August 18, 2025 • 31 mins
Rising construction costs coupled with widespread labor shortages have created a perfect storm for homeowners facing property losses. The gap between insurance coverage and actual rebuilding expenses continues to widen, putting families at significant financial risk..
Mary Roy, Senior Underwriting Team Leader at CRC Group, breaks down the complex factors driving this trend. The fundamental difference between new construction and reconstruction after a loss creates much of this disparity. Rebuilding involves unique challenges – from debris removal and working around existing structures to scheduling complications and protection of remaining assets. These projects lack the economies of scale found in new developments, where contractors purchase materials in bulk and efficiently schedule labor across multiple properties.
Don't wait until disaster strikes. Connect with your clients today to review their homeowner's policies and ensure they have adequate protection against today's rebuilding realities. Subscribe to the Placing You First Podcast for more specialist insights on navigating the complex world of insurance coverage.
Visit REDYIndex.com for critical pricing analysis and a snapshot of the marketplace.
Do you want to take your career to the next level? Join #TeamCRC to get access to best-in-class tools, data, exclusive programs, and more! Send your resume to resumes@crcgroup.com today!
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Amanda Knight (00:23):
Welcome to the Placing you First podcast, where
we spotlight timely topics andinsights to help insurance
professionals move faster and gofurther.
I'm Amanda Knight.
Scott Gordon (00:33):
And I'm Scott Gordon.
Today, we're joined by CRC'sMary Roy, Senior Underwriting
Team Leader, to talk about anissue that continues to grow why
homeowners may not be fullycovered when it comes time to
rebuild, which is a thing.
Amanda Knight (00:48):
Unfortunately.
Scott Gordon (00:49):
So let's get into it.
Amanda Knight (00:50):
This is the Placing you First podcast from
CRC Group.
This podcast features news andinsights from a vast knowledge
base of more than 5,500associates who write more than
$30 billion in premium annually.
Plus, we give you the latestinformation on what's happening
at CRC.
Scott Gordon (01:07):
This is the Placing you First podcast.
Amanda Knight (01:10):
And now the hosts of the podcast, amanda Knight
and Scott Gordon.
Welcome to the podcast.
Mary Roy (01:16):
Mary, thank you so much for having me.
I'm so excited to be here.
Scott Gordon (01:20):
All right, Mary, let's start with the big picture
.
Home prices and constructioncosts have surged in recent
years.
We all know this.
What's driving the increase inresidential construction costs?
Mary Roy (01:31):
So prices for everything have gone up, right,
I mean, just walk out the doorto your house and you'll see it.
But there's more to it thanthat.
When we're talking aboutconstruction in general, when
we're talking about constructionin general, things are rising
(01:53):
same as milk, bread and eggs.
The national rebuild costs rosein 2023.
I think it was just over 4%,4.1% I think, and some states
(02:14):
were even as high as 9% In 2024to 5,.
That went down a little.
It was 3.3%, so it sort of tooka little bit of a dive, but
it's still higher than it hasbeen for years.
And I guess we can start off bytalking about reconstruction
costs versus brand new buildsfrom the ground up.
Reconstruction lacks theeconomies of scale seen in new
(02:38):
construction, so this pushescosts for labor and material.
Just everything goes up fromthere.
We can unpack that a little bitmore in detail later, but if
you have hired a contractor atall in the past few years for
anything, you may have had alittle bit of a sticker shock
(03:02):
when you've received your endbill or your invoice.
I know I have, and of course itdepends where in the US you
live.
But increased costs of labor,inflation of materials and
another real biggie is theworkforce shortages.
(03:22):
Those all go into play here andthat's just really generally
speaking.
And so the more you talk on ageneral basis, people start to
understand, just in layman'sterms oh geez, I sort of get it.
And I mean, just as far asworkforce shortages, we see that
(03:44):
in other markets too, butspecifically in respect to
construction workers.
Here in the US we currently, aswe sit now, have nearly 500,000
construction workers onshortage right now.
I mean that's a huge number andI mean this is affecting all of
(04:07):
us for jobs, both big and small, whether you've had a claim or
you're just doing a littleaddition around the house.
Amanda Knight (04:16):
So we talked, you know, you just mentioned, you
know, when it comes toconstruction versus
reconstruction after disastersor something like that, that
there's a difference there,right, in terms of labor,
materials, timelines.
Is that the economy of scaleyou mentioned as far as maybe a
lower price versus a higherprice?
How does that economy of scaleapply?
(04:38):
Does it apply just to materialsor other things too?
Mary Roy (04:41):
Oh gosh, there's.
You know, if you can picturekind of a web, it shoots out in
all sorts of differentdirections from there.
You know, we can start offtalking really generally and
then go off into lots ofdifferent tangents.
You know, when we talk aboutthe shortage of labor, it's easy
to understand that.
(05:03):
It makes sense that a generalcontractor is going to have to
pay top dollar for reliable help, right, right, you want your
guy to be there when you calland so you're going to pay a
little bit extra for that guywho's always going to pick up
the phone and who's going to dothe job right, exactly, and so
everybody's going to agree yeah,I want that guy working on my
(05:26):
house, right, and that makes alot of sense.
But there's also, when you talkabout materials, specific
materials that havesignificantly increased in price
In the US.
I mean, if you go up to Canada,that's even gone up a lot more.
You can get the statisticsthere up a lot more.
(05:48):
You can get the statisticsthere.
But here in the US over thepast five years there are real
specifics that make sense.
Just to the average Joe Drywall, for example, that's gone up
two and a half percent.
Copper, electrical four percent.
Framing and lumber.
Framing and lumber 1%.
These are real things that youknow affect every single one of
(06:10):
us.
So concrete is a huge one.
That's 5%.
This is all just 2024 to 2025figures, and so these are real
specifics that just keep drivingthe number, driving the number.
And you know, just on a sidenote, certain carriers will
(06:32):
figure these little, you knowspecifics into their rates and
apply construction costsadjustment factors into their
increases too.
So when you see premium renewalincreases on your homeowners,
that falls into it too.
So, it's just like every littleyou know when I talk about that
(06:54):
web.
It just sort of compiles andcompiles.
Amanda Knight (06:57):
Well, and I assume that in new construction
a lot of times at least here aconstruction crew is, maybe
they're building an entiresubdivision so you can maybe get
a discount on some of thosesupplies and materials.
But then if it's just merebuilding one home, those
discounts don't apply.
You're not buying enough lumberor concrete or copper for 25
(07:20):
houses, you're buying it for one.
Mary Roy (07:22):
And Amanda.
And here's the difference right, when you're talking about have
you had a loss or not, whenyou're talking about building a
subdivision brand new or after acatastrophic disaster, it's a
whole different ballgame whereeverybody's fighting for those
same materials and that samegeography.
(07:46):
It's really, really a differentballgame.
Scott Gordon (07:49):
Yeah, and from that number you mentioned
earlier, half a million.
They're also fighting forbodies too.
It sounds like you can't findthe people.
Mary Roy (07:57):
Carriers actually contract with workers from other
geographies, in that case Scott.
From other geographies, in thatcase Scott.
So you know, if there's a loss,you know, in gosh, the wildfire
(08:17):
area, they'll, you know, sendpeople from Florida or linemen
from the Northeast over, and soif you don't think that costs
more money, we're paying forthose guys to stay overnight
places, whether that's hotels orapartments, and so all of that
drives up the cost, for sure.
Scott Gordon (08:31):
Wow yeah.
So now in the article youmentioned that reconstruction
often involves a top-downapproach.
So for dum-dums like me, why isthat more expensive or
difficult than the standardbuilding process?
Mary Roy (08:45):
So this is a real easy concept to understand.
When you're building a housebrand new, you put in your
foundation and you sort of buildground up right, but say you
have a loss and it's just apartial loss, water damage, your
washing machine overflowed oryour toilet overflowed and it
(09:07):
created some water damage.
That's sort of a top down rebidright, there's an existing
structure there and you sort ofa process because, unlike new
construction, there's access andlogistics to have to maneuver
(09:35):
through.
Rebuilds often involve sitechallenges like debris removal,
mold remediation perhaps in ourwater damage, you know
illustration or obviously youwant to protect some existing
landscaping that might alreadybe there.
You don't want these guysbulldozing over.
(09:56):
You know things that arealready already in place.
Contractors may have to gettheir big machinery around
existing structures.
Sometimes it's a game of JengaYou're taking out one and
putting it in a different spot,and so the scheduling is also a
(10:17):
lot messier, whereas in a newbuild you can sort of set your
timeline.
The general contractor's donethis a million times.
He knows when the electricianis coming, the roof guy, you
know.
Amanda Knight (10:30):
Right.
Mary Roy (10:31):
All of that kind of goes out the window, especially
if the materials aren't readilyavailable.
Amanda Knight (10:37):
Right.
Mary Roy (10:37):
Maybe they're on water , and so it's really.
It's amazing how these guys arejust on their toes.
Amanda Knight (10:46):
So there are obviously a ton of moving pieces
and you know differentperspectives and sides to all of
this.
So, from a coverage perspective, what do you think is the
biggest misunderstandinghomeowners maybe have about
replacement cost versus anactual rebuild cost?
Mary Roy (11:08):
replacement cost versus an actual rebuild cost.
So there are a lot of generalmisunderstandings surrounding
homeowner policies.
That's why it's so importantthat we educate and we do things
like that Right.
Sure we talk about that.
The biggest confusion usuallycenters around the difference
between market value what thehouse can sell for versus
(11:29):
replacement cost.
That's always the biggest onethat we're having to sort of
educate about.
Depending on location, thesetwo values can be very, very
different.
Depending on location, thesetwo values can be very, very
different.
I'm here in Massachusetts andso you know.
An example is a home on CapeCod.
(11:50):
It could cost a million dollarsto build brand new, but the
market value of that same homecould be $4 million because it's
situated along the coast, righton the beach, right.
So easy to understand in thatexample.
But some other misconceptions,particularly if there's a claim.
(12:12):
It could be if a home is newish, like built in the last 10-ish
years, insureds may request tokeep the value on the lower end
because we just built this for Xamount.
You know why would it be higher?
And so maybe they're not takinginto account some the unknown
(12:44):
possibility at time of claim.
This could happen and so wehave to account for those
unknowns.
The other one that I think wecome across a lot is people in
the construction industry.
Industry, the contractor whoowns the home says well, I could
(13:08):
rebuild my own home.
Right, that is very wellpossible.
However, if that same insuredhad a loss, particularly if it
was a catastrophic loss,probably everybody of his
clients would also in thatgeneral area also have a loss.
And, as we know, the contractoris last to rebuild his own home
(13:31):
and all of his clients arecalling for him to do the work.
So when real life kind of takesover, you sort of have to talk
clients through.
You sort of have to talkclients through being the
overall bigger picture and thatunknown possibility and sort of
all the possibilities right, andsometimes it just takes a
(13:52):
realistic conversation to talkthrough replacement costs,
rebuilding costs, market valueand, like this, education.
Scott Gordon (14:01):
Now can you walk us through how stuff like
inflation, labor shortages orlocal surges in demand, maybe
like after a storm how they cancreate out of pocket expenses?
Amanda Knight (14:12):
Because that's the part that, like an insured,
is that hurts the most.
Right Is those out of pocketexpenses that you are like right
.
You feel like you gotblindsided by, even if you
shouldn't have been blindsided,because you should have known.
So how does that work?
Mary Roy (14:28):
So for an insured if they're feeling like they're
taking on too much.
That's definitely not theintent of an insurance policy,
right?
The intent of the policy is tomake the insured whole after a
(14:49):
loss.
However, it is a contractbetween the insured and the
carrier.
Way to go about this is for theretail agent to really go and
have that conversation with theinsured ahead of the loss to say
(15:10):
here's all of the coveragesavailable and what amount of
risk are you willing to take onyourself and what is comfortable
for you?
Every insured has a differentamount of comfort with respect
to risk.
It's like playing the stockmarket right, and so someone may
(15:34):
be risk averse and someone maysay put it all on red.
So, depending on that comfortlevel for the insured, their
policy may be tailored in adifferent way that meets their
needs.
And so for an insured to takeon more with respect to, say, a
(15:57):
deductible they may have alarger deductible they may have
a larger deductible Anotherinsured may have the ability to
take on, say, certainendorsements that are
exclusionary, where others saynope, I want everything covered,
I want the lowest deductible, Iwant my company to pay for
(16:18):
everything and I will pay ahigher premium for it because at
a loss I want them to just showup and write a check.
I don't want that.
And so, knowing the intent ofthe insured upfront, before the
claim happens, when you writethe initial policy, that is the
(16:40):
best time to be discussing that,not after it happens.
Amanda Knight (16:44):
Right, it's too late then.
Mary Roy (16:46):
Yeah, too late.
Then Right, exactly.
Hopefully I explained that well.
Amanda Knight (16:50):
No, that makes sense.
So I think, at least to myunderstanding.
Some policies offer, like, anextended replacement or some
sort of inflation protection.
Is that a thing, and are thereany meaningful differences
between how carriers handle thatthat we would want retail
agents to be aware of?
Mary Roy (17:12):
Yep, absolutely so.
There's extended replacementcosts that you can apply to your
homeowner policy.
I would urge every homeowner toadd this to their policy.
If it's available through yourhomeowner carrier, scott, write
that down, talk about that in apercentage 10%, 25%, 50%, even.
(17:50):
That will give you an addedbuffer layer on top of your
dwelling limit, and so this isjust advantageous for any
homeowner.
Just in case you don't haveenough, even if you do have
enough, it's just great to haveany sort of buffer layers built
into your policy.
It's peace of mind andtypically it doesn't cost all
that much.
Extra Inflation protection thattypically bumps the dwelling
(18:11):
limit automatically at thepolicy renewal every year.
This is also a great option forboth the insured and for the
carrier.
So this keeps up withinflationary trends that we've
just talked about and, dependingon geography, the inflation
(18:31):
increases can be as low as 2%and as high as 10%, so it's
worthwhile.
Mostly the inflationpercentages are pushed forth on
policies by the carriers and youknow it's probably on your
policy and you just don't evenknow it's there and you're not
(18:52):
paying any extra for it.
It's just part of your package.
You know the extendedreplacement cost that you
probably pay a little extra for,and you have to ask to have
that added.
It's worth to note here, too,that there's a ton of bells and
whistles that can be added to ahomeowner policy that don't just
(19:15):
automatically come with it, andthis is part of that tailoring
to meet the needs of the insuredthat we were talking about
Personal injury, water, backup,mold, id, fraud, ordinance and
law, cyber flood, I mean, Icould go on and on and on.
These are just, you know,really amazing coverages and
(19:39):
things that retail agents shouldbe talking about with their
insurance and things that retailagents should be talking about
with their insurance.
Amanda Knight (19:48):
And, side note, we are going to put out a
subsequent article to this aboutsome of those additional bells
and whistles that you justmentioned.
So stay tuned.
You'll hear Mary again andyou'll see more from her later,
but we're going to go take alittle more of a deep dive into
some of those that we didn'texplore in this article and
podcast.
Scott Gordon (20:02):
And next.
Now we've touched on this, butthe million dollar question is
what risks do agents run if theydon't proactively address these
issues with clients?
Amanda Knight (20:11):
I mean, obviously you could end up with an
unhappy client, right?
That seems to me like a riskright.
Somebody is going to be upset,but are there other risks?
Mary Roy (20:20):
I mean, I'd like to think that all retail agents are
proactively addressing thesecoverages with their clients.
If the insured has a loss andthey're not adequately insured,
then the retail agent is thefirst call that they make, right
, that's the line of the chainand I wouldn't want to be on the
(20:41):
other end of that phone call.
Okay, by diligence with theclient.
And so, yes, you could have anangry insured on your phone call
, sure, but beyond that, youknow lawsuits, litigation, for
sure, I mean, it can get intoscary and scarier levels beyond
(21:04):
that.
So you're talking about, youknow, people, their assets and
oftentimes their large asset,right, and these are personal
things.
And so when an insured has aloss, particularly on their
homeowner, these are their, youknow, family pictures, their
children's item.
Amanda Knight (21:25):
Where their kids grew up.
Mary Roy (21:30):
Yeah, right, there are values that you often can't put
money to wedding dresses andfamily heirlooms and pets.
So when you start talking likethat, there are feelings
associated and so things can gethot and heavy pretty quickly,
(21:51):
more so than even you know.
When a restaurant owner has afire and I'm not downplaying
that at all, right, sure, afamily loses a pet in a fire or
when you know there are bigfeelings that come about there,
so, come about there.
(22:16):
So, yeah, there's a heavyamount of diligence that really
needs to be done on the frontend.
Amanda Knight (22:18):
So what sort of proactive diligence or proactive
steps can retail agents take toensure their clients are better
protected when it comes to areinsurance scenario?
I mean, we've talked aboutmaking sure you understand what
their intentions are, what theirlevel of risk sensitivity is,
what the client's comfortablewith.
(22:39):
Is there anything?
You know?
I love checklists, so for me,if I were a retail agent, I
would love a checklist of okay,what kinds of things do I need
to keep in mind proactively,before I ever, even you know,
talk to this person or thisfamily?
Mary Roy (22:53):
So when writing a homeowner policy, for the very
first time retail agents can runa replacement cost estimator.
This gives an estimatedvaluation of the home even
before they ever go out there,ever take a picture.
We ever inspect.
That way they can have anupfront conversation with the
(23:16):
client.
Say here, this is what we thinkyou know, if you had a loss,
this is what we think it wouldbe to rebuild it.
So there's your conversation,upfront.
The retail agent should beconfirming the area, the square
feet of the house, theconstruction type, if there were
any updates over the years thatthe homeowner has lived there
(23:37):
wiring, plumbing, heating, roofhave you done any additions?
Anything in particular that weshould know?
Do you have any alarms?
Central station fire, burglar,water shut off devices is a
really big one these days.
Any other protective measuresIf you're in a coastal area, do
you have shutters?
(23:58):
If you're down in Florida, whatare your hurricane protections?
And so you know, depending ongeographically, they really do
know their area, they know theirbackyard, you know better than
anybody.
And so you know.
In the wildfire zones they'llask wildfire info or possibly
quake retrofitting info.
(24:19):
And so to take that detailedassessment on the front end
really, really helps becauseyou're getting all of the info
where, when there is a loss, wecan say here, we did all of this
diligence, we know this insured, we know the intent of the
policy.
We went out, we inspected, thisis what it did look like, this
(24:43):
is the information we gatheredand here's how we're going to
put it back same as it wasbefore.
So we're partnered with theclient and that's really the
intent of the insurance company,the policy, the insured, the
broker everybody's on the samepage.
(25:04):
And if you're not taking allthat info up front, there should
be a big question mark herelike wait a minute, my agent
doesn't do that with me.
You know they should.
They really should, right yeah.
So that's what I would say thoseproactive steps really, really
do make a difference.
Scott Gordon (25:23):
As the old ad used to say, it makes sound
financial sense.
It makes sound financial sense.
So let's talk a bit about therole that CRC's wholesale
brokers can play in helpingretail agents find better fit
coverage.
Mary Roy (25:37):
So I mean, I've been doing this I think this is my
23rd year and my answer to thisquestion has not changed in that
whole time.
Answer to this question has notchanged in that whole time
Complete submissions,well-constructed narratives,
supplemental applications ifnecessary, any supporting data,
(25:59):
prior carrier info.
If you've got pictures orinspections or any details,
anything you know about theclient, the retail agent knows
that client the best and sogetting gathering and giving
(26:24):
that information to thewholesale broker is the best.
So when we get that detailed,completed submission, the extra
effort made on the front endmakes all the difference in
terms of turnaround, eligibility, rate coverage.
The CRC wholesale broker hasaccess to so many carriers so we
(26:46):
can find the right fit for thatinsured.
We can tailor the coverages tomeet their exact needs.
No two insureds are the sameand find the most competitive
rate, and so it's really theinsured's best interest, no
matter how unique or howchallenging they might be.
They might be.
(27:07):
So that's the part of the jobthat's so rewarding and exciting
to me, and really that's whatmakes the partnership between
the CRC wholesale broker and theretail agent.
Scott Gordon (27:23):
So awesome.
That's great.
I don't even need coverage andyou're making me want to go out
and get some.
All right, I think we're donewith.
Have we covered everything,Amanda?
Amanda Knight (27:31):
Yeah, on to the fun stuff, scott.
Yeah, oh my.
Scott Gordon (27:34):
God, you know what that means.
Amanda Knight (27:35):
Rapid fire.
Scott Gordon (27:36):
It's time for what we like to call rapid fire,
where you just answer questionsoff the top of your head.
And here's the first one, firstconcert you ever attended.
Mary Roy (27:50):
This First concert you ever attended.
This one is very easy for me.
I was very young.
I saw Debbie Gibson and Tiffanyopen for Bruce Springsteen in
Disney and if you think that'sepic.
That was a early 80s epicconcert.
Yep.
Scott Gordon (28:13):
It's all downhill after that.
Really, I mean, have you seenanything like that came?
I know this isn't the question,amanda, but now I want to know
you seen anything that lived upto that since then?
Metallica was pretty awesomeokay, yeah, well, normally we
don't answer these, but amAmanda?
I'm kind of curious.
What was your first concertexperience?
Amanda Knight (28:30):
My first concert.
Granted, I'm a Midwestern farmkid, so my first concert was
John Michael Montgomery.
Wow, I don't even know if hestill makes music.
I don't even know if he stillexists.
Scott Gordon (28:43):
I have a vague recollection of who that is.
Amanda Knight (28:45):
Everyone.
Go Google and see if that guyis still alive.
All right, Scott, I'm going toGoogle while you tell us your
first concert you don't want toknow, I don't want to reveal my
age.
Scott Gordon (28:55):
I was.
I was eight years old.
When I was eight years old, Iwent with my mom and my
grandmother to see the Bee Geesand the Pointer Sisters.
Oh, that's a great one, but thefirst one that I really the
rock concert that I really likegot tickets for and went to was
in 1984.
I saw REO, speedwagon and CheapTrick opened for them and it
(29:16):
was amazing.
It was really good.
Mary Roy (29:18):
That's a really great one.
Scott Gordon (29:20):
Okay, question number two the book on your
nightstand right now.
Mary Roy (29:25):
So currently I have no book on my nightstand because I
just put it in my beach bag tothe beach this weekend.
It is Life is Short, so wearyour party pants.
Amanda Knight (29:40):
When you come back on the podcast after your
next article.
We're going to have to get areview of that because it sounds
.
I'll let you know how I'm goingto get it.
It might be something rightafter All alley, it might be
Okay.
Scott Gordon (29:52):
Last question your go-to pick-me-up on a long day.
Mary Roy (29:57):
That's an easy one I'm hanging out with my girls.
I have two extremely sassydaughters and they have the
uncanny ability to put meinstantly in a great mood, so
they are truly the light of allthings Fantastic.
Amanda Knight (30:17):
I love that because I have a 13 year old and
sometimes she is not the lightof all things.
So I will say, most of the timeshe is, but at the end of a
long day I'm not sure that it'salways yeah, 13.
Scott Gordon (30:29):
They talk about terrible twos, but 13 is 10
times worse than any of that fora girl 100%.
Amanda Knight (30:36):
Well, Mary, thank you for joining us.
It was so good to get to chatwith you today, Same same.
Mary Roy (30:42):
Thank you guys for having me.
Scott Gordon (30:44):
And to our listeners.
Thanks for tuning in to Placingyou First.
If you found today's episodehelpful, be sure to subscribe
and share.
Amanda Knight (30:51):
And to learn more or connect with a CRC
specialist, visit crcgroupcom.
We'll see you next time.
Welcome to the Placing you First podcast, where
we spotlight timely topics andinsights to help insurance
professionals move faster and gofurther.
I'm Amanda Knight.
Scott Gordon (00:33):
And I'm Scott Gordon.
Today, we're joined by CRC'sMary Roy, Senior Underwriting
Team Leader, to talk about anissue that continues to grow why
homeowners may not be fullycovered when it comes time to
rebuild, which is a thing.
Amanda Knight (00:48):
Unfortunately.
Scott Gordon (00:49):
So let's get into it.
Amanda Knight (00:50):
This is the Placing you First podcast from
CRC Group.
This podcast features news andinsights from a vast knowledge
base of more than 5,500associates who write more than
$30 billion in premium annually.
Plus, we give you the latestinformation on what's happening
at CRC.
Scott Gordon (01:07):
This is the Placing you First podcast.
Amanda Knight (01:10):
And now the hosts of the podcast, amanda Knight
and Scott Gordon.
Welcome to the podcast.
Mary Roy (01:16):
Mary, thank you so much for having me.
I'm so excited to be here.
Scott Gordon (01:20):
All right, Mary, let's start with the big picture
.
Home prices and constructioncosts have surged in recent
years.
We all know this.
What's driving the increase inresidential construction costs?
Mary Roy (01:31):
So prices for everything have gone up, right,
I mean, just walk out the doorto your house and you'll see it.
But there's more to it thanthat.
When we're talking aboutconstruction in general, when
we're talking about constructionin general, things are rising
(01:53):
same as milk, bread and eggs.
The national rebuild costs rosein 2023.
I think it was just over 4%,4.1% I think, and some states
(02:14):
were even as high as 9% In 2024to 5,.
That went down a little.
It was 3.3%, so it sort of tooka little bit of a dive, but
it's still higher than it hasbeen for years.
And I guess we can start off bytalking about reconstruction
costs versus brand new buildsfrom the ground up.
Reconstruction lacks theeconomies of scale seen in new
(02:38):
construction, so this pushescosts for labor and material.
Just everything goes up fromthere.
We can unpack that a little bitmore in detail later, but if
you have hired a contractor atall in the past few years for
anything, you may have had alittle bit of a sticker shock
(03:02):
when you've received your endbill or your invoice.
I know I have, and of course itdepends where in the US you
live.
But increased costs of labor,inflation of materials and
another real biggie is theworkforce shortages.
(03:22):
Those all go into play here andthat's just really generally
speaking.
And so the more you talk on ageneral basis, people start to
understand, just in layman'sterms oh geez, I sort of get it.
And I mean, just as far asworkforce shortages, we see that
(03:44):
in other markets too, butspecifically in respect to
construction workers.
Here in the US we currently, aswe sit now, have nearly 500,000
construction workers onshortage right now.
I mean that's a huge number andI mean this is affecting all of
(04:07):
us for jobs, both big and small, whether you've had a claim or
you're just doing a littleaddition around the house.
Amanda Knight (04:16):
So we talked, you know, you just mentioned, you
know, when it comes toconstruction versus
reconstruction after disastersor something like that, that
there's a difference there,right, in terms of labor,
materials, timelines.
Is that the economy of scaleyou mentioned as far as maybe a
lower price versus a higherprice?
How does that economy of scaleapply?
(04:38):
Does it apply just to materialsor other things too?
Mary Roy (04:41):
Oh gosh, there's.
You know, if you can picturekind of a web, it shoots out in
all sorts of differentdirections from there.
You know, we can start offtalking really generally and
then go off into lots ofdifferent tangents.
You know, when we talk aboutthe shortage of labor, it's easy
to understand that.
(05:03):
It makes sense that a generalcontractor is going to have to
pay top dollar for reliable help, right, right, you want your
guy to be there when you calland so you're going to pay a
little bit extra for that guywho's always going to pick up
the phone and who's going to dothe job right, exactly, and so
everybody's going to agree yeah,I want that guy working on my
(05:26):
house, right, and that makes alot of sense.
But there's also, when you talkabout materials, specific
materials that havesignificantly increased in price
In the US.
I mean, if you go up to Canada,that's even gone up a lot more.
You can get the statisticsthere up a lot more.
(05:48):
You can get the statisticsthere.
But here in the US over thepast five years there are real
specifics that make sense.
Just to the average Joe Drywall, for example, that's gone up
two and a half percent.
Copper, electrical four percent.
Framing and lumber.
Framing and lumber 1%.
These are real things that youknow affect every single one of
(06:10):
us.
So concrete is a huge one.
That's 5%.
This is all just 2024 to 2025figures, and so these are real
specifics that just keep drivingthe number, driving the number.
And you know, just on a sidenote, certain carriers will
(06:32):
figure these little, you knowspecifics into their rates and
apply construction costsadjustment factors into their
increases too.
So when you see premium renewalincreases on your homeowners,
that falls into it too.
So, it's just like every littleyou know when I talk about that
(06:54):
web.
It just sort of compiles andcompiles.
Amanda Knight (06:57):
Well, and I assume that in new construction
a lot of times at least here aconstruction crew is, maybe
they're building an entiresubdivision so you can maybe get
a discount on some of thosesupplies and materials.
But then if it's just merebuilding one home, those
discounts don't apply.
You're not buying enough lumberor concrete or copper for 25
(07:20):
houses, you're buying it for one.
Mary Roy (07:22):
And Amanda.
And here's the difference right, when you're talking about have
you had a loss or not, whenyou're talking about building a
subdivision brand new or after acatastrophic disaster, it's a
whole different ballgame whereeverybody's fighting for those
same materials and that samegeography.
(07:46):
It's really, really a differentballgame.
Scott Gordon (07:49):
Yeah, and from that number you mentioned
earlier, half a million.
They're also fighting forbodies too.
It sounds like you can't findthe people.
Mary Roy (07:57):
Carriers actually contract with workers from other
geographies, in that case Scott.
From other geographies, in thatcase Scott.
So you know, if there's a loss,you know, in gosh, the wildfire
(08:17):
area, they'll, you know, sendpeople from Florida or linemen
from the Northeast over, and soif you don't think that costs
more money, we're paying forthose guys to stay overnight
places, whether that's hotels orapartments, and so all of that
drives up the cost, for sure.
Scott Gordon (08:31):
Wow yeah.
So now in the article youmentioned that reconstruction
often involves a top-downapproach.
So for dum-dums like me, why isthat more expensive or
difficult than the standardbuilding process?
Mary Roy (08:45):
So this is a real easy concept to understand.
When you're building a housebrand new, you put in your
foundation and you sort of buildground up right, but say you
have a loss and it's just apartial loss, water damage, your
washing machine overflowed oryour toilet overflowed and it
(09:07):
created some water damage.
That's sort of a top down rebidright, there's an existing
structure there and you sort ofa process because, unlike new
construction, there's access andlogistics to have to maneuver
(09:35):
through.
Rebuilds often involve sitechallenges like debris removal,
mold remediation perhaps in ourwater damage, you know
illustration or obviously youwant to protect some existing
landscaping that might alreadybe there.
You don't want these guysbulldozing over.
(09:56):
You know things that arealready already in place.
Contractors may have to gettheir big machinery around
existing structures.
Sometimes it's a game of JengaYou're taking out one and
putting it in a different spot,and so the scheduling is also a
(10:17):
lot messier, whereas in a newbuild you can sort of set your
timeline.
The general contractor's donethis a million times.
He knows when the electricianis coming, the roof guy, you
know.
Amanda Knight (10:30):
Right.
Mary Roy (10:31):
All of that kind of goes out the window, especially
if the materials aren't readilyavailable.
Amanda Knight (10:37):
Right.
Mary Roy (10:37):
Maybe they're on water , and so it's really.
It's amazing how these guys arejust on their toes.
Amanda Knight (10:46):
So there are obviously a ton of moving pieces
and you know differentperspectives and sides to all of
this.
So, from a coverage perspective, what do you think is the
biggest misunderstandinghomeowners maybe have about
replacement cost versus anactual rebuild cost?
Mary Roy (11:08):
replacement cost versus an actual rebuild cost.
So there are a lot of generalmisunderstandings surrounding
homeowner policies.
That's why it's so importantthat we educate and we do things
like that Right.
Sure we talk about that.
The biggest confusion usuallycenters around the difference
between market value what thehouse can sell for versus
(11:29):
replacement cost.
That's always the biggest onethat we're having to sort of
educate about.
Depending on location, thesetwo values can be very, very
different.
Depending on location, thesetwo values can be very, very
different.
I'm here in Massachusetts andso you know.
An example is a home on CapeCod.
(11:50):
It could cost a million dollarsto build brand new, but the
market value of that same homecould be $4 million because it's
situated along the coast, righton the beach, right.
So easy to understand in thatexample.
But some other misconceptions,particularly if there's a claim.
(12:12):
It could be if a home is newish, like built in the last 10-ish
years, insureds may request tokeep the value on the lower end
because we just built this for Xamount.
You know why would it be higher?
And so maybe they're not takinginto account some the unknown
(12:44):
possibility at time of claim.
This could happen and so wehave to account for those
unknowns.
The other one that I think wecome across a lot is people in
the construction industry.
Industry, the contractor whoowns the home says well, I could
(13:08):
rebuild my own home.
Right, that is very wellpossible.
However, if that same insuredhad a loss, particularly if it
was a catastrophic loss,probably everybody of his
clients would also in thatgeneral area also have a loss.
And, as we know, the contractoris last to rebuild his own home
(13:31):
and all of his clients arecalling for him to do the work.
So when real life kind of takesover, you sort of have to talk
clients through.
You sort of have to talkclients through being the
overall bigger picture and thatunknown possibility and sort of
all the possibilities right, andsometimes it just takes a
(13:52):
realistic conversation to talkthrough replacement costs,
rebuilding costs, market valueand, like this, education.
Scott Gordon (14:01):
Now can you walk us through how stuff like
inflation, labor shortages orlocal surges in demand, maybe
like after a storm how they cancreate out of pocket expenses?
Amanda Knight (14:12):
Because that's the part that, like an insured,
is that hurts the most.
Right Is those out of pocketexpenses that you are like right
.
You feel like you gotblindsided by, even if you
shouldn't have been blindsided,because you should have known.
So how does that work?
Mary Roy (14:28):
So for an insured if they're feeling like they're
taking on too much.
That's definitely not theintent of an insurance policy,
right?
The intent of the policy is tomake the insured whole after a
(14:49):
loss.
However, it is a contractbetween the insured and the
carrier.
Way to go about this is for theretail agent to really go and
have that conversation with theinsured ahead of the loss to say
(15:10):
here's all of the coveragesavailable and what amount of
risk are you willing to take onyourself and what is comfortable
for you?
Every insured has a differentamount of comfort with respect
to risk.
It's like playing the stockmarket right, and so someone may
(15:34):
be risk averse and someone maysay put it all on red.
So, depending on that comfortlevel for the insured, their
policy may be tailored in adifferent way that meets their
needs.
And so for an insured to takeon more with respect to, say, a
(15:57):
deductible they may have alarger deductible they may have
a larger deductible Anotherinsured may have the ability to
take on, say, certainendorsements that are
exclusionary, where others saynope, I want everything covered,
I want the lowest deductible, Iwant my company to pay for
(16:18):
everything and I will pay ahigher premium for it because at
a loss I want them to just showup and write a check.
I don't want that.
And so, knowing the intent ofthe insured upfront, before the
claim happens, when you writethe initial policy, that is the
(16:40):
best time to be discussing that,not after it happens.
Amanda Knight (16:44):
Right, it's too late then.
Mary Roy (16:46):
Yeah, too late.
Then Right, exactly.
Hopefully I explained that well.
Amanda Knight (16:50):
No, that makes sense.
So I think, at least to myunderstanding.
Some policies offer, like, anextended replacement or some
sort of inflation protection.
Is that a thing, and are thereany meaningful differences
between how carriers handle thatthat we would want retail
agents to be aware of?
Mary Roy (17:12):
Yep, absolutely so.
There's extended replacementcosts that you can apply to your
homeowner policy.
I would urge every homeowner toadd this to their policy.
If it's available through yourhomeowner carrier, scott, write
that down, talk about that in apercentage 10%, 25%, 50%, even.
(17:50):
That will give you an addedbuffer layer on top of your
dwelling limit, and so this isjust advantageous for any
homeowner.
Just in case you don't haveenough, even if you do have
enough, it's just great to haveany sort of buffer layers built
into your policy.
It's peace of mind andtypically it doesn't cost all
that much.
Extra Inflation protection thattypically bumps the dwelling
(18:11):
limit automatically at thepolicy renewal every year.
This is also a great option forboth the insured and for the
carrier.
So this keeps up withinflationary trends that we've
just talked about and, dependingon geography, the inflation
(18:31):
increases can be as low as 2%and as high as 10%, so it's
worthwhile.
Mostly the inflationpercentages are pushed forth on
policies by the carriers and youknow it's probably on your
policy and you just don't evenknow it's there and you're not
(18:52):
paying any extra for it.
It's just part of your package.
You know the extendedreplacement cost that you
probably pay a little extra for,and you have to ask to have
that added.
It's worth to note here, too,that there's a ton of bells and
whistles that can be added to ahomeowner policy that don't just
(19:15):
automatically come with it, andthis is part of that tailoring
to meet the needs of the insuredthat we were talking about
Personal injury, water, backup,mold, id, fraud, ordinance and
law, cyber flood, I mean, Icould go on and on and on.
These are just, you know,really amazing coverages and
(19:39):
things that retail agents shouldbe talking about with their
insurance and things that retailagents should be talking about
with their insurance.
Amanda Knight (19:48):
And, side note, we are going to put out a
subsequent article to this aboutsome of those additional bells
and whistles that you justmentioned.
So stay tuned.
You'll hear Mary again andyou'll see more from her later,
but we're going to go take alittle more of a deep dive into
some of those that we didn'texplore in this article and
podcast.
Scott Gordon (20:02):
And next.
Now we've touched on this, butthe million dollar question is
what risks do agents run if theydon't proactively address these
issues with clients?
Amanda Knight (20:11):
I mean, obviously you could end up with an
unhappy client, right?
That seems to me like a riskright.
Somebody is going to be upset,but are there other risks?
Mary Roy (20:20):
I mean, I'd like to think that all retail agents are
proactively addressing thesecoverages with their clients.
If the insured has a loss andthey're not adequately insured,
then the retail agent is thefirst call that they make, right
, that's the line of the chainand I wouldn't want to be on the
(20:41):
other end of that phone call.
Okay, by diligence with theclient.
And so, yes, you could have anangry insured on your phone call
, sure, but beyond that, youknow lawsuits, litigation, for
sure, I mean, it can get intoscary and scarier levels beyond
(21:04):
that.
So you're talking about, youknow, people, their assets and
oftentimes their large asset,right, and these are personal
things.
And so when an insured has aloss, particularly on their
homeowner, these are their, youknow, family pictures, their
children's item.
Amanda Knight (21:25):
Where their kids grew up.
Mary Roy (21:30):
Yeah, right, there are values that you often can't put
money to wedding dresses andfamily heirlooms and pets.
So when you start talking likethat, there are feelings
associated and so things can gethot and heavy pretty quickly,
(21:51):
more so than even you know.
When a restaurant owner has afire and I'm not downplaying
that at all, right, sure, afamily loses a pet in a fire or
when you know there are bigfeelings that come about there,
so, come about there.
(22:16):
So, yeah, there's a heavyamount of diligence that really
needs to be done on the frontend.
Amanda Knight (22:18):
So what sort of proactive diligence or proactive
steps can retail agents take toensure their clients are better
protected when it comes to areinsurance scenario?
I mean, we've talked aboutmaking sure you understand what
their intentions are, what theirlevel of risk sensitivity is,
what the client's comfortablewith.
(22:39):
Is there anything?
You know?
I love checklists, so for me,if I were a retail agent, I
would love a checklist of okay,what kinds of things do I need
to keep in mind proactively,before I ever, even you know,
talk to this person or thisfamily?
Mary Roy (22:53):
So when writing a homeowner policy, for the very
first time retail agents can runa replacement cost estimator.
This gives an estimatedvaluation of the home even
before they ever go out there,ever take a picture.
We ever inspect.
That way they can have anupfront conversation with the
(23:16):
client.
Say here, this is what we thinkyou know, if you had a loss,
this is what we think it wouldbe to rebuild it.
So there's your conversation,upfront.
The retail agent should beconfirming the area, the square
feet of the house, theconstruction type, if there were
any updates over the years thatthe homeowner has lived there
(23:37):
wiring, plumbing, heating, roofhave you done any additions?
Anything in particular that weshould know?
Do you have any alarms?
Central station fire, burglar,water shut off devices is a
really big one these days.
Any other protective measuresIf you're in a coastal area, do
you have shutters?
(23:58):
If you're down in Florida, whatare your hurricane protections?
And so you know, depending ongeographically, they really do
know their area, they know theirbackyard, you know better than
anybody.
And so you know.
In the wildfire zones they'llask wildfire info or possibly
quake retrofitting info.
(24:19):
And so to take that detailedassessment on the front end
really, really helps becauseyou're getting all of the info
where, when there is a loss, wecan say here, we did all of this
diligence, we know this insured, we know the intent of the
policy.
We went out, we inspected, thisis what it did look like, this
(24:43):
is the information we gatheredand here's how we're going to
put it back same as it wasbefore.
So we're partnered with theclient and that's really the
intent of the insurance company,the policy, the insured, the
broker everybody's on the samepage.
(25:04):
And if you're not taking allthat info up front, there should
be a big question mark herelike wait a minute, my agent
doesn't do that with me.
You know they should.
They really should, right yeah.
So that's what I would say thoseproactive steps really, really
do make a difference.
Scott Gordon (25:23):
As the old ad used to say, it makes sound
financial sense.
It makes sound financial sense.
So let's talk a bit about therole that CRC's wholesale
brokers can play in helpingretail agents find better fit
coverage.
Mary Roy (25:37):
So I mean, I've been doing this I think this is my
23rd year and my answer to thisquestion has not changed in that
whole time.
Answer to this question has notchanged in that whole time
Complete submissions,well-constructed narratives,
supplemental applications ifnecessary, any supporting data,
(25:59):
prior carrier info.
If you've got pictures orinspections or any details,
anything you know about theclient, the retail agent knows
that client the best and sogetting gathering and giving
(26:24):
that information to thewholesale broker is the best.
So when we get that detailed,completed submission, the extra
effort made on the front endmakes all the difference in
terms of turnaround, eligibility, rate coverage.
The CRC wholesale broker hasaccess to so many carriers so we
(26:46):
can find the right fit for thatinsured.
We can tailor the coverages tomeet their exact needs.
No two insureds are the sameand find the most competitive
rate, and so it's really theinsured's best interest, no
matter how unique or howchallenging they might be.
They might be.
(27:07):
So that's the part of the jobthat's so rewarding and exciting
to me, and really that's whatmakes the partnership between
the CRC wholesale broker and theretail agent.
Scott Gordon (27:23):
So awesome.
That's great.
I don't even need coverage andyou're making me want to go out
and get some.
All right, I think we're donewith.
Have we covered everything,Amanda?
Amanda Knight (27:31):
Yeah, on to the fun stuff, scott.
Yeah, oh my.
Scott Gordon (27:34):
God, you know what that means.
Amanda Knight (27:35):
Rapid fire.
Scott Gordon (27:36):
It's time for what we like to call rapid fire,
where you just answer questionsoff the top of your head.
And here's the first one, firstconcert you ever attended.
Mary Roy (27:50):
This First concert you ever attended.
This one is very easy for me.
I was very young.
I saw Debbie Gibson and Tiffanyopen for Bruce Springsteen in
Disney and if you think that'sepic.
That was a early 80s epicconcert.
Yep.
Scott Gordon (28:13):
It's all downhill after that.
Really, I mean, have you seenanything like that came?
I know this isn't the question,amanda, but now I want to know
you seen anything that lived upto that since then?
Metallica was pretty awesomeokay, yeah, well, normally we
don't answer these, but amAmanda?
I'm kind of curious.
What was your first concertexperience?
Amanda Knight (28:30):
My first concert.
Granted, I'm a Midwestern farmkid, so my first concert was
John Michael Montgomery.
Wow, I don't even know if hestill makes music.
I don't even know if he stillexists.
Scott Gordon (28:43):
I have a vague recollection of who that is.
Amanda Knight (28:45):
Everyone.
Go Google and see if that guyis still alive.
All right, Scott, I'm going toGoogle while you tell us your
first concert you don't want toknow, I don't want to reveal my
age.
Scott Gordon (28:55):
I was.
I was eight years old.
When I was eight years old, Iwent with my mom and my
grandmother to see the Bee Geesand the Pointer Sisters.
Oh, that's a great one, but thefirst one that I really the
rock concert that I really likegot tickets for and went to was
in 1984.
I saw REO, speedwagon and CheapTrick opened for them and it
(29:16):
was amazing.
It was really good.
Mary Roy (29:18):
That's a really great one.
Scott Gordon (29:20):
Okay, question number two the book on your
nightstand right now.
Mary Roy (29:25):
So currently I have no book on my nightstand because I
just put it in my beach bag tothe beach this weekend.
It is Life is Short, so wearyour party pants.
Amanda Knight (29:40):
When you come back on the podcast after your
next article.
We're going to have to get areview of that because it sounds
.
I'll let you know how I'm goingto get it.
It might be something rightafter All alley, it might be
Okay.
Scott Gordon (29:52):
Last question your go-to pick-me-up on a long day.
Mary Roy (29:57):
That's an easy one I'm hanging out with my girls.
I have two extremely sassydaughters and they have the
uncanny ability to put meinstantly in a great mood, so
they are truly the light of allthings Fantastic.
Amanda Knight (30:17):
I love that because I have a 13 year old and
sometimes she is not the lightof all things.
So I will say, most of the timeshe is, but at the end of a
long day I'm not sure that it'salways yeah, 13.
Scott Gordon (30:29):
They talk about terrible twos, but 13 is 10
times worse than any of that fora girl 100%.
Amanda Knight (30:36):
Well, Mary, thank you for joining us.
It was so good to get to chatwith you today, Same same.
Mary Roy (30:42):
Thank you guys for having me.
Scott Gordon (30:44):
And to our listeners.
Thanks for tuning in to Placingyou First.
If you found today's episodehelpful, be sure to subscribe
and share.
Amanda Knight (30:51):
And to learn more or connect with a CRC
specialist, visit crcgroupcom.
We'll see you next time.
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