically telling this professional roofer that he is not
approaching this with the desire to repair. Is he is
basically saying, you already have your mind made up. But
what the reality is is that the insurance just already
has his mind made up as to the fact that
this we will not repare replace this roof, even if
(31:34):
it's within the timeframe of when a roof should be replaced,
which is I think twenty five years or something like that.
And it's just fascinating because the point that the guy
on the YouTube channel made is that you could argue that, well,
they knew how old the roof was when they insured
the house, and if they weren't going to replace it
due to this storm damage, then that was what this
(31:55):
was relating to. Then they shouldn't have insured it in
the first place. But the fact is, when people in
sure you're home, they ask very vague questions. They want
that plausible deniability, right, They don't want to know everything
that's wrong with the house. That way, when something really
does go wrong, they can say, well, I wasn't really
covering of the terms of our agreement.
Speaker 3 (32:15):
Could you describe your foundation in terms of vibes?
Speaker 4 (32:20):
It really is that way more or less, because like
you know they ask you, these guys.
Speaker 5 (32:23):
I literally applied for a new policy today because of
that issue I was talking about. I finally dealt with it,
and they're like, how old did your roof? I'm like, oh,
I could look it up. It and I just give
us a ballpark. I'm like, really, a ballpark that'll work
for you. That's a little sus isn't it. Because the
point is they'd prefer a ballpark, and they're doing almost
over the phone.
Speaker 4 (32:42):
They haven't come to my house.
Speaker 5 (32:44):
You'd think that they would inspect the home before agreeing
to ensure it. But that is a feature for them,
not a bug. The less they know, the better.
Speaker 3 (32:52):
Honestly, a lot of ballparks don't even have roofs, to
be honest.
Speaker 4 (32:56):
A lot of ballparks burned down.
Speaker 2 (32:58):
Can you imagine the insurance on owning a ballpark, That's.
Speaker 4 (33:02):
What I'm saying.
Speaker 3 (33:03):
That's where you start to just think seriously about buying
the insurance company.
Speaker 2 (33:08):
You know, yeah, yeah, yeah, But this.
Speaker 3 (33:10):
Is and you know, another great example I think, to
a great comparison to Knowle's point, a terrifying one is
anybody who works in the medical industry, you've seen something
simpler when doctors or nurses say this person needs this
treatment and the insurance company comes back and says, ah,
(33:31):
that sounds like a luxury.
Speaker 4 (33:33):
They don't really need that second long do they?
Speaker 2 (33:36):
Oh, they they can totally pay for that if they
want to.
Speaker 4 (33:40):
Yeah.
Speaker 3 (33:41):
Yeah, they did describe the vibes of their kidney when
they signed up, so it's really on them. This is
I think this goes to another issue, and this is
a factor that is also a prime mover of the
home insurance crisis which we are entering. It's the obfuscation
(34:02):
because the scope of the problem was a big open
secret in the industry. But for a long time, it
was hard for the public to get information about this,
to get the full lay of the land, because insurance
companies were purposely hiding a lot of it. For a
very long time. It was a herculean effort to get
a look at the cost of insurance, the same insurance
(34:25):
policies in different parts of the United States, because the
private insurance companies didn't disclose that the same way like
a lot of streaming places won't give you their exact numbers.
That's their secret sauce, right, and you don't want you know,
you don't want Johnny Blue Jeans in Enied, Oklahoma or
(34:48):
wherever to learn that somebody else across the river somewhere
is paying much less for the same product.
Speaker 5 (34:57):
Not to mention that some of these big players in
the insurance space, like the State Farms of the World
or whatever, they pretty much fall into that too big
to fail category. So if they ever did have a
bum year or maybe they had to pay out too much,
they're going to get a bail out, and then it's
like rinse and repeat kind of.
Speaker 2 (35:16):
You know, So, how do we even know what we
know about how much insurance premiums cost on average, per state,
per region, per you know, even town. Well, we didn't
have There wasn't some group putting all those numbers together.
Kind of like how remember we when we looked into
murders and homicides and deaths in national parks and we
(35:40):
were trying to find in the missing like the number
of people. Nobody's out there collecting that data and putting
it in a spreadsheet and publishing it online somewhere or
in an article or journal. Nobody was doing that for
homeowners insurance either until a dude named Benjamin Keys. Oh
it's a ben it's one of the good ones. And
Benjamin Keys comes along. He was a professor of real
(36:02):
estate at the University of Pennsylvania's Wharton School. And another
person named Philip Moulder. Oh my god, a Molder too, right,
that's awesome. Good to be Trio, Moulder and Keys got together.
Philip Moulder is a professor at the University of Wisconsin
School of Business. They got together and said, hey, let's
figure this stuff out, and we're going to tell you
(36:24):
what they figured out right after a word from our sponsor.
Speaker 3 (36:33):
And we've returned. So we've already i think established just
objectively hear the facts level, there are dangerous things on
the horizon climate wise, both metaphorically and literally. And we
learned about the study by Keys of Molder that you
can read in full online thanks to a journalist named
(36:55):
Christopher Flavelle writing for the New York Times. And they
were saying, wait, why are home insurance rates distorted across
this grand country of ours? And they said, all right,
climate change drives it, right, it's me the heat, the
wildfires you were talking about, and old the flooding we're mentioning,
Matt the tornadoes. Of course, because part of this country
(37:17):
is called Tornado Alley. And in a previous conversation we
established how Tornado Alley is growing at a breakneck base
again literally, and this is a well established trend, but
it's not the whole story because it doesn't explain why
a small town like Enid, Oklahoma, would be one of
the most expensive places in the country to have home
(37:40):
insurance relative to the actual value of your house. This
is where we see what Keys and Molder do. They
teamed up with a group called core Logic. Core Logic
is another like hardcore and I say this with great
respect nerd outfit. You know, they're math wizards. Their Property
Information and Analytics group, and they get a lot of
(38:02):
info from mortgage servicers. So if you own a home,
you pay, you know, into your ESCRO account, and groups
like core Logic get the information about what you're paid.
And they got the data for about twelve point four
million what we call owner occupied households, so not people
flip in airbnbs, you know, none of the black rock stuff,
(38:26):
people who live in the homes that they own. And
then Keys and Malta did some really clever They went
into these Escro accounts. They did some fancy financial forensics,
and they managed to estimate what each household paid for
property insurance. And then they found that, yes, there's a
(38:47):
relationship between climate risk and what companies charge, but it's
not all the same. It doesn't explain the discrepancy. Higher
premiums are charged in every state where regulators don't ask
as many questions from the company. Oh in other words,
(39:09):
and oh is right. In other words, states with rubber
stamp regulators serve the customers up to these private industries
on a platter. And I would pose it that it's
not going to be tough for us to find some
revolving door situations where you know, you might work as
a regulator and then later you get a plumb job
(39:30):
for some of the prior.
Speaker 2 (39:31):
Yeah, yeah, dude, that's that's exactly what was found in Texas. Look,
it's kind of a known thing. Texas is a state
where regulations are frowned upon a little bit in general,
not fully, but you know, let's say they're minimized on
purpose in Texas. Unlike especially in California, when an insurance
(39:57):
company wants to raise a rate, they we kind of
get to just do that and then they get to
ask for forgiveness later rather than asking permission upfront. In California, though,
if you want to raise rates as an all state
or whatever you know company, you are a state farm.
If you want to raise rates, you have to go
(40:17):
to California to a government body and say, hey, here,
for X, Y and Z, we need to raise our
home insurance premiums, you know, on average or whatever.
Speaker 5 (40:28):
So you'd have to make your case with like the
increased prevalence of natural disasters and certain areas and tie
it to specific events and say this is why we need.
Speaker 4 (40:38):
To do this.
Speaker 2 (40:39):
Yes, but in Texas you've got something called the Department
of Insurance that takes a look at stuff. It approves
the rates, but it takes a look at about half
of the rate increases that happen every year from homeowner's
insurance companies.
Speaker 5 (40:56):
So that's the rubber stamping we were talking about, right, Yeah, Yeah.
Speaker 3 (41:01):
I don't want to again, as we said, I don't
want tom malign people unfairly, but it's it's giving big
golf game conversation energy out there in Texas.
Speaker 2 (41:12):
Yes, you know what I mean, Yes, and I misspoke.
They don't look at half of them. They look at
all of them presumably, but they approve roughly half of them.
Just like, yeah, definitely, you guys can raise.
Speaker 5 (41:23):
Rates, And is there an appeal process from the consumers perspective? Like,
I know, for example, you can dispute property tax increases.
There is a whole system in place for that, at
least here in Georgia. But what about with the insurance rates?
Speaker 2 (41:37):
Yes, yes, in Texas there is one thing, you guys.
In nineteen ninety one, the Texas State Legislature made a
thing called Public Insurance Council or the Public Insurance Council,
and they represent the interests of consumers and they attempt
to maintain a quote, at least according to this article
written by Michael Hardy in Texas Monthly, they attempt to
(42:00):
a balanced marketplace.
Speaker 4 (42:03):
You're saying it in a way or I don't know
if you believe that that's what actually happened.
Speaker 3 (42:06):
I heard, well, I heard italics.
Speaker 2 (42:09):
Mike. Michael put it in quotations in his.
Speaker 5 (42:12):
Arr italics voice too, Matt to be fair, No, it's
it does seem sure, it's a good cover story.
Speaker 4 (42:20):
It's good for optics to say.
Speaker 5 (42:21):
No, no, no, no, we have this sub committee or whatever
that's looking out for the best interest in the consumer.
But it would seem to me that they do a
bit of rubber stamping themselves, or at least I haven't
heard of any much coming out of this short of
a couple of like publicity grabs.
Speaker 4 (42:36):
Maybe I don't know. Tell me what you guys think.
Speaker 3 (42:38):
Well, there are also valid points which I guess we're
ethically required to mention, and those valid points would be
from their perspective. There would be arguments like, hey, people
do need home insurance, right, so let's work with these entities.
And then another one would probably be the kind of
iron hand and velvet gloves of argument that happens so often,
(43:02):
which is, we bring a lot of business to this state, right,
or we as an industry employ a lot of people,
which can be true but can also be an implicit threat.
Speaker 4 (43:16):
Yep.
Speaker 2 (43:17):
And there's a third perspective, get on YouTube and learn carpentry, dude,
except I would never follow that. I wish I could
repair stuff. You can learn anything homeowners.
Speaker 3 (43:33):
Right, right, I don't know. It's I love that you're
bringing up this example because the effects of these state
by state regulatory differences. Right, You're in a California, and
it asks and we're not saying California is perfect by
any means, but you're in a state where regulation has teeth,
(43:54):
and you are required to come with some facts, to
come with some quantitative data that shows the necessity of
a thing, right, because they don't want you to leave
either as an insurance company. They don't want those companies
to leave. But then if you go to places with
much more lax or compromised regulation, then you see that
there is a huge discrepancy. You can go into this
(44:18):
New York Times article. You can see the discrepancy in
these pretty clever infographics wherein you can plug in like
you can look at your own zip code or your
own county and you'll see how weird this stuff goes.
That is the reason the average premium has jumped thirty
three percent in just three years, much higher than the
(44:40):
rate of inflation from twenty twenty twenty twenty three. The
system is unfair. You could live in this place with
the same amount of risk regents, with the same amount
of weather, the same chance for you know, a disastrous event,
and you might pay a wildly different rate because some
you might be in a place where the regulator sometimes
(45:00):
do their job or sometimes don't. Dang, we've got a
little lag because I'm recording on the road here. But
just to be clear, that pause was purposeful. I was
going for like a.
Speaker 4 (45:12):
Dramatic thing, but pregnant pause a pp.
Speaker 2 (45:17):
Pp And Ben, you found another quote from that same
New York Times article that is unfortunate.
Speaker 3 (45:27):
Yeah, yeah, it's a little long, but I think it's
worth I think it's worth hearing. Should we round robin it?
Speaker 4 (45:33):
Absolutely? Across the more than nine thousand zip codes for
which data was available, the typical American household last year
paid about five hundred dollars in home insurance premiums for
every one hundred thousand dollars of home value, or zero
point five percent, the professors found.
Speaker 2 (45:50):
But in California, which suffered through more than seven thousand
wildfires last year, good Lord, the typical homeowner in many
zip codes paid premiums as low as point zero five
percent of home value.
Speaker 3 (46:05):
By contrast, the quote concludes in parts of Alabama, Oklahoma, Louisiana,
and Texas, the average homeowner faced home insurance premiums greater
than two percent of the value of local homes. Now
zero point five point h five two percent. They may
sound like small numbers until we realize we're talking about
percentages of hundreds and hundreds of thousands of dollars.
Speaker 2 (46:28):
Well, yeah, and think about the vast differences in average
home value there that are represented in a ton of
homes in Louisiana versus a ton of homes in California.
I don't want to sparage any homes in Louisiana. It's
just you imagine the amount of wealth and money that
goes out into many parts of California and the types
(46:50):
of homes that are built, and the price increases in
home value that have been happening out there.
Speaker 5 (46:56):
Well, I know we're largely kind of during this conversation
around the climate change angle, but I did just want
to just give a tiny quick conclusion to my kind
of home insurance odyssey. After looking at this research and
preparing for this podcast today this morning, I kind of
lit a little bit of a fire under me to
(47:18):
take care of this and stop overpaying for my homeowner's
insurance policy that my mortgage just took it upon themselves
assign me up for. And I received quotes from four
different companies, including the company that I get my.
Speaker 4 (47:31):
Car insurance through and they were just all over the place.
Speaker 5 (47:35):
And there's a formulaic way that they ask you these
questions and it's like literally to dictate it, I'm sure
by legal legal ees and regulations, and it ultimately the
thing they tell you upfront is this is the cost
that we assess it would cost to rebuild your home,
and that number you guys from four different organizations, completely
(47:55):
different number, completely different number, and the kind of boilerplate
cover they thought that I needed also completely different, and
the deductibles also completely different. And it was really eye
opening for me, how like if I'm a total you know,
nube with this stuff, and I definitely am not armed
a little more so now, but not to the degree
(48:18):
that maybe someone who does this stuff for a living
with the right questions or and I honestly it's so
mandatory that I just don't know how much that would
even help. And I was just to MAT's point earlier
in the episode, I was just satisfied with getting my
payment down by a couple hundred bucks a month and
just to move on with it, because they just browbeat
you with this stuff and you're almost left like in
this submissive state where you're.
Speaker 4 (48:39):
Like, please just make it go away, Please just make
it go away.
Speaker 5 (48:42):
And that's how I'm honestly get a little choked up
talking about it in a weird way, because it is
like emotional abuse in a way, you know, because you're like,
am I am I complying? Am I complying? As long
as I'm complying, you know? And I just was left
with yeah, And I ultimately went with State Farm. And
you know why I went with because it was cheaper
and the guy was kind of nice and didn't sound
(49:03):
like a dead eyed robot. And I got a better
car insurance rate too, so I bundled. But even that
stuff we haven't talked about. They'll be like, oh, we'll
give you thirty percent off on your homeowners if you
bundle your car.
Speaker 4 (49:14):
What up with that, y'all.
Speaker 3 (49:16):
Whenever somebody gives you a margin that large off, they're
also giving you a sneak into how big their profit
margin is to begin with. And you should always this
is very this very I don't want to come off
be a stereotype of myself, but this is also part
of the reason why you should always check your car insurance.
(49:39):
You should check every bill you have to pay regularly,
because if you don't, it will just continue to kind
of hitch its pants up as a bigger and bigger
slice of your budget because people are counting on you
to not care. They're counting on you to not dive
into that boring stuff. It's boring on purpose, you know
(50:00):
what I mean. And again, it's the system, it's not
the individuals. Look, we know here in the US alone,
thirty nine million different properties are vulnerable to one or
more types of disasters. We know that about ten point
seven million Americans right now live in a county where
one hundred percent of the homes are vulnerable to that
(50:24):
insurance correction. And those places tend to be less wealthy.
They're less equipped to fight for their rights, you know,
to do something. We're talking about our group text, you know,
to get the lawyers to be able to take something
to court when things are getting shisty. I mean it's
going to it's going to expand, just like Tornado Alley.
(50:48):
And also a bit of empathy, as weird as it
may sound, for those insurance companies, if they can't make
a profit, they can't exist either. So from their perspective,
this is not about necessarily screwing people over. It's an
existential threat, you know what I mean. You can't sell
flood insurance if you know for sure the entire place
(51:09):
is going to flood several times a year.
Speaker 2 (51:12):
No, that's why. You know, what is it? The five
hundred year Floodplaine or whatever is a thing because there's
some risk there. Buzz, five hundred years come.
Speaker 3 (51:22):
On, right, by which time I'll be retired, you know,
out in Sioux Falls. I don't know why I'm referencing
Sioux Falls. I think it's a please don't destroy sketch.
You guys don't.
Speaker 2 (51:35):
Oh yeah, I love those guys. I really quickly got
I found this. Apparently Vermont has a super low homeowner's
insurance average. It was like seven hundred and ninety nine
dollars average or something in Vermont. And there are lovely
homes out there. Let's go to Vermont, benas country.
Speaker 3 (51:58):
Why don't we go to the country.
Speaker 2 (52:00):
Yeah, I don't even know what's out there, leaves no.
Speaker 4 (52:05):
Name the other draft.
Speaker 5 (52:07):
It's probably a good, probably be good for our mental health, y'all.
I don't even know they got the internet in Vermont, y'all.
Everyone's so mentally healthy and spry out there and just
noodling on a banjo on a front.
Speaker 4 (52:17):
Porch with a weed in their mouth.
Speaker 3 (52:19):
Sanders, is there still like.
Speaker 4 (52:22):
Kicking it on the regular? Yeah?
Speaker 2 (52:24):
Oh hey, quick breaking news. I know we were talking
about Vermont, but just talking about climate change with talking
about disasters. I'm reading right here on ABC News that
as we were recording a four point four magnitude earthquake
Los Angeles.
Speaker 3 (52:40):
Yeah, California happened.
Speaker 4 (52:42):
Yeah.
Speaker 3 (52:42):
Actually one of our what I learned about, one of
our old colleagues or former colleagues reported it apparently very
very scary stuff. Also, the you know, the ring of
fire is awakening. Is the problem the tectonic it's a
cool name for the tectonic plate sensitivity around the Pacific,
(53:03):
rim typhoons, earthquakes, It's all happening. Stay safe, Yeah, stay safe,
and also let us know this larger question. I'm glad
you got the breaking news for us there, Matt, because
this does bring to mind a larger question. Disasters are
(53:24):
becoming more frequent, less predictable, expanding to touch places previously
considered safe, while also growing in severity. So where can
people go for safety? What will the world look like
beyond insurance, right beyond the financial stuff. Existentially, what is
this planet going to look like? Not just next year,
(53:44):
but within the next decade. Let us know, and also
tell us your homeowner war stories. If you are a contractor,
we got a lot of contractors in the audience tonight.
Speaker 4 (53:55):
Tell us the.
Speaker 3 (53:56):
Weirdest conversations you've had with an adjuster. I love to
hear from you. We try to be easy to find online.
Speaker 4 (54:03):
That's right.
Speaker 5 (54:04):
You can find this at the handle Conspiracy Stuff where
we exist on Facebook where we have a Facebook group
Here's where it gets crazy, on YouTube, where we have
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Speaker 4 (54:16):
We are Conspiracy Stuff Show.
Speaker 2 (54:18):
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(54:39):
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(55:02):
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Speaker 2 (00:24):
Hello, welcome back to the show. My name is Matt,
my name is Noah.
Speaker 3 (00:27):
They call me Ben. We're joined as always with our
super producer Ball, Mission Control Deck, and most importantly, you
are you.
Speaker 4 (00:35):
You are here.
Speaker 3 (00:36):
That makes this the stuff they don't want you to know.
Skirt Skirt. Today's episode is about something a lot of
people might find boring. It's a peculiar type of product.
It's something you buy out a necessity instead of for fundsies,
something that mainly just adults get. It's something everyone worries about.
(00:58):
And the weird thing is it's one of the it's
one of the only things that the more you use it,
every single time you use this thing that you paid for,
it gets more expensive.
Speaker 4 (01:10):
Oh I know, this one's from the Lord of the Rings.
This is a Gollum riddle.
Speaker 5 (01:12):
It's the wind, It's time Wait, it's a timeshare silence,
It's it's.
Speaker 4 (01:19):
It's a million.
Speaker 3 (01:21):
Nelson's on the road again. Uh yeah, it's you nailed
it No, uh sort of, it's it is. It's like
a ridiculous situation because it does feel like a riddle,
doesn't it? Like how the hell could this one thing
have all these attributes we described? Who wants to do it?
For anybody who hasn't read the title? What are we
talking about?
Speaker 2 (01:42):
Insurance? But specifically insurance for your your stuff, your house.
Speaker 5 (01:48):
Your house and all the stuff contained within it. Yeah,
around it, you know, out out buildings, whatever, you know,
all that.
Speaker 2 (01:58):
Stuff any one that happens to come on to your property.
Speaker 3 (02:02):
Right yes, now in most cases that is, that is true.
But I mean think about how weird that is. Like
these are cold open I want to go too long.
But you know, if you went to a shoe store,
you bought a pair of shoes, you wore out the
shoes over time, you went back to the shoe store
and they said beat me here, Paul, They said, hey,
you buddy, now your next pair is twice as expensive.
(02:23):
You would never go to that shoe store again. But
that's exactly how home insurance works.
Speaker 4 (02:27):
Right. I wish I.
Speaker 2 (02:29):
Could do they sell shoe insurance. I would do that.
Speaker 5 (02:32):
It's technically covered. It's technically covered if it's in your closet.
Speaker 3 (02:37):
That's why you park your car and a house during
a storm.
Speaker 5 (02:39):
We'll get to it in a bit, but Ben, I
think that metaphor, I guess is more appropriate than you
might even think the idea of, like dang, well, if
that were the case, I guess I'd never wear those shoes,
would I?
Speaker 3 (02:50):
So home insurance in particular, this is going to strike
a chord with a lot of us listening tonight. There
is a storm on the way, both metaphorically and literally, and.
Speaker 2 (02:58):
We'll take a ride on that storm when we get
back from a word from our sponsor.
Speaker 3 (03:09):
Here are the facts writers on the storm. What is
home insurance?
Speaker 4 (03:14):
We described it.
Speaker 3 (03:15):
It's a sub category of property insurance, and you guys
nailed it because full disclosure. You know, homeownership can be
tough for a lot of people in our generation and younger,
especially these days. And some of us are homeowners. In
the audience tonight, many and some of our hosts rough homeowners.
(03:36):
And it's kind of pain in the butt, but it
does make sense, right, Like you know, a small a
small mistake can be very expensive, very quickly.
Speaker 2 (03:47):
It can. It can be devastating too, especially if it's
not even a mistake if it's an act of God
or nature or the universe, however you want to think
about it.
Speaker 3 (04:00):
Yeah, we've known each other for a while, and you guys,
I've both been homeowners at various times, and when we're
just hanging out or chatting before after a show or
even not work related, we hit on some of the
same things. For most people in the US, if you
were a homeowner, your home is your largest financial asset.
(04:22):
That's simply the stats, and repairs are inevitable over time.
Your water heater goes out, I'm like, I'm trying not
to point fingers at this one, but I remember, yeah,
Matt's Okay, can I say it. Matt's water heater went.
It was a whole.
Speaker 2 (04:37):
It didn't go out, it started leaking, and I didn't
know it was leaking, and it leaked water in black
nastiness all over my floor and into my crawl space,
and I didn't discover until way too late, And thankfully
I had some pretty good homeowners insurance.
Speaker 4 (04:53):
You know.
Speaker 5 (04:53):
As funny as I moved in to this place and
almost immediately my sump pump, which is another expensive piece
of equipment, just basically exploded and just leaked foul you know,
poop water. Basically a some pop if anyone doesn't know,
is a thing that you know, pumps the stuff from
a downstairs bathroom or drain or whatever, like I've got
(05:14):
laundry stuff in the basement to the upstairs where it
then goes out, you know, and drains with the rest
of the stuff from the house. I tried to make
a claim for this and it was denied, so I
just paid for it out of pocket, and it kind
of established a pattern for me where rather than filing
an insurance claim anytime something goes wrong up to a
(05:35):
certain point it's like catastrophic and I couldn't afford it,
I just paid for it myself and then take a
tax right off, because you could take a tax right
off for improvements to your house. And it's a lot
easier to do that than it is to contend with
the insurance companies because it's a lot of stuff that
you have to file, a lot of you know, boxes
you have to tick, and chances are you're gonna get denied.
Speaker 3 (05:57):
And there's a lot of waiting and do you have
to always remember, look, we've got a private insurance is
a huge employer in the US. We're not attacking the individuals.
We are describing some problems with a broken system. One
of the questions I had in another life when I
worked in what you could call insurance, was who do
(06:18):
the adjusters serve? Yeah, it's not you, that's the company, right,
I mean water, heater roof replacements, which inevitably happen over time.
Not to mention like you were describing Matt so called
acts of God, natural disasters, bad weather, even non catastrophic
bad weather like falling trees, flooding, vandalism, a thousand other things.
(06:42):
It's tough for a lot of people to have that
much liquidity, that much cash in hand with a snap
of their fingers. And that's where insurance comes in.
Speaker 5 (06:51):
And you know, and like the afore mentioned sump pump situation,
that's a two thousand dollars replacement, which is right on
the edge of what.
Speaker 4 (06:58):
I could afford to pay out of pop.
Speaker 5 (07:00):
And rather than deal with it, you know, it can
can test the denial of the of the of the claim.
I just went ahead and dealt with it and ate it.
And then again you can like get that back in
the form of a tax ride off at the end
of the year, so it does kind of balance out,
But it really makes me think about how insurance isn't
really you can't just feel. They say insurance is selling
(07:22):
piece of mind, but I don't buy that. I don't
think it gives me any piece of mind at all.
Maybe for like a catastrophic thing like you're talking about,
being like a tree falling on your house or an
active god, but even that piece of mind is just
somewhere down the line. Maybe you'll get some money back
and you'll get some coverage for what you've paid into
that system. And I guess we should really quickly to
summarize a couple of the different types of insurance that
(07:45):
apply to homeowners here.
Speaker 3 (07:47):
Yeah, and a big part of this is the window
of time. It's something you've been familiar with if you've
ever worked freelance, and invoice can take as long as
ninety days, but all your other living expense is don't
pause for ninety days.
Speaker 5 (08:03):
And while you might get reimbursed for some of that,
it's not going to happen immediately.
Speaker 3 (08:07):
So often there's new Often people don't have the wherewithal
to wait a full year right for that advantage and
I love that you point out types of homeowner insurance
so the industry calls it HOI. There's actual cash value
policy that factors in depreciation, inflation, all that stuff. So
(08:27):
like if you have an old water heater, then you
get paid some percentage of that original cost. Then there's
a replacement cost policy just says hey, if your water
heater goes out, then you get a new one that
is about the same for this current era or this
current year or whatever. You also have to get different
(08:48):
types of coverage for your home right Like when Hurricane
Katrina hit, a lot of people found their insurance claims
denied because they didn't explicitly have have protection for floods
or flooding, which is just the terrible thing to hear.
You've got to assume that anything in your policy that
is not specifically covered may not be covered at all.
Speaker 5 (09:11):
Well, and a lot of that stuff's buried in the
fine print. And we're not lawyers, we don't always know
exactly what we there's a certain assumption that these organizations
are there to help you out and we're not here
to completely malign the insurance you know industry a little bit,
but I mean, you know, there is an expectation of like, well,
(09:33):
surely they tell me if I need that, but no,
they surely will not.
Speaker 2 (09:38):
Well and as an individual, add ons to insurance like
flood protection, specific types of fire protection or whatever, you know,
that fine print stuff that can be so cost prohibitive
when you're looking at different home insurance policies and when
you're already especially if you're in the process of buying
a home, which is a laborantine thing that your mind
(10:02):
has to navigate through, hopefully with the help of somebody
that kind of knows what they're doing. When you get
to the home insurance part of that, it is it
reminds me of the funeral game a little bit, where
you're you're already kind of broken down, You're pretty vulnerable
in that state already, and you just kind of want
(10:22):
to get it done. And you also you almost all,
I don't know in my in my experience, you go
for the minimum, like, Okay, I think I'll be okay
with this because it's it's expensive no matter where you are, and.
Speaker 5 (10:35):
At that point, you're just trying to get your monthly
payment down because you know, typically it gets factored into
your monthly payment, and most people can't afford to pay
that full premium in one fell swoop, so you factor
it into escrow or whatever. Where you're it adds a
couple hundred dollars a month, and you're already house poor
from making a massive down payment, so you want that
monthly payment to be as low as possible.
Speaker 4 (10:55):
Therefore, you're much you're willing to overlook.
Speaker 5 (10:58):
Well, surely I don't need the the volcano insurance, right,
there's no man, I mean, there's no active volcanoes near
my house.
Speaker 4 (11:05):
Right.
Speaker 3 (11:05):
Most people listening tonight do not have a Honda Odyssey
add on to their home insurance policy, and that leads to.
Speaker 4 (11:14):
Things ascess though you probably should.
Speaker 3 (11:15):
Yeah, just look at the stats. But then also, you know,
I'd love that you mentioned Escro account without getting two
in the weeds. For most homeowners, you're going to have
a mortgage, and your mortgage and these associated costs like
homeowners insurance that goes into an Escro account that your
lender pays all the stuff out through that through that account. Look,
(11:38):
there are a lot of people, you know, to that's
point about having the lowest possible denominator or the bare minimum.
There are people who would prefer to have no insurance whatsoever.
You know, they're like, I don't have a case on
my iPhone. I live, you know, by the code of God, playing.
Speaker 2 (11:54):
Dice, dude. But see, I always thought Ben that it
was a requirement for like for I thought, just if
you own a home, you have to have homeowners insurance.
The way if you have a vehicle and you want
to drive with a driver's license, have to have auto insurance.
Speaker 5 (12:11):
Well, but the only requirement is for the bank. The
bank is protecting their investments. You don't have to have
it if you own your house out right. I don't
believe you do have to have it. It might very state
in the state, but okay, you do not.
Speaker 3 (12:23):
There is no in the United States. There is no
state nor federal there's neither state nor federal law requiring
you to have homeowners insurance. But if you have a mortgage,
you don't totally own your home yet, so the banks
or the lenders will require you to get that insurance
as part of the deal. And that's all, like you
(12:46):
guys said, that's all so that the bank can be
made whole if your home is destroyed or if something
bad happens. All right, folks stap in our fingers.
Speaker 4 (12:55):
Wake up. That's it.
Speaker 3 (12:55):
That's all the background getting to the other stuff. You
need to know this, and please do send us your
home insurance war stories as well. The price you pay
here's why this is on a conspiracy show. The price
you pay for home insurance depends upon where you live.
And now, to steal the line for Fox News, more
than ever, those prices are changing. They are not going down.
(13:19):
Everything shows us that the strangeness dare we say a
bit of conspiracy here, is only going to accelerate. It's
only going to get worse, and much sooner than we
would all perhaps like to think.
Speaker 4 (13:32):
So let's put a pit on that.
Speaker 5 (13:34):
Think about that for a second, only take a quick
ad break, and then we'll come back and get right
into the weeds, but not too weedy.
Speaker 3 (13:46):
Here's where it gets crazy. It's been an open secret
in the industry for years. Costly climate catastrophes have driven
up the cost of home insurance across the United States,
specifically in certain areas, and in some of those areas,
they've driven these insurance companies out of the market completely.
(14:06):
The industry already has a euphemism for this. These moves
are called insurance corrections.
Speaker 5 (14:13):
Mmmm.
Speaker 2 (14:15):
Wherever we heard that before? That time correction? Yeah.
Speaker 5 (14:18):
Stock I mean it's the same thing, dude. It's currency,
it really is, and there's a market for it, and
it's based on conditions, you know, much like the stock
market is, and sometimes things are underassessed and or their
speculation that has.
Speaker 4 (14:32):
To do with certain weather events. It's all predictive.
Speaker 5 (14:35):
It's like betting on futures in the stock market. It's
very interesting that that same term is used, but I
think very appropriate.
Speaker 2 (14:42):
Well, lest we forget Ben already said this in the episode,
these are for profit companies every time, no matter what,
they are for profit. And if they can't make more
money with you paying them every month for nothing happening,
then they're having to shell out because stuff's actually happening.
Then the there's no business.
Speaker 4 (15:02):
Yeah.
Speaker 3 (15:03):
And in June of twenty twenty three, sixty million Americans
in just California and Florida found themselves scrambling for protection
because they would imagine this. You buy a house and
your bank says, okay, congratulations, you're in the homeownership class.
Welcome to Florida, California. You need to get homeowners insurance
(15:25):
until you're done with your mortgage and you can't find
a company that will give you a policy, or even worse,
you've lived in California, you've lived in Florida for a
number of years, you still have your mortgage, and you
get a you get that annual letter from your insurance
company and they say, hey, we're not going to renew
(15:45):
your coverage. You had a good run. Go try someone else,
but not Farmers, cause we're we're getting out of dodge.
Speaker 2 (15:53):
Like that's nuts. And there are also stories of people
being handed a what like a forty percent increase or
or even way higher than that.
Speaker 4 (16:04):
Eighty.
Speaker 2 (16:05):
I think I didn't I didn't see eighty. But I
think you're we're talking where all of a sudden you're
gonna just renew your homeowner's insurance and now it's it's skyrockets,
and you realize, oh wait, I actually can't afford that.
What do you do?
Speaker 3 (16:20):
Yeah, it's not better either, You're not paying more for
something better.
Speaker 5 (16:24):
Well, no, And and I think I maybe have mentioned
in the past that I had a bit of a conundrum,
and I'll get to what ultimately the resolution that was
a little later. But my homeowner's insurance policy was canceled
because I didn't receive or acknowledge some notification that probably
came in the US mail. And again, I mean, it's
my own fault and consider it, like chalk it up
(16:46):
to an experience as a you know, relatively new homeowner.
But you have to interact with them because the terms
can change, because if you don't like acknowledge the terms
of change, then they cancel it. So I mean, maybe
I'm misunderstanding the way that works, but that's my understanding
is that because I didn't reach out with this renewal period,
(17:06):
they just canceled it, you know, unilaterally. And then my
mortgage company took it upon themselves because it's a term
of my mortgage to have homeowners insurance, and they signed
me up for a policy of their choosing that was
a good four hundred dollars extra a month and I
just like totally ate that for way too long because
I was just so frustrated with the whole process.
Speaker 3 (17:27):
Yeah, and that's unfortunately a very common story for a
lot of people, even before these climate crises started driving
people literally out of house and home. And in defense
of these insurance companies, you know, getting mad at them
for being for profit is kind of like getting mad
(17:47):
at dogs for barking and pooping. It's part of what
they do. It's arguably why they're around.
Speaker 2 (17:54):
It's how the system works. It's it's why they will
cover when your entire roof blows off during tornado, because
there are enough other people also paying for that tornado
insurance and it's expensive.
Speaker 3 (18:09):
Yeah, and it's all a numbers game, you know. Some
of the most I think some of the most high
up intellectual mathematicians are underwriters. They're the ones who figure
out how much your premium is. A premium is just
sort of the dumb word the industry uses for those
(18:29):
payments you make monthly or annually or bi monthly or whatever.
They don't want to turn people away if they can
help it, because that's their business model. They need customers,
so they don't want to say no, but sometimes for
their own survival as a company, they do have to
say no. The numbers. It all goes back to the numbers.
(18:51):
The numbers are inarguable. Maybe we talk a little bit
about just how crazy things have gotten in California and Florida.
Speaker 4 (18:59):
Correct.
Speaker 5 (19:00):
In California, there were eight disaster events from twenty twenty
to twenty twenty four that caused between twenty billion with
a B and fifty billion in damages can buy. I
think wildfires, y'all think of like total loss of property
in like Malibu. For example, a good friend of ours,
I'll just keep them private, but a very close friend
and colleague of ours had a family member who entirely
(19:23):
lost their home in Malibu that they'd lived in, you know,
for I don't want to say a generation, if not longer.
And that is a common story, you know. Yeah, you're
running a little bit of a risk living in California,
a place where wildfires thrive like that and their rock
slides and things like that and erosion. Certainly, so that
makes sense that it would maybe cost a little more
(19:44):
because the damages and potential events are much likelihood is
a little higher there, but still in Florida. On the
other hand, thirty severe storms or hurricanes from twenty twenty
to twenty twenty four caused between one hundred billion and
two hundred billion dollars in damage.
Speaker 4 (20:04):
One of these, of course, was.
Speaker 5 (20:05):
Hurricane Ian, the third most just catastrophic costly storm in
United States history so far, and again, this a lot
of this has to do with the fact that these
things are becoming more and more common because of climate change.
Speaker 3 (20:24):
And this is coming from our good friends at NOAH.
So this is a nonpartisan, non political source. This is
just a bunch of boffins and eggheads.
Speaker 2 (20:35):
And that's the National Oceanic and Atmospheric Administration. And this
is just one extra thing.
Speaker 4 (20:41):
Be guys.
Speaker 2 (20:41):
I want to throw Texas in here too, because I
found some interesting stuff on them. And as we were
going through the research, I kept thinking back to twenty
twenty one. Do you guys remember when there was a
big storm in twenty twenty one and power was out
for a long long time. I think it was Ury
was like a winter storm Ury, and the Texas grid
(21:04):
failed basically and there was like it was only I
think it was ten billion dollars worth in losses like
insurance losses for that one storm across all of Texas.
And if you look at the numbers again from NOAH
with Texas, there are an average of four natural disasters
in that state that occur every year, but between twenty
(21:28):
nineteen and twenty twenty three they suffered an average of
eleven over one billion dollar events every year. Like that's
imagine as a state shelling out eleven billion dollars a
year knowingly because of natural disasters, and then as an
insurance company, you know that you've got all of these
(21:48):
people that you now have to serve to repair all
of these homes. I don't know that. It just seems
unsustainable to me.
Speaker 3 (21:56):
It reminds me how recently we encountered the hottest day
ever recorded on Earth. It was a Sunday in July,
and it was only the hottest day ever for about
twenty four hours because the next day was hotter. So
the two hottest days on the planet, number one and
(22:17):
number two, happened consecutively this year, which shows us the
pattern is escalating. It's untenable, as many people in California,
Texas and Florida can agree even just looking at their
home insurance bills. You know what I mean, Like, no
matter what your political ideology is, the money moves and
(22:38):
you can tell what the mathematicians are thinking by looking
at the bill.
Speaker 2 (22:43):
Well, yeah, and all they have to do is pay
a little bit of attention and go, oh, we guys,
we need to raise our rates by a lot. And
when I say a lot, I mean a lot.
Speaker 4 (22:56):
Yeah.
Speaker 3 (22:56):
Twenty twenty three, the average homeowner insurance premium then Florida
is six thousand dollars a year, not thick thousand dollars.
That would be.
Speaker 2 (23:06):
Fair, Robin, thick thousand dollars dollars.
Speaker 3 (23:11):
I mean, but that's that's way above average right in
the US. I mean, it's definitely higher than Georgia.
Speaker 4 (23:16):
Correct.
Speaker 2 (23:17):
Yeah, think about that being the average. That means some
people are paying way more than that.
Speaker 4 (23:21):
Right, Yeah.
Speaker 3 (23:22):
And then just this year twenty twenty four, the average
went up two thousand, seven hundred and seventy dollars. The
average home insurance in Florida now is eight thousand, seven
hundred and seventy dollars a year, and it'll probably be
higher in twenty twenty five.
Speaker 2 (23:39):
Yeah, it'll have to be until it just goes away
in twenty twenty eight. I'm just joking Florida, I mean,
not homeowners and sure, okay, let me you know.
Speaker 5 (23:52):
Says by everybody remembers that tool song about sea you
down in Arizona Bay. I mean, Florida and California are
two of these locations that they're beautiful and they are
lovely places to live but there are some somewhat apocalyptic future,
you know, kind of doom saying things associated with them.
Speaker 3 (24:11):
One hundred percent one hundred percent. And you know, as
more and more private companies exit these areas, more and
more people enter state run alternatives. Kind of like how
if you can't afford private medical insurance, you may have
you may live in a part of the country that
allows you to participate in a government plan. And California
(24:34):
has something called the Fair Plan Association. Florida has something
called the Citizens Property Insurance Corporation, And as of just
last year, that Florida state run company alone held the
homeowner policies for one out of eight of every household
in Florida.
Speaker 2 (24:51):
That's a lot more than I would have expected. But
it does make sense, man, watching just watching the news,
watching the weather recently, especially when you see the kind
of storm that we just had. And I can't tell
you the name of it because I'm I didn't keep
up that well with it. But the storm that formed
in the Atlantic pretty swiftly became a hurricane and then
swept across and then went all the way up the
(25:13):
eastern seaboard of the US, and people from Florida all
the way up to Upstate New York got flooding, like
terrible flooding. When that kind of thing is feeling more
and more like a regular occurrence, it's not good. It's
not good for anybody who's gonna have to pay homeowners
insurance agreed.
Speaker 3 (25:34):
Yeah, and it's not good for the companies either. I mean,
there are it's such a headline. It's such red meat
for a headline, right to divide people or to alarm people,
to say climate change is pushing home insurance. But there
are other factors at play. The story is not as
simple as headlines might imply. So one of the big
(25:57):
things that people hadn't thought about. I don't know if
we all thought about this as well before we started
researching is the role the pandemic played, But maybe not
in the way we think. There was a great interview
with a guy named David Blades, which first off, is
a really cool name.
Speaker 4 (26:15):
Like a magician or something. I mean game.
Speaker 2 (26:18):
He's like a he's a bouncer.
Speaker 3 (26:20):
I picture of talking. Yeah, I picture he's like specializes
in knives and butterfly knives and switchblades. So he's talking
to NBC. Yeah, he's talking to NBC, and he's just
like he's got his hand on a desk and he's
popping the knife in between his spread out fingers or something.
But he he said that we need to look at
(26:41):
us construction cost because before the pandemic, from twenty sixteen
to twenty twenty, those costs increase between like one and
three percent, which seemed very reasonable, moderate what you could expect.
But let's give the let's give a quote directly from
David Leads.
Speaker 2 (27:00):
Okay, this is a direct quote, and I'm just gonna
put this here because I think I accidentally made a
skip over his actual credits. He's the associate director for
Industry Research and Analytics at am Best, which is a
global credit agency in data group. Okay, so he said,
with this increase, you're talking about a very moderate amount
of inflation. He says, Yet during and after the pandemic,
(27:24):
supply chains were disrupted, real estate prices skyrocketed, and interest
rates surged. As a result, construction costs soared thirteen point
four percent in twenty twenty one and nine point three
percent the year after. So combine that's twenty two point
seven percent. I think, if I'm doing my math correctly,
(27:45):
I may not be, but that amount of construction cost
increase is that makes so much sense?
Speaker 4 (27:53):
Ben?
Speaker 2 (27:54):
Why why would construction costs increase homeowners insurance?
Speaker 3 (27:58):
Ooh yeah, that's or Dennis Reynolds moment. That's the thing
where like we haven't thought about that. When construction costs rise,
so does the cost of literally any repair. So a
home prices surge in the beginning, but then anytime you know,
the water heater breaks, anytime you've got to replace the roof,
(28:18):
anytime a Honda Odyssey hits the side of your house,
it's going to cost at least twenty something percent more.
And this means that the insurance companies have to start
jacking up their rates to a certain threshold. But they
don't have infinite tolerance. At a certain point, they have
to ask themselves, well, it's not just a matter of
(28:41):
whether or not we can turn a profit here, but
can we act? Can we literally afford to do business
at all in these areas where we know hurricanes are
not a possibility but a certitude, you know, a certainty.
Speaker 2 (28:56):
Too, that is that is indeed nuts. And I'm just
gonna take it really quickly to my water heater situation
because that was right in pandemic times, and that's when
construction costs were going way up because the prices of
wood were going way up, and they had to replace
quite a bit of wood in the floor of my house,
and it costs them way more than they expected the
(29:17):
insurance company to even do the job. So I ended
up having to I don't even know how I navigated it,
but I had to pay extra money basically at that
time because of my deductible or whatever it was I had,
plus some other thing and I can't even remember, but
it was. It was because of those construction costs.
Speaker 5 (29:35):
And the interesting thing too, is, like I think, I
see you guys are linked to this YouTube video on
building integrity, just a YouTube channel, and the guy that
I think runs that, he's like a consultant in cases
of insurance fraud, but you know, in terms of fraud
perpetrated by insurance companies. And one thing this dude pointed
out that I definitely verified is relatively common. Is this
(29:58):
idea that you know, since these are for profit organizations,
their money that they receive that are profits, they don't
necessarily even have to like put those aside in the
hopes that you know, like this is this is held
for you right where it's not like the same as escrower.
That's money that you pay through your mortgage company they
(30:19):
hold on to for you, and that then is you.
So the money that you pay your insurance company, they're
not like tucking that away. And there could come a
time where maybe so many claims are coming through that
the insurance company isn't profitable that year, but they only
apparently have to like balance the books in years where
they don't make their bottom line. So it's just a
(30:42):
really interesting balancing act because of this whole for profit
nature of it, and the fact of the matter is
it really just isn't designed to protect you. And there
were all these video clips I was watching of like
insurance adjusters coming out and hanging out with a roofer
who shown them that this roof needs to be replaced
(31:02):
by ripping out these shingles seeing see look the nail
holes here is all warm, and the insurance just is like, no,
you're being too aggressive with that. That's not how you
do that. You don't pull it, you don't rip the
nail out like that. You're not even trying.
Speaker 2 (31:13):
Guy.
Speaker 5 (31:13):
He's basically telling this professional roofer that he is not
approaching this with the desire to repair. Is he is
basically saying, you already have your mind made up. But
what the reality is is that the insurance just already
has his mind made up as to the fact that
this we will not repare replace this roof, even if
(31:34):
it's within the timeframe of when a roof should be replaced,
which is I think twenty five years or something like that.
And it's just fascinating because the point that the guy
on the YouTube channel made is that you could argue that, well,
they knew how old the roof was when they insured
the house, and if they weren't going to replace it
due to this storm damage, then that was what this
(31:55):
was relating to. Then they shouldn't have insured it in
the first place. But the fact is, when people in
sure you're home, they ask very vague questions. They want
that plausible deniability, right, They don't want to know everything
that's wrong with the house. That way, when something really
does go wrong, they can say, well, I wasn't really
covering of the terms of our agreement.
Speaker 3 (32:15):
Could you describe your foundation in terms of vibes?
Speaker 4 (32:20):
It really is that way more or less, because like
you know they ask you, these guys.
Speaker 5 (32:23):
I literally applied for a new policy today because of
that issue I was talking about. I finally dealt with it,
and they're like, how old did your roof? I'm like, oh,
I could look it up. It and I just give
us a ballpark. I'm like, really, a ballpark that'll work
for you. That's a little sus isn't it. Because the
point is they'd prefer a ballpark, and they're doing almost
over the phone.
Speaker 4 (32:42):
They haven't come to my house.
Speaker 5 (32:44):
You'd think that they would inspect the home before agreeing
to ensure it. But that is a feature for them,
not a bug. The less they know, the better.
Speaker 3 (32:52):
Honestly, a lot of ballparks don't even have roofs, to
be honest.
Speaker 4 (32:56):
A lot of ballparks burned down.
Speaker 2 (32:58):
Can you imagine the insurance on owning a ballpark, That's.
Speaker 4 (33:02):
What I'm saying.
Speaker 3 (33:03):
That's where you start to just think seriously about buying
the insurance company.
Speaker 2 (33:08):
You know, yeah, yeah, yeah, But this.
Speaker 3 (33:10):
Is and you know, another great example I think, to
a great comparison to Knowle's point, a terrifying one is
anybody who works in the medical industry, you've seen something
simpler when doctors or nurses say this person needs this
treatment and the insurance company comes back and says, ah,
(33:31):
that sounds like a luxury.
Speaker 4 (33:33):
They don't really need that second long do they?
Speaker 2 (33:36):
Oh, they they can totally pay for that if they
want to.
Speaker 4 (33:40):
Yeah.
Speaker 3 (33:41):
Yeah, they did describe the vibes of their kidney when
they signed up, so it's really on them. This is
I think this goes to another issue, and this is
a factor that is also a prime mover of the
home insurance crisis which we are entering. It's the obfuscation
(34:02):
because the scope of the problem was a big open
secret in the industry. But for a long time, it
was hard for the public to get information about this,
to get the full lay of the land, because insurance
companies were purposely hiding a lot of it. For a
very long time. It was a herculean effort to get
a look at the cost of insurance, the same insurance
(34:25):
policies in different parts of the United States, because the
private insurance companies didn't disclose that the same way like
a lot of streaming places won't give you their exact numbers.
That's their secret sauce, right, and you don't want you know,
you don't want Johnny Blue Jeans in Enied, Oklahoma or
(34:48):
wherever to learn that somebody else across the river somewhere
is paying much less for the same product.
Speaker 5 (34:57):
Not to mention that some of these big players in
the insurance space, like the State Farms of the World
or whatever, they pretty much fall into that too big
to fail category. So if they ever did have a
bum year or maybe they had to pay out too much,
they're going to get a bail out, and then it's
like rinse and repeat kind of.
Speaker 2 (35:16):
You know, So, how do we even know what we
know about how much insurance premiums cost on average, per state,
per region, per you know, even town. Well, we didn't
have There wasn't some group putting all those numbers together.
Kind of like how remember we when we looked into
murders and homicides and deaths in national parks and we
(35:40):
were trying to find in the missing like the number
of people. Nobody's out there collecting that data and putting
it in a spreadsheet and publishing it online somewhere or
in an article or journal. Nobody was doing that for
homeowners insurance either until a dude named Benjamin Keys. Oh
it's a ben it's one of the good ones. And
Benjamin Keys comes along. He was a professor of real
(36:02):
estate at the University of Pennsylvania's Wharton School. And another
person named Philip Moulder. Oh my god, a Molder too, right,
that's awesome. Good to be Trio, Moulder and Keys got together.
Philip Moulder is a professor at the University of Wisconsin
School of Business. They got together and said, hey, let's
figure this stuff out, and we're going to tell you
(36:24):
what they figured out right after a word from our sponsor.
Speaker 3 (36:33):
And we've returned. So we've already i think established just
objectively hear the facts level, there are dangerous things on
the horizon climate wise, both metaphorically and literally. And we
learned about the study by Keys of Molder that you
can read in full online thanks to a journalist named
(36:55):
Christopher Flavelle writing for the New York Times. And they
were saying, wait, why are home insurance rates distorted across
this grand country of ours? And they said, all right,
climate change drives it, right, it's me the heat, the
wildfires you were talking about, and old the flooding we're mentioning,
Matt the tornadoes. Of course, because part of this country
(37:17):
is called Tornado Alley. And in a previous conversation we
established how Tornado Alley is growing at a breakneck base
again literally, and this is a well established trend, but
it's not the whole story because it doesn't explain why
a small town like Enid, Oklahoma, would be one of
the most expensive places in the country to have home
(37:40):
insurance relative to the actual value of your house. This
is where we see what Keys and Molder do. They
teamed up with a group called core Logic. Core Logic
is another like hardcore and I say this with great
respect nerd outfit. You know, they're math wizards. Their Property
Information and Analytics group, and they get a lot of
(38:02):
info from mortgage servicers. So if you own a home,
you pay, you know, into your ESCRO account, and groups
like core Logic get the information about what you're paid.
And they got the data for about twelve point four
million what we call owner occupied households, so not people
flip in airbnbs, you know, none of the black rock stuff,
(38:26):
people who live in the homes that they own. And
then Keys and Malta did some really clever They went
into these Escro accounts. They did some fancy financial forensics,
and they managed to estimate what each household paid for
property insurance. And then they found that, yes, there's a
(38:47):
relationship between climate risk and what companies charge, but it's
not all the same. It doesn't explain the discrepancy. Higher
premiums are charged in every state where regulators don't ask
as many questions from the company. Oh in other words,
(39:09):
and oh is right. In other words, states with rubber
stamp regulators serve the customers up to these private industries
on a platter. And I would pose it that it's
not going to be tough for us to find some
revolving door situations where you know, you might work as
a regulator and then later you get a plumb job
(39:30):
for some of the prior.
Speaker 2 (39:31):
Yeah, yeah, dude, that's that's exactly what was found in Texas. Look,
it's kind of a known thing. Texas is a state
where regulations are frowned upon a little bit in general,
not fully, but you know, let's say they're minimized on
purpose in Texas. Unlike especially in California, when an insurance
(39:57):
company wants to raise a rate, they we kind of
get to just do that and then they get to
ask for forgiveness later rather than asking permission upfront. In California, though,
if you want to raise rates as an all state
or whatever you know company, you are a state farm.
If you want to raise rates, you have to go
(40:17):
to California to a government body and say, hey, here,
for X, Y and Z, we need to raise our
home insurance premiums, you know, on average or whatever.
Speaker 5 (40:28):
So you'd have to make your case with like the
increased prevalence of natural disasters and certain areas and tie
it to specific events and say this is why we need.
Speaker 4 (40:38):
To do this.
Speaker 2 (40:39):
Yes, but in Texas you've got something called the Department
of Insurance that takes a look at stuff. It approves
the rates, but it takes a look at about half
of the rate increases that happen every year from homeowner's
insurance companies.
Speaker 5 (40:56):
So that's the rubber stamping we were talking about, right, Yeah, Yeah.
Speaker 3 (41:01):
I don't want to again, as we said, I don't
want tom malign people unfairly, but it's it's giving big
golf game conversation energy out there in Texas.
Speaker 2 (41:12):
Yes, you know what I mean, Yes, and I misspoke.
They don't look at half of them. They look at
all of them presumably, but they approve roughly half of them.
Just like, yeah, definitely, you guys can raise.
Speaker 5 (41:23):
Rates, And is there an appeal process from the consumers perspective? Like,
I know, for example, you can dispute property tax increases.
There is a whole system in place for that, at
least here in Georgia. But what about with the insurance rates?
Speaker 2 (41:37):
Yes, yes, in Texas there is one thing, you guys.
In nineteen ninety one, the Texas State Legislature made a
thing called Public Insurance Council or the Public Insurance Council,
and they represent the interests of consumers and they attempt
to maintain a quote, at least according to this article
written by Michael Hardy in Texas Monthly, they attempt to
(42:00):
a balanced marketplace.
Speaker 4 (42:03):
You're saying it in a way or I don't know
if you believe that that's what actually happened.
Speaker 3 (42:06):
I heard, well, I heard italics.
Speaker 2 (42:09):
Mike. Michael put it in quotations in his.
Speaker 5 (42:12):
Arr italics voice too, Matt to be fair, No, it's
it does seem sure, it's a good cover story.
Speaker 4 (42:20):
It's good for optics to say.
Speaker 5 (42:21):
No, no, no, no, we have this sub committee or whatever
that's looking out for the best interest in the consumer.
But it would seem to me that they do a
bit of rubber stamping themselves, or at least I haven't
heard of any much coming out of this short of
a couple of like publicity grabs.
Speaker 4 (42:36):
Maybe I don't know. Tell me what you guys think.
Speaker 3 (42:38):
Well, there are also valid points which I guess we're
ethically required to mention, and those valid points would be
from their perspective. There would be arguments like, hey, people
do need home insurance, right, so let's work with these entities.
And then another one would probably be the kind of
iron hand and velvet gloves of argument that happens so often,
(43:02):
which is, we bring a lot of business to this state, right,
or we as an industry employ a lot of people,
which can be true but can also be an implicit threat.
Speaker 4 (43:16):
Yep.
Speaker 2 (43:17):
And there's a third perspective, get on YouTube and learn carpentry, dude,
except I would never follow that. I wish I could
repair stuff. You can learn anything homeowners.
Speaker 3 (43:33):
Right, right, I don't know. It's I love that you're
bringing up this example because the effects of these state
by state regulatory differences. Right, You're in a California, and
it asks and we're not saying California is perfect by
any means, but you're in a state where regulation has teeth,
(43:54):
and you are required to come with some facts, to
come with some quantitative data that shows the necessity of
a thing, right, because they don't want you to leave
either as an insurance company. They don't want those companies
to leave. But then if you go to places with
much more lax or compromised regulation, then you see that
there is a huge discrepancy. You can go into this
(44:18):
New York Times article. You can see the discrepancy in
these pretty clever infographics wherein you can plug in like
you can look at your own zip code or your
own county and you'll see how weird this stuff goes.
That is the reason the average premium has jumped thirty
three percent in just three years, much higher than the
(44:40):
rate of inflation from twenty twenty twenty twenty three. The
system is unfair. You could live in this place with
the same amount of risk regents, with the same amount
of weather, the same chance for you know, a disastrous event,
and you might pay a wildly different rate because some
you might be in a place where the regulator sometimes
(45:00):
do their job or sometimes don't. Dang, we've got a
little lag because I'm recording on the road here. But
just to be clear, that pause was purposeful. I was
going for like a.
Speaker 4 (45:12):
Dramatic thing, but pregnant pause a pp.
Speaker 2 (45:17):
Pp And Ben, you found another quote from that same
New York Times article that is unfortunate.
Speaker 3 (45:27):
Yeah, yeah, it's a little long, but I think it's
worth I think it's worth hearing. Should we round robin it?
Speaker 4 (45:33):
Absolutely? Across the more than nine thousand zip codes for
which data was available, the typical American household last year
paid about five hundred dollars in home insurance premiums for
every one hundred thousand dollars of home value, or zero
point five percent, the professors found.
Speaker 2 (45:50):
But in California, which suffered through more than seven thousand
wildfires last year, good Lord, the typical homeowner in many
zip codes paid premiums as low as point zero five
percent of home value.
Speaker 3 (46:05):
By contrast, the quote concludes in parts of Alabama, Oklahoma, Louisiana,
and Texas, the average homeowner faced home insurance premiums greater
than two percent of the value of local homes. Now
zero point five point h five two percent. They may
sound like small numbers until we realize we're talking about
percentages of hundreds and hundreds of thousands of dollars.
Speaker 2 (46:28):
Well, yeah, and think about the vast differences in average
home value there that are represented in a ton of
homes in Louisiana versus a ton of homes in California.
I don't want to sparage any homes in Louisiana. It's
just you imagine the amount of wealth and money that
goes out into many parts of California and the types
(46:50):
of homes that are built, and the price increases in
home value that have been happening out there.
Speaker 5 (46:56):
Well, I know we're largely kind of during this conversation
around the climate change angle, but I did just want
to just give a tiny quick conclusion to my kind
of home insurance odyssey. After looking at this research and
preparing for this podcast today this morning, I kind of
lit a little bit of a fire under me to
(47:18):
take care of this and stop overpaying for my homeowner's
insurance policy that my mortgage just took it upon themselves
assign me up for. And I received quotes from four
different companies, including the company that I get my.
Speaker 4 (47:31):
Car insurance through and they were just all over the place.
Speaker 5 (47:35):
And there's a formulaic way that they ask you these
questions and it's like literally to dictate it, I'm sure
by legal legal ees and regulations, and it ultimately the
thing they tell you upfront is this is the cost
that we assess it would cost to rebuild your home,
and that number you guys from four different organizations, completely
(47:55):
different number, completely different number, and the kind of boilerplate
cover they thought that I needed also completely different, and
the deductibles also completely different. And it was really eye
opening for me, how like if I'm a total you know,
nube with this stuff, and I definitely am not armed
a little more so now, but not to the degree
(48:18):
that maybe someone who does this stuff for a living
with the right questions or and I honestly it's so
mandatory that I just don't know how much that would
even help. And I was just to MAT's point earlier
in the episode, I was just satisfied with getting my
payment down by a couple hundred bucks a month and
just to move on with it, because they just browbeat
you with this stuff and you're almost left like in
this submissive state where you're.
Speaker 4 (48:39):
Like, please just make it go away, Please just make
it go away.
Speaker 5 (48:42):
And that's how I'm honestly get a little choked up
talking about it in a weird way, because it is
like emotional abuse in a way, you know, because you're like,
am I am I complying? Am I complying? As long
as I'm complying, you know? And I just was left
with yeah, And I ultimately went with State Farm. And
you know why I went with because it was cheaper
and the guy was kind of nice and didn't sound
(49:03):
like a dead eyed robot. And I got a better
car insurance rate too, so I bundled. But even that
stuff we haven't talked about. They'll be like, oh, we'll
give you thirty percent off on your homeowners if you
bundle your car.
Speaker 4 (49:14):
What up with that, y'all.
Speaker 3 (49:16):
Whenever somebody gives you a margin that large off, they're
also giving you a sneak into how big their profit
margin is to begin with. And you should always this
is very this very I don't want to come off
be a stereotype of myself, but this is also part
of the reason why you should always check your car insurance.
(49:39):
You should check every bill you have to pay regularly,
because if you don't, it will just continue to kind
of hitch its pants up as a bigger and bigger
slice of your budget because people are counting on you
to not care. They're counting on you to not dive
into that boring stuff. It's boring on purpose, you know
(50:00):
what I mean. And again, it's the system, it's not
the individuals. Look, we know here in the US alone,
thirty nine million different properties are vulnerable to one or
more types of disasters. We know that about ten point
seven million Americans right now live in a county where
one hundred percent of the homes are vulnerable to that
(50:24):
insurance correction. And those places tend to be less wealthy.
They're less equipped to fight for their rights, you know,
to do something. We're talking about our group text, you know,
to get the lawyers to be able to take something
to court when things are getting shisty. I mean it's
going to it's going to expand, just like Tornado Alley.
(50:48):
And also a bit of empathy, as weird as it
may sound, for those insurance companies, if they can't make
a profit, they can't exist either. So from their perspective,
this is not about necessarily screwing people over. It's an
existential threat, you know what I mean. You can't sell
flood insurance if you know for sure the entire place
(51:09):
is going to flood several times a year.
Speaker 2 (51:12):
No, that's why. You know, what is it? The five
hundred year Floodplaine or whatever is a thing because there's
some risk there. Buzz, five hundred years come.
Speaker 3 (51:22):
On, right, by which time I'll be retired, you know,
out in Sioux Falls. I don't know why I'm referencing
Sioux Falls. I think it's a please don't destroy sketch.
You guys don't.
Speaker 2 (51:35):
Oh yeah, I love those guys. I really quickly got
I found this. Apparently Vermont has a super low homeowner's
insurance average. It was like seven hundred and ninety nine
dollars average or something in Vermont. And there are lovely
homes out there. Let's go to Vermont, benas country.
Speaker 3 (51:58):
Why don't we go to the country.
Speaker 2 (52:00):
Yeah, I don't even know what's out there, leaves no.
Speaker 4 (52:05):
Name the other draft.
Speaker 5 (52:07):
It's probably a good, probably be good for our mental health, y'all.
I don't even know they got the internet in Vermont, y'all.
Everyone's so mentally healthy and spry out there and just
noodling on a banjo on a front.
Speaker 4 (52:17):
Porch with a weed in their mouth.
Speaker 3 (52:19):
Sanders, is there still like.
Speaker 4 (52:22):
Kicking it on the regular? Yeah?
Speaker 2 (52:24):
Oh hey, quick breaking news. I know we were talking
about Vermont, but just talking about climate change with talking
about disasters. I'm reading right here on ABC News that
as we were recording a four point four magnitude earthquake
Los Angeles.
Speaker 3 (52:40):
Yeah, California happened.
Speaker 4 (52:42):
Yeah.
Speaker 3 (52:42):
Actually one of our what I learned about, one of
our old colleagues or former colleagues reported it apparently very
very scary stuff. Also, the you know, the ring of
fire is awakening. Is the problem the tectonic it's a
cool name for the tectonic plate sensitivity around the Pacific,
(53:03):
rim typhoons, earthquakes, It's all happening. Stay safe, Yeah, stay safe,
and also let us know this larger question. I'm glad
you got the breaking news for us there, Matt, because
this does bring to mind a larger question. Disasters are
(53:24):
becoming more frequent, less predictable, expanding to touch places previously
considered safe, while also growing in severity. So where can
people go for safety? What will the world look like
beyond insurance, right beyond the financial stuff. Existentially, what is
this planet going to look like? Not just next year,
(53:44):
but within the next decade. Let us know, and also
tell us your homeowner war stories. If you are a contractor,
we got a lot of contractors in the audience tonight.
Speaker 4 (53:55):
Tell us the.
Speaker 3 (53:56):
Weirdest conversations you've had with an adjuster. I love to
hear from you. We try to be easy to find online.
Speaker 4 (54:03):
That's right.
Speaker 5 (54:04):
You can find this at the handle Conspiracy Stuff where
we exist on Facebook where we have a Facebook group
Here's where it gets crazy, on YouTube, where we have
video content coming at you on the regular, and on axfka, Twitter,
on Instagram and TikTok.
Speaker 4 (54:16):
We are Conspiracy Stuff Show.
Speaker 2 (54:18):
We have a phone number. It is one eight three
three STDWYTK. When you call in, you've got three minutes
to leave a voicemail. Please do give yourself a cool
nickname and let us know if we can use that
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say then can fit in that voicemail. Why not instead
(54:39):
send us a good old fashioned email.
Speaker 3 (54:41):
We are the entities that read every piece of correspondence
we receive, be aware, but unafree. Sometimes the void rights back.
Quick note here, folks, the audio quality may be a
little bit different for a few weeks. Some of us
are nomadic, but we are going to keep the lights
(55:02):
on here and to do that we need your help.
So give us a shout in the dark. Conspiracy at
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Speaker 2 (55:29):
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