Insurance Hour
KCAA: Insurance Hour (Thu, 27 Jun, 2024)
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Hello, hello, and welcome to insurance hour. I am your host, Carl Sussman. Thank you so much for being here today. If you have any questions, feel free to reach out. You can call us at 559-656-0317. You can also send any questions you have to questions@insurancehour.com. If you need help right away, you can also dial pound 250 on your cell phone. Use the keyword insurance, and you will be routed to, hopefully, an agent right away that can help you. Today, I am thrilled to have a guest with us that is going to provide us with more information than you can possibly imagine, and hopefully dispel an awful lot of rumors. I have with us Benjamin McKay. He is the CEO and Executive Director of the Surplus Lines Association of California. He has a career in both public and private sectors. Expertise and insurance, regulatory affairs, legislative affairs. He has been instrumental in shaping the Surplus Lines market in California, being sure that the needs of consumers and businesses are handled. - I don't want to, I mean, I can sing your praises indefinitely, but I want to first just welcome you so much for being here with us. - Thank you, Karl. Pleasure to be here. - We have an unbelievable change and shift in the insurance industry in California, as you and I certainly know. And if people are tuned in, they're probably aware of it as well. So before we get into the nuts and bolts of it, in your own words, can you describe briefly what does Surplus Lines Insurance mean? And how does it differ from, I suppose, standard insurance, if you want to call it that? - Yeah, standard's a good term, in fact, for what is also known as admitted insurance. I usually look at the insurance world and I divide it into three parts. You have life insurance, you have health insurance, and you have PNC, property casualty insurance. So that's all your stuff, your house, your building. That's what we are. We're the property and casualty insurance. It's also liability, someone falls down at your business and gets hurt, that sort of thing. But I think life and health are pretty self-explanatory. People understand those. It's this PNC part that's a little tricky. And then PNC can be further divided into standard or admitted and non-admitted and government programs. Like, for instance, the Fair Plan or the California Earthquake Authority. And so if you put those three together, that's the whole property and casualty pie. Standard, surplus lines, government. And there's other kind of really weird ones if you want to get crazy like self-insurance and cap visitors and things like that. But we'll avoid those because they're a very specialized small part, the big parts, the parts that matter. I'm sure your listeners are admitted, also called standard, surplus lines and government. And I shouldn't warn before we get too far along. I'm gonna re-say words a lot because the language of insurance is so utterly confusing. We use the same word to mean three different things and three words do mean the same thing. So I've created this habit of saying, when I'm being agent, I mean retail agent. When I say broker, I mean surplus, you know. - Absolutely, the more of that, the better. Because I want everyone to have a chance to try and understand it. And context clues don't always work for this thing. - Right, right, exactly. - So, when we're talking about surplus lines, that means, is that equivalent to a non-admitted carrier? Are those fairly synonymous terms to use? - They are, they're synonymous. The only reason we use non-admitted, we don't like that term 'cause it sounds like, oh, you're not licensed. You know, there's admitted and then you're not admitted, means you're some fly by night. So we like to use surplus lines. The problem, of course, is the statute uses non-admitted. So if somebody were to pull up the statute book and they won't find surplus lines in there, they'll find the surplus lines association in there. But they won't find, surplus lines will find non-admitted. And so you have to use both terms, particularly if you're testifying in front of the legislature or you're writing a white paper. But surplus lines, I think, is a more accurate description. Here's why, surplus lines carriers are admitted somewhere. So they're just not admitted in California, but they have a license to write insurance in Delaware, in Nevada, somewhere else. So they are admitted somewhere. They're just not licensed in California. So in California, they're considered a surplus lines carrier. So that's really the main distinction. We can get into a lot of particulars, but essentially, yes, surplus lines, it simply means they're not licensed here. If you're licensed here, then you're subject to the full regulatory gamut of California. If you're licensed in Delaware, but ensuring California risks, you're subject to the full gamut of Delaware. - What are some reasons that a carrier would, and I guess this is loading the question, I'm assuming that they're choosing to not become admitted in California, what are some reasons that a carrier would make that choice to not obtain a license specifically in California? - Yeah, well, so the main reason right now is trying to get rate and form freedom. And you're seeing that because of this Prop 103 intervener process, you could, for instance, I was just watching all these fast food restaurants, 'cause the minimum wage went up, and they all increased their prices by 13%, 20%, to cover that cost. Well, in insurance, you can't do that. You have to go to the Department of Insurance and say, hey, I can prove that I should charge more, because now the wood I have to buy to replace your house, and the nails, and everything else has gone up, and the workers are now making 13% more. I need to charge 13% more. And the department says, well, we have to have a hearing. There's an intervener process, and the interveners will come in, and it'll be a year before you get that rate increase. So maybe, yeah, it could be three years. It's taken as long as three years. So if you're charging the right amount, which the department makes sure you're charging the lowest possible amount, is what it seems to, you know, is typically what it is, you're not gonna be profitable. And then if too many of your houses burn, you know, it's like, right now there's several wildfires. They're pretty small, but, you know, in the last, since the 2000s, we've had nine of the worst natural catastrophes in recorded history. So in the last 24 years, nine of the 10, and the 10th one was Hurricane Andrew in '96. So, you know, there's clearly more risk. There's clearly more stuff blowing down and burning, and so forth, and the costs are going up. You know, the inflation is a real thing, as we've all felt it, you know, especially these last few years, and it affects insurance industry. And so if you wanna charge the right rate, you have to go surplus lines, 'cause you can't get the rate typically on an emitted basis. Even though the department is trying really hard to give those rate increases, this Prop 103 and our venor process just drags it out by the time you get, you know, 10%, it's two years later, and you need another 10% now. - Right, interesting. I wanna talk more about this. We have to take a quick break, but I wanna touch on something you also said about rate and policy form, because there's some jargon I think might be held for some people. - Absolutely. - We'll talk about that in just two seconds. - Okay. (upbeat music) - Let's talk about earthquakes for a minute. Look, we know we live in earthquake country here in California. Powerful, devastating earthquakes have happened here before, and science says that they will happen again. They can't tell us exactly when, they can just tell us that it is going to happen. Count on it, prepare for it. Did you know that earthquakes are not covered by your homeowner's insurance policy? You need a separate policy to give you the peace of mind that you will be able to recover without getting financially wiped out the next time we get hit with a big one. There's a great company here in California that will provide you with earthquake coverage you need at a price you can afford. That company is Geovara. I have a policy through Geovara. I really like how easy it is to choose from all of their great coverage options backed by the financial strength that lets me know that they will be here for me when I need them the most. Go to getquake.com/insuranceour to learn more. That's getquake.com/insuranceour. Make sure you're ready for the day when the ground shakes again. (upbeat music) Hello, hello, and welcome back. Carl Sussman with Insuranceour. Thank you so much for being here. Again, if you have any questions, you can reach us at 559-656-0317. If you missed any part of this show, you can always check it out on a podcast, check it out on iHeartMedia, check it out on Amazon Alexa, TuneIn, YouTube. You name it, we're pretty much everywhere. Today, we are very fortunate to have Benjamin the Cave here who is talking with us about surplus lines. Again, thank you so much for spending the time with us today. Right before the break, we were talking about why an insurance carrier would elect to be not admitted in a state. And you mentioned something about not being able to get adequate rates and also about the ability or not to have certain policy forms. Can you explain a little bit about what you mean when you say policy forms? Absolutely, and I warned myself not to use jargon and I did it right away in segment one. It's part of our industry. It is, form is just the product, the policy. It's a contract between you and your insurer that they will, if some event happens, they will pay to make you whole. Based on the terms, meaning the words that are in that policy. So when we say form, we just mean your insurance policy, the piece of paper that you get that promises that you'll be paid if some bad unfortunate event happens. And so in surplus lines, most of the policies we call it, there's another big word bespoke, which means unique. Right, it's each policy tends, you know, in the admitted side, you'll have an H03 policy and everybody's homeowners policy is pretty much the same. And the-- Boiler plate is what most people look at it. Policies are on a basic chassis and then carriers will tweak them a little bit. That's right, exactly. And there's this organization that's made up of insurance commissioners that looks at these policies and talks about the language and tries to make model laws. And then there's this group called ISO that creates ISO forms so that they're all standardized. But in surplus lines, we understand that some of these risks are unique. Not everybody has an antique car. Not everybody's building a building. And not every building is on a fault line. All right, some buildings are in a floodplain. And so the policies address those unique characteristics of the risk. You know, oh, you have fireproof tiles or you have wood tiles or you have-- you know, for a roof. And the policy will reflect those differences. In a homeowner's policy, a distinction might be a fire hydrant run right in front of your house or you don't have a fire hydrant within 10 blocks of your house. Those sorts of things matter and that insurance carriers will take that into account. And in surplus lines, it's various. You know, we're more specific about what the words say in the contract. So is it fair to say that with the surplus policy or with the surplus line and insurer, they're able to be much more granular on what they underwrite for. For example, if somebody has a dog that's on the quote unquote bad list, right? And the primary market says, we don't want to ensure you're home because of the liability, because of that dog. A surplus carrier could come in and say, we are going to do everything. We're just not going to cover if this particular dog bites someone. They can get down to that level of granularity. Yeah, for sure, for sure. And I think the bad list is trampolines, pools, and dogs. And those tend to be-- we won't ensure you list. And the dogs change. You know, it used to be back when I was younger. It was Dover and Pincers, right? And now it's Pitbulls. And so which dog does change? But that's right, the circle science policies can get more granular. It takes more work to get more granular. They'd rather have a more standard policy, if they could, because it's quicker. It's more efficient. But with unique risks, risk in the woo-wee, there's another term, the wildlife urban interface zone that would see area near urban areas. Those policies require some very specific examination. We call underwriting, but you really want to look at how much defensible space is there. What is the chance that a fire is going to burn this house? When you do the math, and you figure the average insurance policy in California is about $4,000. And the average house has $500,000, which means you have to pay on that policy for 60 years before you've paid for the cost of that house. And so if you're an insurer, you can't have too many of those houses burned down, or you're going to go out of business pretty quick. Right. And that's just the fire portion. We're not talking about a liability loss or something else that might happen and cost some money. So the California marketplace, as everyone I'm sure that's paying attention realizes, is in crisis mode right now. So the surplus line carriers are really getting a lot of pressure put on them, both by market forces and by ironically, consumer groups to step in. I say that with a smile, because it's usually the consumer groups that like to have a jaundice eye toward the non-admitted market. And all of a sudden, they've come around asking for help. So can you-- Is your vehicle stopping like it should? Does it squeal or grind when you break? Don't miss out on summer break deals at O'Reilly Auto Parts. Oh, oh, oh, oh, O'Reilly Auto Parts. You'd speak a little bit about how the surplus lines industry in general and the carriers have stepped up when it comes to property insurance in California since this insurance shortage has begun. Yeah, absolutely. And that really is one of the key roles of the surplus lines industry is to step in when the admitted standard market pulls back. So we're not allowed to write business that the admitted market is willing. We're not allowed to place business, insure houses, buildings that the admitted market is willing to insure. We specifically have to go to the admitted market, three different carriers who write a certain type of business and ask them in writing and put it in an affidavit, a legal document that says, we swear we talked to three of these insurers and they said they wouldn't write this exact policy. Then we can write it. Then we can insure it. And so it's very specific, the law is very specific, and we're prohibited from writing it unless they don't want to. If they don't want to, we come in and we're able to insure it. Now, if we can't insure it, that's where the government part kicks in. But what you're seeing in the current marketplace is surplus lines is growing dramatically. Hundreds of percent over the last couple of years. Because of that pullback, as we've all seen in the news, all of these admitted insurers either pulling out of the state completely or stopping writing new business. And surplus lines is filled back gap largely. Now there's limits. They pulled back too much. We're really not a huge part of the market compared to the admitted market. So there's going to be capacity issues even with lots of private equity and lots of money is flowing to insurance. But the scope of the problem is so big that it still threatens to outstrip the capacity. Well, that's the thing, right? Is that there's still a finite amount of capacity out there, regardless of if they're admitted carriers or not. You mentioned something that I want to talk about right after our break, which is what has to be done before a consumer can actually purchase a policy from all of these affidavits and things. Let's talk about that as soon as we come right back. Benjamin, we'll be right back. [MUSIC PLAYING] Ladies and gentlemen, boys and girls, in just a few moments, the window to the magic podcast show will begin. My name is Patrick. My name is Calvin. I'm Mouse Gautier Gray. My name is Paul, and I will be your guide through the wonderful world of Disney sound experiences. This show is a weekly trip into the world of the Disney theme parks and resorts. And this is the place where you get to use your ears to surround yourself with the magic. For your safety, please remain seated while listening to the window to the magic.com podcast. Maybe there's a name for this, something like "Diznautic" a session. Surround me so we look happy. Please visit windowtothemagic.com for more information, or you can find us on Apple Podcasts and in the iHeart Media app. [MUSIC PLAYING] Hello, hello, and welcome back. I'm Carl Sussman, and this is Insurance Hour. Thank you so much for being here. We are talking about surplus lines insurance with Bandicae. And I want to just jump right back in. We have so much to cover. Right before the break, we were talking about some of the-- I guess you could call it red tape. Some of the processes that have to happen before a California consumer can actually buy from a non-admitted company. It's interesting, because I always think about buying cars. I can go buy whatever car I want. There's no stopping. There's no law that says you can't do this, you can't do that. There are no hoops I have to jump through. But interestingly enough, if you want to purchase insurance from a particular insurance company, there are steps you have to go through as a consumer. And as we're going to hear now, also steps that the insurer has to go through before the two of you can actually be paired together. Ben, you want to walk us through that process? Absolutely. Yeah, so if you can't-- let's use homeowners as the example. If you want to buy homeowners insurance, and your agent, your Carl Sussman, can't find an admitted carrier, say state farm all say to any of these carriers that are no longer riding in California, you then can go to the surplus-lines market. But only after you ask three of those carriers, admitted carriers, who write that type of business. So you can't go to a carrier that doesn't write homeowners and say, hey, well, you're at this homeowners policy. We know you only do auto. So say no, and then I can go to the surplus-lines marketplace. It has to be a carrier that writes that kind of insurance. Houses within the range of your house, 100,000 to 500,000, whatever it is. And you have to then fill out an SL-2 form, newly designed SL-2 form, which is a legal affidavit. And you have to put down the name of that carrier, the phone number, who you talk to, so that it can be verified that you actually did talk. Now, you as an individual aren't going to do this. Your agent's going to do this for you. Right, I was waiting for a break to be able to ask you the burning question. You're saying you have to go to three places. Consumers don't have to call three places. If they're dealing with an independent broker, this is something that they have to do sort of on the back end. Correct. Now, if you're not dealing with a broker, you could do-- you would have to do this yourself. But you're probably not doing that, I would guess. You also have to file-- the retail agent has to file a D1, which is this disclosure form that essentially make sure you know that this is a surplus-science policy, and then they have to maintain that in their records. So there's some paperwork, and then you have to go find the surplus-science carrier. And that can be challenging because they're not household names. People haven't heard of Lexington and Iron Shore and these carriers, because they're really known to surplus-science brokers who place business with them, because they're not allowed to advertise. So you're not hearing about it. That's an interesting one right there. I want to pause you on that. So you're saying that if a carrier is not admitted to do business in California, they can't place ads on television? That's right. That's why you'll never see a Lexington commercial in California. And so that's the other reason, a little bit tricky to find. And why you need your agent to go either direct or work with a surplus-science broker to find carriers who A, exist, and B will ensure your particular kind of risk. And it really gets complicated or funny and complicated. I think people will turn their brains off. So let me erase-- not complicated. It gets interesting because if you're an insurance carrier admitted in St. Nevada, Florida, Texas, somewhere else, you're considered a foreign insurer to a California insurance consumer. So you're foreign, even though you're still in the United States, we consider you foreign. You're foreign to California. If you're located outside of the United States, so you're in Japan, you're in Switzerland, then you're considered an alien. I'm laughing because you and I know these terms. And it's funny when you say them because they're so poorly-- Poorly chosen. --defined, right? Yes. Yeah. They're aliens. Yeah, they're aliens. And of course, in the modern political context, it's even worse to call them aliens. But when you go to your insured and you say, hey, I had to place your trust policy with an alien, they're going to look at you funny and say, I don't want my policy placed with an alien. I don't know how to get tomorrow to collect in that policy. But those are the terms that have been in place for years and years and decades, if not centuries. And so those are the terms that are used in the statute. So we use them again, just like we have to make sure even though surplus lines is better, we talk about not admitted because it's the term of our and it's in the statute. Would you say that it's fair to say that one of the reasons that we don't see-- we're not recognizing some of these non-admitted carriers is specifically because of regulation that prevents them from marketing. So we simply aren't exposed to them. Is that a fair statement? I think that's a very fair statement. And is it true that there are some companies, non-admitted companies, that are actually owned by or are subsidiaries of admitted companies or names that we might be familiar with? Absolutely, absolutely. In fact-- What's about that? Yeah, so basically, all of the carriers you know-- Liberty Mutual, travelers, nationwide-- they all have surplus lines carriers in their group. So it'll be the nationwide group. And they'll have admitted carriers, and they'll have surplus lines carriers in that group. And in fact, if you want to take a nice trip to London and you go to Lloyds of London, they call them boxes. They're just groups of desks where different insurance carriers, they call them syndicates there, different syndicates set up. And if you went there 100 years ago, you might see the Ben McKay syndicate, or the Carl Sussman syndicate. If you go there today, it's travelers. You see the travelers umbrella. You see the Liberty Mutual statue. It's all the ones that you see that you're paraged by on TV constantly, they're all the syndicates now. So yes, that's a really good point. It ends up with a few exceptions. It ends up being all of these behemoth insurance companies. That in some-- I'll give you an example-- progressive set up a surplus lines insurer to insurer Uber. It's a very unique type of risk. This transportation network company is what we call Uber in the statute. It's a very unique risk because you have the app and how much are they insured for when the app's on and then versus when someone's in the car, versus when they're cruising around looking for somebody. There's different insurance limits for each of those three stages. And so they had to set up a special purpose company to ensure that risk. And it's certainly been challenging. They weren't the first one to insure Uber. And it's interesting because, like you said, and I want to talk about this more right after the break, these are owned by companies that we do know. Let's talk about it a little bit more as soon as we come right back. Ben, stand by. Got it. [MUSIC PLAYING] Do you need homeowners insurance? Has your previous insurance company left the state? Non-renewed your policy? Or maybe they just raise your premium to an amount that you simply can't afford? Whatever the situation, we can help. Just dial #250 on your cell phone and say keyword insurance quote, and we will connect you with an agent who can assist you right away. Don't get caught unprepared. Ensure what matters. With an insurance company you can trust and with a premium that you can afford. Don't put off until tomorrow what you should have done yesterday. Simply dial #250 on your cell phone and say keyword insurance quote. [MUSIC PLAYING] Hello, hello, welcome back. This is Carl Sussman, and you are tuned into insurance hour. If you have any questions, feel free to reach out, of course, anytime, 559-656-0317, or you can send your questions to questions@insurancehour.com. Any immediate questions or concerns, you can dial #250 from any mobile phone, use the keyword insurance, and get connected to an agent that can help you right away. Today we have our special guest, Ben McKay, and he is helping us understand the surplus/non-admitted insurance marketplace. I have to get the wording just right, right? Yes. And before the break, we were talking about carriers that are non-admitted actually being owned by carriers that are and that we might recognize. Ben, you want to explain how that works and how that would potentially be an area that consumers should be aware of? Yeah, so it's really a corporate law. So you can have many legal entities under the same corporate umbrella. So if you're Liberty Mutual, it's not just one company. It's 10 companies, or 20 companies, if you're nationwide the same. If you're Berkshire Hathaway, your insurance company, you're a railroad, you're an investment company, you're GEICO, it doesn't even have to all be the same business. It could be completely diversified. And that's pretty typical in corporate America these days. And so you might be dealing with a surplus-igns insurer, but that surplus-igns insurer very well could be owned and probably is owned by an admitted carrier or more and more owned by private equity groups, which are all the rage in the last decade or so buying all kinds of businesses and recently getting into the insurance space. Let's talk a little bit about how we can subdivide certain carriers that are not admitted in California with the Leslie List. I get a lot of questions from people that say, do I know if this is a good company? Do they have enough money? Has anybody checked them out if they're not admitted in California? Can you explain the Leslie List, how it works? What type of background checking if you're comfortable saying that the Department of Insurance does? And what a general consumer should be able to take away from that? Absolutely, absolutely. So the last list is the list of approved surplus-igns insurers. So here we go, mixing terms again. Surplus-igns not not admitted. But so the list of approved surplus-igns insurers is a list that is owned by the department. But most of the research is done by us at the Surplus-igns Association. And carriers who want to be on the list, it's a voluntary list. They have to submit to us proof of financial stability proof of seasoning that their management team has been in the insurance business for a sufficient amount of time, usually at least three years, that they've done this kind of business that they're looking to write, whether it's homeowners or construction or whatever it is, that they have expertise in that. And they submit all of this documentation to us. We review it and we have a whole team of financial analysts that we'll look at, not only the management, but how their capital is kept. Is their capital-- so for instance, in California, you have to have $45 million in capital and surplus or the equivalent. And there's buckets. So $20 million has to be very, very safe. In other words, like, treasuries. There has to be-- you can't lose that money. And then the next 20 can be a little bit more-- a little bit less solid. It can be, for instance, like securities. But it has to be AAA rated versus credit default swaps or-- Just to reiterate, you're talking about how an insurance carrier is maintaining their reserves, the money they keep on hand. Correct. The money they have on hand now. And to compare that to an admitted carrier or a licensed carrier, they need about $1 million in paid in capital and about $2.6 million in surplus. And that's about it. Why the discrepancy? Because the department, the belief is that the public policy is that they're more heavily scrutinized by the department. So and that number goes up, by the way, as they write policies, that amount that they have to keep in reserve increases. So that what I'm talking about is just the table stakes, just to hang a shingle and say, we're Ben McCain, insurance company, licensed in California. The numbers are much less. So the public policy is they're more heavily scrutinized, so they don't need as much money, because they're watched constantly. There's market conduct examinations, et cetera. In reality, there was this crisis a few years ago, and this housing crisis. And there was legislation that came out of it called the Dodd-Frank Act in 2015. And in that legislation, there was a section that addressed surplus lines insurance. And essentially said that there's a minimum of surplus lines insurers can write in any state where they meet certain minimum requirements, which essentially are, they're admitted somewhere. So they're licensed in another jurisdiction. And they have $15 million in capital or surplus. But it also permitted-- so this is a federal law-- it permitted states to increase that minimum. And California chose to increase it from $15 to $45. I'm shocked at that. So that's really why it came out in the legal wranglings, what feels right at the time in 2015, what number, and then 2016 in California, what amount feels safe for consumers? And that's the number we landed on. They call it law and sausages. They're the two things you don't want to see made, because it's just so nauseating. This is an example. Sometimes there's not a ton of rhyme or reason. It's just kind of your best-- the policymakers' best effort. So it's fair for someone to say that if they're going to purchase insurance from a non-abidded company, that it's a reasonable ask to ask your broker if they're on the Leslie list. Or is that a list that they can just go and look up themselves online and check themselves? They can absolutely check it online. It's on the surplus lines, s-l-a-c-a-l dot com. It's on our website, just type L-a-s-l-i. And lastly list-- and it'll come up. It's also on the Department of Insurance, the CDI dot gov website. And you can see it there. Highly recommended. You don't have to be on the lastly list to ensure risks in California. But if you're not on the lastly list, there's no telling what your actual financial situation is. It could be fine. It could not be fine. An example that a regulator told me one time was there was a company that claimed to have $15 million worth of olive oil. And that was one of their assets. And they had one of those giant containers you see on the side of the road that you think are filled with gas. And an inspector actually went up and climbed up the stairs all the way around and opened the big hatch and stuck a stick in. And the stick went down about a thick engine. Dan, hold on to that thought. We've got to talk more about olive oil. I'm going to take a great break. Ladies and gentlemen, boys and girls, in just a few moments, the window to the magic podcast show will begin. My name is Patrick. My name is Calvin. I'm Mouse Katir Gray. My name is Paul, and I will be your guide through the wonderful world of Disney sound experiences. This show is a weekly trip into the world of the Disney theme parks and resorts. And this is the place where you get to use your ears to surround yourself with the magic. For your safety, please remain seated while listening to the window to the magic.com podcast. Maybe there's a name for this, something like "Diznautic" concession. [INTERPOSING VOICES] Please visit windowtothemagic.com for more information, or you can find us on Apple podcasts and in the iHeart Media app. Hello, hello, this is Carl Sussman, and you are tuned in to "insurance hour." Thank you so much for spending time with us today. We are learning all about non-admitted insurance companies, AKA surplus lines, insurance carriers, AKA-- all of a while ago. I think that's going to be a new one. Then the K is our special guest. Before the break, we were talking. And again, if you've missed any of this, be sure to go back online and find this. Just search for "insurance hour." You'll find it as a podcast. If you find on YouTube, you'll find everywhere. Ben was explaining how different insurance carriers maintain their money basically, their funds. And he was talking about it very interesting when Ben-- start that one over again. I want to hear it again. Well, so assets are assets, and they could be anything-- gold bars, or in one case, olive oil. And this company claimed to have $15 million worth of olive oil in this giant tank. And an inspector went out and climbed up the giant tank and opened the hatch and stuck a stick down. And the stick went six inches down. So they had a few thousand dollars worth of olive today. I don't know. Maybe it would be a million dollars worth of olive oil. But it certainly was in $15 million that they had claimed. And so companies that aren't reviewed, that aren't on the last list, aren't reviewed by us, reviewed by the Department of Insurance, you never really know. And when something bad happens like a giant wildfire that wipes the one in Paradise, for instance, that horrific event, an insurance carrier just folded immediately. As soon as that fire-- before the fire is even put out, they went out of business. They handed the keys to the building to the department. So you want to make sure that not only do you have insurance, but you have insurance with a carrier that's going to be able to pay that claim. Because that's ultimately what we're selling. We're selling a promise. And that promise is that we'll be able to pay that claim when the bad event happens so that you'll be made whole. And so if you go with an insurance carrier that's not financially secure, that promise may be broken. And so you're saying that this list is something that people should definitely check out. And relatively speaking, that is a level of oversight that's being done that might not be necessarily by the Department of Insurance, or includes them, or what's their involvement in that? Yeah, it's their list. They have final say on what carriers go on that list. So we review them. They review them. So it is absolutely a level of oversight. The list of approved surplus signs and jurors. Carriers want to be on it because it's essentially the good housekeeping seal of approval. It says that they've gone through the scrutiny. They've gone through the financial review crucible and they came out the other side successful. And they have the money. They say they're being watched. It's not just a one time deal. We review them on an ongoing basis. So it's certainly a level of certainty that an insured can have that their promise is going to be kept. Do you have to date us by using saying good housekeeping? That I-- Anyone that's going to get that reference, like you and I, all of a sudden I'm thinking, oh, my scientific. [LAUGHTER] Good housekeeping seal of approval, but maybe we'll call it the Better Business Bureau. That feels a little more current, right? I can edit that out. Yeah, we'll try and we'll just pretend we didn't hear that. So now that we've covered the general idea that a non-admitted carrier or surplus lines carrier, number one, might be a carrier that you know of in a different name. Number two, there is a way that you can even check on these carriers by the California Department of Insurance and others to be sure that they have the financial wherewithal to be taking on the risks that they do. Talk to us about the process, how it differs for a consumer. For consumers going to a broker and they're purchasing a policy, how does it differ from if they were to go to a broker and purchase a policy that went with, let's say, Mercury? Instead, they go to a broker and they're purchasing a policy that's going to be going through any number of surplus line companies. How is that going to differ? I know we touched on it with regard to the forms that have to be signed. Talk to us about the money and how payments are made and things of that nature. Yep. So ideally, for the consumer, it would feel the same. But that's ideally. You would go to your retail agent, your retail agent. We'd go to a surplus lines broker typically, but they could go straight to the carrier. There are certainly retail brokers that have surplus lines licenses who can go directly to a surplus lines carrier. But in order to access a surplus lines carrier, you have to have a surplus lines license. Or you have to be an individual constituent, which never happens, but effectively, I could go to London and buy a surplus lines policy from a London syndicate. But that doesn't typically happen. What happens is I go to my retail agent. My retail agent goes to a surplus lines broker or is a surplus lines broker. And they go to a surplus lines carrier. That's called, another term, exporting the policy. You're exporting it out of California to a surplus lines carrier. That exporting process has to be done by a surplus lines-- most surplus lines broker. And so that surplus-- and why? Because that surplus lines broker is the person who is responsible for the transaction. And by responsible, I mean legally responsible for the transaction. They're the person whose license is going to get revoked. They're the person who's going to get fined if the transaction goes bad. So if they place the policy with a company, that's not financially stable. If they place the wrong coverage, if they fail to place coverage after taking your money and promising to place coverage, they're the person who it's called a broker responsibility state, and the broker is responsible. So that person has to be licensed. And they're licensed by the state of California. So while the carrier is licensed by some other state or some other country, the broker is licensed here in California, and that gives California jurisdiction over that person. So they can haul money-- And are you referring to the retail broker or the surplus lines broker? They're both. Well, both, yeah. But I was referring to the surplus lines broker specifically. But yes, both are licensed here in California. And so the state has control jurisdiction over both of them, because you're within the borders of the state. So they can get you. And so the relationship that your broker has with their surplus broker, in essence, is significant. So that's something that maybe consumers would like to know as well when they're talking to their broker and they're getting a proposal, is to maybe ask them. I see this as a surplus policy. This is a non-abverted carrier. Have you been working with the brokerage that you're obtaining this from for a long time? What's your relationship like? Have you had positive experiences? Claims are different. Payments are different. And I want to talk about how they differ from an admitted market policy. And I know, like you said, ideally, it would be transparent to the client. But when we come back from the break, I want to go over briefly how it works with a non-admitted carrier, who pays who. And at the end of the day, if there's a claim, who are you going to contact? And who would you expect to have come out and handle those claims? If they're not domiciled, they're not licensed in California, is there some difference in how claims might be handled? So a little bit of preview of what we're going to talk about in our final segment coming up. Ben McKay with us today. And we'll be back with you in just a moment. Are you feeling lost in the search for the right insurance? Making call after call, only to find no one willing to go that extra mile for you? At Sussman Insurance Agency, we understand that frustration. And we're here to change your experience. Where other sea obstacles, we see opportunities, while many might shy away from jumping through hoops. At Sussman Insurance Agency, we are prepared to leap, looking under every rock, exploring every avenue. That's not just what we do. It's who we are. Our dedicated team doesn't just offer policies. We provide solutions, solutions born from persistence, expertise, and a genuine commitment to finding you the best coverage possible. We don't just meet expectations. We surpass them. If you're tired of hearing no, or it's not possible, it's time to turn to a team that believes in yes, and let's make it happen. Don't settle for less. Reach out to Sussman Insurance Agency at 877-411-5200. Visit us online at sussmaninsurance.com or email sales@sussmaninsurance.com. Let's uncover the insurance solutions you deserve. Sussman Insurance Agency, going the extra mile every time. Hello, hello, Carl Sussman, and you are tuned in to Insurance Hour. If you missed any part of this show, there's a ton of important information here. Make sure you go online, search for Insurance Hour, grab it as a podcast, grab it on YouTube, find it somewhere, because there is information here that you definitely want to have. Then in our final segment, I want to make sure that we hit on everything, and it's hard to combine so much information. There's such a short time. I appreciate you trying. One of the things that we do get asked with some frequency is, when you go to your broker and you ask and you're looking to get an insurance policy and they go to, say, a surplus lines broker, what does that surplus line broker do? Do they just immediately go to one insurance company for a quote or do they check with multiple carriers or what's the general process? Yeah, they are required to go to multiple markets because they want to get you the best coverage for the best price, and so you should ask them or your agent should ask them, what markets do you go to? What did the market say? Obviously, that doesn't always happen, but certainly within your right, you're also gonna want to know, besides just the relationship, what's in that relationship? How much is the surplus lines broker getting paid? How much is the retail agent getting paid? Is it a percent? Are there fees? All of those, particularly on a personal lines policy, they need to be disclosed. And the rules are a little bit different for commercial lines 'cause they assume you have lawyers and risk managers and people like that who are gonna scrutinize, but for individuals, you do have to have some agency of your own agency and ask these questions yourself. Totally appropriate, if you have a good agent which you probably do, they're gonna show you anyway, but it's appropriate to ask and it's appropriate to know what is the financial relationship between the retail agent and the surplus lines broker. Okay, two other quick points I wanna be sure we get in. Typically, if you buy a policy from an admitted carrier or maybe even a direct to consumer carrier, you're going to pay your premium to the insurance company. If there's a claim, the insurance company's going to send out one of their employees to deal with the claim. How would that differ potentially if you're purchasing a policy from your broker with a non-admitted carrier? Yeah, and that's something that varies. Some surplus lines brokers do claims, meaning that they'll come out and adjust the claim. Some don't, some carriers will allow it, some carriers will not allow it. Typically, you're gonna get an independent claims adjuster at that point who's gonna come out and do an assessment of the damage. If they work for the carrier, they may not even be licensed in the state. If they're an independent claims adjuster, they will be. So that's really the distinction you're gonna wanna know the difference. You wanna wanna ask them what their status is with the state. It doesn't necessarily mean one's bad, but you certainly wanna know what your recourse is. If somebody's licensed with the state, you can go after their license. If they're not licensed with the state, you can't go after the license. Now you gotta go to court and sue them and that sort of thing. And then if they don't live in the state, you have to try and sue them in another state, which gets tricky as well. So just as a legal matter, you wanna make sure you understand that. And that's part of that relationship you wanna understand between your retail agent and your circle signs broker. Does that broker handle claims? That's something you're gonna wanna know. - That's a big one. And what about premium payments? Where does the consumer pay the premium that's going to be going at some point reaching the surplus lines carrier? - Yeah, so there is a big debate over whether carriers can direct bill and or whether it has to go through the retail agent. And the issue is this, once the retail agent receives payment from this, from the insured, that policy is deemed to be placed. So even if the retail agent doesn't ever give them the carrier the money, the carrier still has to pay the claim. - Wow. - So carriers are really anxious about not getting paid directly. So they would prefer to get paid directly so they know they have the premium because they're on the claim as soon as the retail agent gets paid. So from a consumer standpoint, the good news is once you pay the agent or the carrier, you're covered. So you're gonna get your claim paid, but it can vary between those two. But typically it goes to the retail agent, retail agent to the surplus lines or to the carrier carrier then rebate. We'll not rebate, but then gives the percentage to the surplus lines broker that they're owed. And those numbers vary significantly. And that's, you know, and that can affect your price as well. You know, it's the surplus lines where the more people you put into this-- - Everybody wants to make a buck. - Everybody wants to make a buck, yep. - I got you. Well, you know, in the last couple of minutes, what I want to talk a little bit about is, obviously with the crisis in California and unfolding all over the country, frankly, there's been an increase in business that's going to the excess surplus line, not admitted, throw in your new version of it, olive oil, that's gonna be my new one, carrier. And what do you see happening as California starts to update their regulations and potentially some of the more admitted, I call them the name brand, carriers, that are admitted in California, start to start begin writing business again. How do you see the long-term impact of that when that starts to occur? - Yeah, so, I mean, as prices go up, more people will get come back in, more named brands will come back into the market as they, you know, the governor just came out last week and said for every dollar that insurance carriers, admitted carriers are receiving in premium, they're paying out a dollar 14, right? So they're 14% under water and on every policy, and that's just not sustainable, which is why they're cutting back. So I think what happens is a couple of things. Number one, California's getting serious about managing the forest, right? That's really been one of the driving forces and rate increases is the fact that there's been so many losses. You know, if you have a concentration of risk, you have a hundred houses and a 200 house community and they all burn, right? You know, you're in trouble as an insurer. You need one house here, one house over here, another house, you know, over in New Jersey house because they're unlikely to be affected by the same event. But if you're very focused, you know, your concentration is great in an area, that's problematic. So as we take care of the forest, which one of the one piece of evidence that we're taking care of them is we're doing controlled burns again. And so many years ago, I think in the '70s, we decided we're gonna have to forest take care of themselves and that didn't work so well. And skip ahead, you know, to all the wildfires we've had in the last 10 years. And finally, we said, okay, that didn't work. Now we're gonna do controlled burns. I actually got a phone call from one of the environmental groups and they said, hey, the state decided you're gonna do controlled burns again. But we, I said, great, we need it. And they said, but we have one problem. I said, what's that? Well, the companies that do the controlled burns can't get insurance. - Oh. - Ben, I wanna talk more with you about it, but we're out of time today. Will you come back and chat with us some more another time? - I'd love to. - Absolutely, thanks. - Thank you. - Everybody, Ben DeKay, thank you so much for spending time with us today. - My pleasure. Thank you. - I do wanna thank all of you for taking the time to listen today. I know insurance is not necessarily the most sexy concept. It's not the most exciting thing in the world. It is important that you understand what it is you're getting, what you should be looking for, red flags, you name it. You just need to know more than you're used to. Things are more complicated than they used to be. If you have any questions, please reach out to me directly. You can email your questions to questions@insuranceour.com or call and leave a voicemail at 559-656-0317. Educating and entertaining Californians, one insurance policy at a time, this is insurance hour. The show is dedicated to Shamrock-Papa. - E-digits, lock 'em in for more information, recreation, and guaranteed fun. KCAA 1050 AM. - For over 75 years, the Marine Toys for Tots program has provided toys and emotional support to economically disadvantaged children, primarily during the holidays. But needs are not just seasonal, and now neither is Toys for Tots. They've expanded their outreach to support families in need all year long, with their new programs, including the Foster Care Initiative, the Native American program, and the Youth Ambassador program. To learn how you can help, visit toysfortots.org. KCAA Loma Linda, your CNBC news station for the Inland Empire. - NBC News on KCAA Loma Linda, sponsored by Teamsters Local 1932, protecting the future of working families, Teamsters1932.org. - NBC News Radio, I'm Brian Shook. A new poll released on the eve of the first presidential debate says former President Donald Trump has taken the lead over President Biden nationally. Jonathan O'Halloran reports. - With all eyes on the first debate, a new Quinnipiac poll says 73% of voters will likely watch the debate, and 16% say each candidate's performance in that debate could lead to them changing their vote. The poll also finds former President Trump now leads President Biden 49 to 45% head-to-head, that after Trump trailed by 1% back on May 22nd. In a six-way race that includes RFK Jr., the poll finds Trump's lead increases to six percentage points, beating Biden 43 to 37%. - The Northeast is feeling hot and humid conditions after getting a short break from scorching temperatures earlier in the week. The conditions could bring severe thunderstorms tonight to New York, New Jersey, and Delaware. Baltimore, New York City, Philadelphia, and Washington, D.C., could all see damaging storms as well. Congressman Dan Crenshaw of Texas says the constitutional system of checks and balances is being ignored by this administration. - Congress and the American people have been disrespected, so we are here to say no more. - House Republicans want to hold Attorney General Merrick Garland in contempt for failing to turn over records to Congress. They want to get their hands on the tapes of special counsel Robert Herr's interview with the president over the handling of classified documents. The Justice Department has released a written transcript, but has declined the Republicans' request for the audio. Four teenagers are being charged after a freeway chase and police shooting in Wisconsin. On Tuesday, Milwaukee County prosecutors named two 18-year-old girls and two 17-year-old boys with a 20-count criminal complaint. You're listening to the latest from NBC News Radio. - Located in the heart of San Bernardino, California, the Teamsters Local 1932 Training Center is designed to train workers for high demand, good paying jobs, and various industries throughout the Inland Empire. If you want a pathway to a high paying job and the respect that comes with a union contract, visit1932trainingcenter.org to enroll today. That's1932trainingcenter.org. - I'm Jake Yates, here's the latest news and weather on KCAA. Voters in Temecula have outed school board president Joseph Kamrowski by a narrow margin. A final tabulation announced Thursday, June 20th found that Kamrowski lost the June 4th recall election by 209 votes. Anthony Vega has been sworn in as Colton's 30-second police chief since the city's incorporation. Vega shifts over from the Rialto PD where he served for over five years. He started his law enforcement career in 1997 with the San Bernardino County Sheriff's Department. Area codes may be a new status symbol from a growing population and an increase in new businesses to an iconic reputation. There are several reasons why an area code could be sought after and Americans are purchasing specific ones. These six area codes are the most sought after area codes in the country. San Bernardino at the top of the list, 909 area code ranks number four, Pasadena's 626 area code is the fifth most sought after, Irvine's 949 area code ranks number six, Los Angeles 2-1-3 and 3-2-3 area codes are the 10th and 15th most sought after. More in news of Riverside County Sheriff's deputy has been arrested on suspicion of sexually assaulting a female volunteer in the department. A one-day investigation led to the rest of Deputy Alexander Vani, the law enforcement officer is an eight-year employee and was assigned to the Hemmett station. Now taking a look at the inland empire weather, continued mostly sunny through Friday with little temperature change, highs in the 90s, overnight lows in the mid-60s, patchy early mornings, fog returning Friday, mountains, highs from the 70s into the 90s, deserts continued sunny and hot highs from the upper 90s to the 112, beaches highs around 73 surf, two and four feet, water 61 to 70, a pattern of sunshine and warm weather is here for an extended stay. And that's the latest, you're up to date with Jake Yates on KCAA 1050 AM and 106.5 FM, the stations that leave no listener behind. E-digits, lock 'em in for more information, recreation and guaranteed fun. KCAA 1050 AM. (air whooshing) (upbeat music) ♪ Control chaos ♪ (upbeat music) (upbeat music)