Ep 92: HOA Insurance Tips for 2025

Kevin Davis 0:00
If you are a good account, you have a little bit more power than anybody else out there, because insurance people know that I got the right rate right now. I know I’m making five cents on every dollar, so my rate is the correct rate. So I want to write the good stuff so I can make that five cents. I don’t write the bad stuff. Got their stuff going to go from five losing, making five cents and losing five cents. Okay? HOA

Announcer 0:27
Insights is brought to you by five companies that care about board members, association, insights and marketplace Association, reserves, community, financials, Hoa invest and Kevin Davis, Insurance Services. You’ll find links to their websites and social media in the show notes,

Robert Nordlund 0:42
Hi. I’m Robert Nordlund of association reserves, and I’m

Kevin Davis 0:45
Kevin Davis of Kevin Davis Insurance Services. And this is HOA Insights, where we promote common sense

Robert Nordlund 0:51
for common areas. Welcome to episode number 92 where we’re again speaking with insurance expert and regular co host Kevin Davis, and in warming up for this meeting, I’m reminded he puts a smile on my face, and we’re going to talk today about what to expect in 2025 with respect to insurance, a little bit of a sobering conversation, but an amazingly informative conversation. We want your association to thrive. So we want you to be well informed about what insurance issues and costs you’re likely to face at your association in 2025 we don’t want anyone in our podcast audience to be surprised by what’s going on out there. Well, this is a follow up to episode number 91 none of another one of our popular board hero episodes. It was a fun one told by a board member who had a drug house in their nice suburban community that caused enough trouble in the neighborhood that it led to a bomb scare. And I’ll leave you with that. It’s a heck of a story. If you missed that episode or any other prior episodes, take a moment after today’s program to listen from our podcast website, Hoa insights.org, or watch on our YouTube channel, better yet, subscribe from any of the major podcast platforms so you don’t miss any future episodes. Those of you watching on YouTube TV can see, if I hold it up, my HOA insights mug with a cartoon on it. It’s my favorite. I got that from our merch store, which you can browse through from our HOA insights.org, website, or the link in our show notes, you’ll find we have some great free stuff, like the mug I showed board member, Zoom backgrounds and so go to the merch store, download a free zoom background for yourself. Find the mug you’d like, and if you’re the 10th person to email me at podcast@reservesday.com with your name, shipping address, mug choice, and mentioning episode 92 mug giveaway. I’ll ship that mug to you free of charge. We enjoy hearing from you responding to the issues you’re facing at your association. So if you have a hot topic, a crazy story, or a question you’d like us to address, you can contact us at 805-203-3130, or email us at podcast at reserve study.com some of those questions led to today’s topic, what to expect in 2025 with respect to insurance? Insurance was a big deal these last two years, so fortunately, we have the right guy here to help answer that question. So Kevin, tell us more about what 2025 is going to bring with respect to insurance.

Kevin Davis 3:31
Okay, let me put, let’s talk a disclaimer and that. Okay, every account should be viewed on his own merits. Okay, so whatever we talk about for the next 30 minutes, very account should be viewed on his own merits that way. I’m gonna speak in general terms. So we don’t a lot of phone calls say, Kevin, you said X, Y, Z, very account should be viewed on his own merits promised exactly however, this is the interesting thing. If you think about since COVID coming out of COVID, the insurance companies looked at the numbers and realize that for every dollar they took in, they were paying out $1.05

Robert Nordlund 4:05
$1.08 $1.06 you can’t stay in business. Six cents for every dollar, yeah, can’t stay in business doing that.

Kevin Davis 4:11
And that’s what they looked at. They looked at it because of all you know, catastrophes that’s going on out there. They look at the inflation that was happening out there, so many different things happening out there that they just didn’t they weren’t making money, so now all of a sudden, a perfect example that is that love is Farmers Insurance. Farmers Insurance went from 106 to 105 and then went to 103 so last year, they finished at 103 okay, for every dollar, yeah, explain that. So for every dollar they took in, they paid $1.03 Okay, so they operate in the negative. And again, most insurance operate in the negative over the past couple of years. American family, who writes a lot of community associations, they went 114 Okay, and 110 so after they realized those numbers, two things. Happened, they either a pulled out of the market like farmers did, and the American family this time, we don’t write any more condominiums, even though they have commercials. You see the commercial all the time without the community association in the marketplace. So they left, and then you had the other ones say, Okay, we’re going to stay in it, but we’re going to raise the rate significantly. We’re going to increase deductibles, you know, up high, and we’re going to lower the

Robert Nordlund 5:22
threshold, lower coverage. Okay, I’m going to slow you down there. Raise rates. Okay, increase raise rates.

Kevin Davis 5:26
Increase deductibles and limit coverage. Okay?

Robert Nordlund 5:33
If I was losing money, I would do what I needed to do. And so the simple thing is, yes, raise your rates. If I’m at 105 I’m paying more than I’m bringing in. That’s clearly not sustainable. You can’t stay in business doing that, so you got to raise your rates at least 5% to get break even, or you can limit how much you’re paying out, which is increasing the deductibles, or carve out a little tighter what you are and aren’t insuring. Is that

Kevin Davis 6:03
perfect? Okay, perfect. Okay. And as a Plan B, say I can’t write this coverage anymore. You know? I can’t. It’s too costly for me, and I’ll never get the amount of rate that I need. So I’m out of this business. So that’s what’s happened on the past couple of

Robert Nordlund 6:19
years. Just throw in the towel and say, I’m out. Yep, I’m out. Okay, I’m done.

Kevin Davis 6:23
So that’s why you look at over the past couple of years, the demand was greater than the supply,

Robert Nordlund 6:32
because the supply had stepped out of

Kevin Davis 6:35
the room, yep, okay, yes. So now, all of a sudden, the unlimited supply, and so that supply saying, Okay, I’ll be in this business, but it’s gonna cost you. It’s all you add or you’re gonna participate in the loss. That means a $25,000 deductable, if you have water damage, if that, if that, you know, water overheats or the water spills over, you’re gonna participate in that loss. So now all of a sudden, insurance company is saying, we can’t afford it. You got a great deal. And we making changes in changes right now. So the past couple of years, the rates have been lined up a lot, and people understand it. And feeling you probably felt yourself in your auto insurance, yes. So now you look at numbers in 2025 and I love doing these talks, because I have to do research myself. And I looked up Farmers Insurance. Because Farmers Insurance is big in California, they went from a 106 Okay, to 105 to 103 from 2021 2022 and 2023, 2024 they expect to be at 95 cents. So that means for every dollar they take in, they only spend 95

Robert Nordlund 7:41
cents. You know? I like that. I feel like that’s what you want as a business. You want to make a profit, a sustainable profit, but not as a consumer. I don’t want them to make a killing on me, but I want them to stay in business and

Kevin Davis 7:55
95 cents, 95 so five cents on the dollar is pretty acceptable right now. Most of them are at 98 eight cents on a dollar. And again, it varies all across the board, but 98 cents so this year has been somewhat profitable. One reason why it’s been profitable because the losses out there, the severe losses from the wind and the hurricanes and their flyers everything, have not been as great as they have been in the past. Okay, explain that to me. Okay, so in the past. So let’s say that we have 24 weather related climate disasters this year in 2024 Okay, 24 of them. Okay. Now, historically, you may have more, okay, but they didn’t cost as much. So you average about a billion dollars per storm. So that’s about, you know, $24 billion this year. But last year we spent more than 24 billion,

Robert Nordlund 8:53
Kevin, just, just you throwing out words like billions I got me rubbing my forehead. Just Yes,

Kevin Davis 9:01
yes, big deals, okay, and that, but it is, and that’s the issue there. And for a for example, we had two major hurricanes in the past several months. We had Milton in Florida and Helene doing up the coast. Now, what happened now when we did a podcast at the podcast of Robin new again, a couple of months ago, and we were worried because those two storms came in, and we expected more storms to come in after that, because that hurricane season was still in effect then. But guess what? Milton wasn’t as bad as we thought it would be, because it missed major areas until lean damage didn’t damage the property that caused insurance, a lot of money. So

Robert Nordlund 9:42
it was more. It wasn’t major metropolitan areas, densely populated, a lot of structures. It was more what I heard flooding in Asheville, kind of sparsely populated outlying areas.

Kevin Davis 9:58
Yes, and flooding is. Covered by the federal government, not by your regular insurance companies. Interesting. So the federal government took a big loss on that one, not insurance companies, interesting.

Robert Nordlund 10:11
So the type of catastrophe and earlier you were thrown around, you’re speaking so fast, I’d just slow you down. You’re talking about cat this and like so you live in the world of cats catastrophes, yes, yes, yes, and, and,

Kevin Davis 10:26
and what’s interesting about cat losses this year, because they were lower that the insurance companies still made money. Okay, good, though. It wasn’t significantly lower. It wasn’t like, you know, they it was this, they still lost, you know, $24 billion they still the loss amount was in the billions, and still counting. Okay, the year is not over yet. Okay, even though this will be 2025 when they see this presentation, we have a couple days left before the year. So what we’re doing, what we’re seeing now, is because of the year, because of lack of cat losses, okay? Now all of a sudden, inflation has lowered and everything so the cost to repair and replace the items, okay, has flattened out. All of a sudden. In 2024 the insurance providers in the commercial insurance, the insurance that we’re in has made some money. No, let’s say they haven’t lost money. Okay? Because, from the way insurance works, is that they right now look on paper, that 5% is meaningful, but they’re still paying claims for night from from this year, so still claim from Milton Elaine, they’re still paying those clients at the end of the year. It may go up a little bit, but still, for the first time, they have not, they will not, they should not lose money.

Robert Nordlund 11:48
Good. Okay, so we’re not you and I just talking to each other here. We’re not really expecting that they’re going to try to recoup all that money they lost in the last few years. They just want to get back to stability, making a sustainable profitability. Exactly

Kevin Davis 12:06
Okay, exactly. It’s not a matter. Because as far as they’re concerned, if every dollar they put out, they they for every dollar they take in, they lose 95 cents. They’re okay with that, including a cat losses, you know? So they look at all the loss that they’ve seen all the hurricanes, and say, well, guess what? We made five that means our rates are correct rates. You know, where our rates are, where they should be. If we’re making 5% with all the things happening out there right now, we feel good about what we’re doing in an insurance industry. As

Robert Nordlund 12:39
a consumer, I’m starting to feel good that. Can I say the worst is over?

Kevin Davis 12:46
Can you say the worst is over? I would say, we don’t. I can’t we can feel comfortable with the coming year. Okay, okay, let’s put it that way. Okay, go get it now. What does that mean? Be feeling comfortable with the mean suggests is that now I love to call this this what we’re talking about, The Good, the Bad and the Ugly. Okay, okay, okay. I called the good the bad and the ugly is most reason. So if you’re looking at insurance companies saying, guess what, we’re making 95 cents at every dollar. I mean, we’re paying 95 cents on every dollar. We’re making five cents. That means we want to write more business now, okay, we’re ready, because we know our rates at what they should be, to make 95 cents. Now, there could be some disasters out. There could be something happening. But guess what? There were disasters last year. We still made money, so we believe that we had the right price. So now what’s going to happen? It was should happen is now on the good accounts. Okay,

Robert Nordlund 13:42
accounts that that’s your asterisk,

Kevin Davis 13:45
yes, the good accounts. And this is the most you know. This is the point that we’re going to make today. Right now, if you are a good account, you have a little bit more power than anybody else out there, because insurance people know that I got the right rate right now, I know I’m making five cents on every dollar, so my rate is the correct rate. So I want to write the good stuff at, so I can make that five cents. I don’t write the bad stuff. That bad stuff’s going to go from five losing making five cents and losing five cents. Okay? So that’s what’s happening right now. All the insurance companies are out there saying, Okay, we got the perfect rate, so we want to, we want to use that rate to track all the good accounts out there. So that’s number one. So right now, if you are a good account, okay, you have leverage. You

Robert Nordlund 14:36
know, I’m going to follow up on that, but I got to tell you, my brain is spinning right now, okay, we did a reserve day. 100 unit, planned development. 100 unit, Hoa, no big deal. Should be easy peasy. Asphalt entry, monument sign, no clubhouse, no tennis courts or nothing. We bid it nice and low. Should be a smooth, easy reserve study. We go there. We find out that the board member had misrepresented. He was new, no real fault of his own. But in this Hoa, the association was responsible to maintain the exteriors of all the residences. And not only that, but the homes were all slightly different, and they were built over five years. And so basically, we had to inspect 100 homes, and not just the asphalt and the entry monument sign. And so what did we do? We finished the reserve study. We said, thank you very much, and we put a note in the file raise their rate 50% for next year. Yeah. And you know that what you’re talking about is the normal business reaction to getting slammed on an account. Yeah, and

Kevin Davis 15:49
you said something really great, because, as a reserve study specialist, there’s certain accounts you want to go after, the ones that more profitable for you then the less copied. Or it depends on what you are you might want to do the complicated ones. You may want to do the easy one, but you know what you want to do? And from insurance point of view right now, everybody’s saying, I want to write, give me the good accounts. You know, we can do a better job on the good accounts. Now, that doesn’t mean you’re going to have people fighting over it, yet fighting them, because again, five cents on the dollar can easily go to losing five cents on the dollar pretty quickly. All it takes is, is something, you know, a cat catastrophe happening out there. So it’s not going to go crazy, but the good accounts are so let’s talk about what

Robert Nordlund 16:33
a good account. Okay, we’ll get to that. Okay, see. What are we gonna do? We’re gonna take a quick break for a message, but I want to talk about what’s it take to be a good account. And you also talked about the catastrophes, but you mentioned a couple of Floridian type catastrophes. I want to get you talking about hail storms, wind storms, wildfires, a lot of other things. It’s not just damning, lots of stuff. Okay, so Hey everyone, it’s now time to take a quick break and hear from one of our generous sponsors, after which we’ll be back with more common sense for common areas

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Robert Nordlund 17:49
And we’re back. So Kevin, we left, and I am aching to hear, how does an association know if they’re a good account, or how they become a good account

Kevin Davis 18:01
if you’re under 30 years of age, if your association less than 30 years okay, that automatically, automatic puts you in that position to be a good account. So, number one, less than 30 years old. Number two, you have to be a well managed, maintained Association. That’s where you come along with that reserve study, that reserve study, is there, they paid attention to it. They have budgets. They have maintenance. That’s number two and number three, no law, no losses or no significant losses. You could have a few losses, but nothing significant. So that is an account that you were looking at, that every Association, every Association you have that every insurance person out there right now wants that account. They want to write that account. Okay,

Robert Nordlund 18:45
couple of questions. You talked about under 30 years. The flashing light in my brain is Champlain tower South was 40 years old. So is this driven by Champlain tower south? Or is it just common knowledge in the insurance

Kevin Davis 18:59
industry? Okay? Yeah, and comment, because after 30 years, I began you as a as a reserve specialist. You know, you everything, you know starts to break down. You know, electrical, plumbing, you know, you know everything, yeah,

Robert Nordlund 19:11
there’s more. There’s more that is old and inclined to fail. Okay, you can’t do anything about the age, but you can do something about how well you maintain the place. So is it in good condition? Mother Nature, Father Time, are undefeated, but you can put up a good fight. You can maintain the place and minimal losses. Is that related to maintaining the place? Well, I

Kevin Davis 19:35
would say the number one thing related to loss is maintenance of the association. Okay, let’s say that you have washing machine that have old rubber hoses in there. What happens to those rubber hoses? They break, and all of a sudden you flood, especially and then you have a significant loss in there. You know, you know whatever it is, and you associate the components. And again, you understand the components there, whenever you don’t maintain them correctly. What happens. Is you end up having a potential loss. And you know from the roof, no matter what it is, you have a potential loss in there for lack of maintenance, if you under 30 years, okay, then those are kind of counts that you have to be more aware that you have that control. Okay. That means when you’re talking to your insurance agent, make sure he understands that you are a well maintained associate. Press that button you have your button. Yeah, your research press that button, yes, yes, yes. Call to your insurance agent, let them know that. Wait a minute. You know, are we going to get a discount issue now? Do I think? Do I think we had a point in time for discounts gonna happen? No, I don’t think so. Because at five cents on the dollar, you can easily go to five cents the other way, and you still have inflationary issues that they’re concerned about. The repair in place still cost a little bit more than they cost in the past. So I don’t think so. But if you get an increase, they may say this, and you’ll give you a three to 5% inflationary increase. Okay, so on that, on that. So I would say it goes to that, but I would say talk to your insurance agent about getting a discount. You never know. You never know, because that’s the kind of business that every insurance company wants. Looks like

Robert Nordlund 21:12
that. Okay, so you talked about maintenance, and I’m going to push you into maybe a corner here, but you talked about washing machine hoses inside even inside a condo, we’re not even talking a HOA or planned development, inside a condo that’s private space, yes, but you’re talking about washing machine hoses that clearly water doesn’t care about boundaries. If you get a break in a hose, it’s going to create a mess. It will go through common area to get to the next home. So we’re encouraging board members to be proactive. Here is that what I hear?

Kevin Davis 21:48
I tell you, great point. Water heaters are the biggest problem. Okay, okay, those water heaters, you know, people don’t maintain until the way they should maintain them. Okay? They leak. They cause problems. People are out of town, they’re home, and again, you do have a problem because you can’t You’re not allowed to enter somebody’s unit, everything like that, but you have to, as boards, let to save money on your insurance. Maintenance is the key. And let them know that things like water hoses and water heaters and those things are the ones that cause you problems over, you know, overflowing anything. Most of your problems you have near Community Association is water damage. Water damage, and that’s why the deductible is so high right now. Or water damage claims you’re seeing, you know, 25 light, hot, high deductibles. So if you’re looking at your components, you want to make sure your components are up to date. And even though your reserve study may say it may last five years, look at it and see, will this last five years? You know, maybe we maybe need replace these hoses now. Maybe replace the water heater now. Maybe need to do certain things that we haven’t done in the past, because at the end of the day, deferred maintenance is the reason why you know your association is paying a lot more money for insurance than anybody else you know, the ones that automatically is in that category of your rates going to continue to go up higher and higher and higher is ones that have deferred maintenance issues. That’s the problems.

Robert Nordlund 23:14
Yeah, Kevin, you got my brain spinning again. We had a client, and we dealt with this nuance that one of the foundations in in my business is there’s a three part test for what should be included in a reserve study. And it starts with it needs to be a common area maintenance responsibility. This board of directors, it was a high rise. Wanted us to include washing machine hoses in the reserve, say, because they wanted to proactively replace them. And the project manager came to me and said, Robert, we can’t do that because it’s not common area. I said, again, when water leaks, it goes through common area. So they are protecting common area by replacing the washing machine hoses. And I can see that same issue for like you say, water heaters and other things, that there is a real reason to be proactive. And that’s that combination between maintain the property and minimizing your losses. If you see a loss about to happen, if you see the hose spigot out by the pool, where the pool service company sprays off the pool deck or something like that, and it’s leaking. It’s always been leaking. Or the pool gate never quite closes, quite right? You fix those things. Fix those things, do what you can. I have a feeling those are those leverage points that are going to push your association from the average who cares about it into the and your word were good account, or preferred account? Yes, yeah, nice. It’s

Kevin Davis 24:48
such a important thing what you’re saying, because just the self closing gate is a shit out on the pool. You know how often you see that one’s not shut all the way shut. This a little bit you. And that’s what causes your liability claims. You know, all of a sudden you have a kid that drowned, that didn’t belong in the area, and all of a sudden, association upset because somebody suck in, yeah, and you say that well, but your self closing gate is not self closing. So all of a sudden, now, of a sudden, you have a huge, multi million dollar lawsuit. Because all you if it was self closing and it closed, he said we did everything we could do to control the loss we had, but if you didn’t do it, now of a sudden, the loss is greater. And then again, that’s another part of some of these accounts where the rates not going to go down, but you still have situations out there where the payment amounts on these liability claims are still pretty high. Yeah,

Robert Nordlund 25:38
if you have a waterfront Association, whether it’s a lake with a dock or oceanfront, that there’s still a liability possibility there. Okay, walk me through some other things. We talked about wind, hurricane and flood type things in Florida and the Southeast. How is that different? If you go to situations like ice storms, snow load, hail storms, and even fire exposure, wildfire exposure, is it? Same things apply,

Kevin Davis 26:13
all right? This is interesting, because you what they do is put higher deductibles. Okay? One thing like ice damning claims. Okay, hail, wind. And they also put a higher doctor or they put a percentage deduct upon them also, okay, meaning you you’ll participate in that loss by about two or 3% okay, so what the insurance company has done over the past couple of years, again, they have not made changes in how they’re going to handle the claim they’re saying. We recognize that community associations will have losses, and we know where the losses are coming from. So we’re going to do is have you participate in those losses as much as possible. If there’s a fire, there’s other avenues out here that handle the fire. We’re not going to use our insurance to pick up this fire. If you have ice dampening, if you have hail, what we’re going to do is say we’re going to give you a another product, another possible, another product, to cover that up. But as you asked me to pick it up, it’s like your earthquake policy. You have an earthquake policy. A lot of that earthquake policies in California is a percentage deductible, so I have $100,000 claim. And if it’s a 5% deductible, it’s a $5,000 percentage. So I’m participating in the claim. Okay? So basically, what’s happening right now is the insurance companies, even though they recognize that they’re making five cents on the dollar, they know they can lose five cents on the dollar, and so they are saying, you’re going to participate in these losses and help us out, because if you do that, the likelihood of a loss will be slightly diminished, and you will think long and hard before you submit the claim or not, because you may have that water damage claim from the from the washing machine hoses, and you go, Wait a minute. If we submit that claim, our insurance rates going to go up. I don’t want that, so I will pay for it ourselves. We will take care of that ourselves, and then we will build back the unit owner that caused the problems. So it’s really tricky right now of insurance, because yes, they’re making money. They’re doing things a little smarter, but they’re not changing the way the coverage is okay.

Robert Nordlund 28:17
Now I hear you with a couple of things. One is that you’re talking about the difference between losing five cents on $1 per year and getting back to a healthy place, which is maybe making five cents on the dollar per year. And one of the ways is playing with a deductible, which can shift it a couple of cents right there, and that helps the insurance company feel a little bit closer to where they’re getting to a stable point they can trim off from losing five cents to at least losing only three cents if they are potentially shifting that. What about if you have a, I’m thinking, from fourth floor to third floor, you have water damage between two things, and maybe you get to a decision point, it’s going to cost 20 grand to fix that water damage. Do we do it internally and spend the 20 grand, or do we notify the insurance company and they raise our rates by 50 grand per year? Exactly?

Unknown Speaker 29:13
Okay, that’s

Robert Nordlund 29:14
it. Yeah, interesting.

Kevin Davis 29:16
That’s the worry right now, the worry for me again, association knows that that’s where you talk to your insurance agent, insurance producer, your broker, and say, Listen, this where we at right now? What happens right now? Because there will come a point in time where, when they start making 10 cents on $1 or 12 cents on the dollar, where now the sudden, two things that deductibles, the deductibles will go back to being reasonable. Okay, okay, the coverage will come back. Okay, then premiums will drop. Because it’s all a matter of, Am I getting enough money to pay the claims? And that’s everything boils down to that. So if inflation is no longer a problem anymore, and we think we’re making enough money for the cap losses out there, and guess what we feel comfortable with the amount of. Money, but charging to the point where, you know what this open that door up a little bit and say, okay, yes, a 30 year building I don’t like. A 35 year building I don’t like, but maybe I’ll change it from, you know, make it 32 years. Yeah, okay. And then what happens? Okay, 35 years, and then anything before, you know. And that’s what happens, and that’s what happened in our industry. It happened at eight industry is that they want to grow. If they’re making 10 cents on the dollar, it’s a healthy organization now, they want to expand it, and if they start losing, they may go back to 95 to 98 they’re still making money. And so it’s a matter of for us to know and understand that right now, who is this a buyer’s market or a seller’s market? Kind of when you buy a home, and historically, for the past four or five years, there’s been more demand and supply. Supply is coming back in. Supply is coming back in, when farmers and American family come back in. Now, so you have more supply, that more supply, then all of a sudden you want to have rates will start getting lower and getting lower and getting lower Yeah.

Robert Nordlund 31:05
Because, as we know, in our country, with the free market economy, if someone’s making a lot of money on something Yeah, or even a reasonable amount of money on something, there’s going to be other people saying, Yeah, we want a piece of that

Kevin Davis 31:17
exactly, exactly yes. And what happens is, it’s, it’s interesting for the insurance, because this is normal. This is where the insurance cycle works. It goes up and down. Now, this is last time it went up. Was or after 911 911 buildings came down. We lost a lot of money out of just the cars alone that was parked at, you know, the World Trade Center, you know, and then you had 10 years after that, you had the fiscal prices that we’ve had, the rates went up and down. Now, this is the high. This is the most rates have been up in a very long time. And I think the reason why because we missed a couple of years of COVID, you know, once during that COVID area, all of a sudden, people took their eye off the ball a little bit, and they started to see that for the past four or five years, we’ve been losing money. And then they start seeing why. And then inflation started coming to repair in a place costs a lot more money than did five years ago, and well, and the value your home is more than was five years ago. So a lot of that, lot of those increases are due, not because of the degree of the insurance is that it costs a lot more money to repair, replace some some of those components we talked about earlier, just

Robert Nordlund 32:31
fundamentally does inflation is real? Okay, but we heard that the is it the Fed is gonna anticipating lower interest rates? Yeah, they’re gonna lower the their magic rate. They are expecting to lower that a couple of times in 2025 that’s good, and with more

Kevin Davis 32:55
one thing about that, I’m glad you mentioned that, because for the first time, insurance had made a lot more money off of their interest rates, so they put that money in. So you talking about the billions of dollars in losses that we have, let’s say that, you know, they had $24 billion in loss. What they do, they take $24 billion out and they put it over there to fund claims. Okay, now that’s stuff to get interest off of that. So interest rate is at that high interest rate, they make more. They make money off the interest rate also, as opposed to zero interest rate, which has been for the past

Robert Nordlund 33:27
10 years. It’s been, well, that’s that’s exactly what associations are finding. Now, in the last few years, they were getting somewhere between zero and 1% on the reserve interest, and now you can get three or 4% and that’s a nice swing that really helps the reserve funding. And I can see the insurance companies, with their bigger piles of money, that they have to be ready for the billions of dollars of losses. Boy, it’s got to be nice for them to be making 4% instead of 1%

Kevin Davis 33:56
nice stuff. If I make a lot more than that,

Robert Nordlund 33:59
let’s, let’s not go there. Let’s let’s just they have wise money managers doing exactly, making smart decisions. Well, Kevin, as always, it’s great talking with you. Any closing thoughts to add at this time?

Kevin Davis 34:10
You know what I would say? This? Control what you can control. You know certain things you have no control over. You know, if you’re over 30 years, you’re over 30 years, but show your insurance provider that, guess what? Yes, we’re over 30 years, but we don’t have deferred maintenance problems. We’re on top of what we’re doing. We have a reserve study. We oversee it. We have a maintenance contract. We do the thing so that we don’t look at us at school over 30 years, that we’re uninsurable or we don’t we shouldn’t have good rates. If you control what you can control, you be in a better position. If you happen to be over 30 years, if you under 30 years, then I would say, be assertive, be aggressive. And say, Guess what? I’d like to see if I can get a lower rate. And above all else, okay, make sure you understand that each account is underwritten on its own.

Robert Nordlund 35:00
Nervous you’re you’re looping us back to where you started. I like that exactly,

Kevin Davis 35:04
because I know I’m against some I’ve got a couple of emails saying, Well, Kevin, you said yes, each each account there is underwritten his own marriage. So yeah. Well, I

Robert Nordlund 35:12
like having you on my closing. Thought there, Robert got it. Okay. Well, I like having you on the account because to me, you make things so clear. And likewise, we hope you in the audience learn some HOA insights today from our discussion that helps you bring common sense to your common area. We look forward to having you join us for another great episode next week.

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