127: Commercial Real Estate Insurance for Dummies with Summit Insurance's Josh Pillsbury & Roche Gom

00:00:00 Taylor Atkinson
Welcome back to the Kelowna Real Estate Podcast. I'm your mortgage broker host, Taylor Atkinson. And I'm your real estate agent host, commercial real estate agent host, Matt Glenn. What's happening, Taylor? Just enjoying summer, man. How about you? Yeah, I'm enjoying summer. Honestly, been super busy at work, which is kind of amazing. I know the real estate market is not exactly bumping, but yeah. Man, we are. Leases are taking off. There are tons of businesses moving, expanding, looking for different places. So I've been really heavily leaning into helping businesses around blown and burn and find new leased spaces. It's been very exciting, honestly. Also made a few commercial sales. So the leap has been fun and very successful. I love it.


00:00:40 Matt Glen
it. It's been great.


00:00:40 Taylor Atkinson
it. It's been great. Yeah. I mean, we see your guys' signs all over town.


00:00:44 Matt Glen
over town. So yeah. And I can't stress,


00:00:45 Taylor Atkinson
I can't stress, I just have to say this, man, like if you're a business looking for a space for the love of God, call a commercial agent to help. Obviously I'm learning this too, but like the difference between someone who's not represented and someone who is like, you're going to get a way better deal. And if you're working for the tenant, like you're not even paying for it. So I would get representation from a commercial agent, not any agent, but call a commercial agent to help you. Yeah. So call Matt. Yeah. Call me for sure. If you want the best deal, but if you just want a good deal, call anybody. I love it.


00:01:12 Matt Glen
it. Yeah. Yeah. We've kind of been slower on the residential side. Not a lot's been going on. We've been doing tons of renewals and refis and stuff, but it's summertime, you know?


00:01:22 Taylor Atkinson
So our house is for sale. We bought our house in 2021, right at the peak. There was 28 offers on our house. So it was listed like obviously kind of low, but. we had 28 offers like there was a few houses like in that range but like we were like one of the most so we obviously paid the most for our house but now selling our house in the low market we are at like 25 showings and we have one offer subject to sales so far it's kind of a crazy paradigm shift in a few years about the differences of how that is like the exact opposite side of the spectrum a perfect analogy of what the real estate market is up to right now


00:01:56 Matt Glen
Yeah. You know, over the last couple of years, it keeps looking like it's gaining some momentum every, you know, there's a couple of months glimpse here and there, but it's just, just stagnant, you know, annoying for you, for sellers. Like you don't want to clean your house 25 times and get the kids out of there, but. And the dogs. Yeah.


00:02:11 Taylor Atkinson
Like, thank God we have our car with the dog mode. Yeah. Right. I honestly don't know what we would do with our dogs for 25 times in like two or two months. Can't take the dogs on somebody walks in the middle of summer in the Okinawa. Like it's kind of crazy. So yeah, dog hoeing in our cars helped a lot. Yeah.


00:02:29 Matt Glen
Well, hey, something exciting for us is we brought on a new show sponsor recently, Middle U. So actually, a previous guest, Al, on show 104, which is awesome if you guys want to go back and listen to that. Basically, Middle U, I've been to some of their courses in person in Kelowna. They really just help the general public with education. So they provide a bunch of courses throughout. Canada, they focus on infill projects, right? So allowing homeowners to basically take their current property, assess it, figure out where the value is, if there's value there, connecting you with, you know, home builders and working with the city. So they've done a great job working with the city of Kelowna. And right now they have a course that is being offered to all Canada. residents, but BC specifically, there's 50 % off and then completely free for Kelowna residents, but registration closes August 20th. So if you want to have a free course, how to check out feasibility, financing, permitting, design, construction, everything like that, listen to show 104 with Al and then sign up for this before the 20th so you can get it for free.


00:03:37 Taylor Atkinson
It's literally a course to teach you how to build infill on your house in Kelowna. It's the perfect course for Kelowna. So something to check out for sure and free for clown residents. So definitely six weeks course,


00:03:48 Matt Glen
self -paced through the university of Calgary. So yeah, really cool to be collaborating with them for us as well. Like as a sponsor, we love what they're doing. So, and then today's show also loved these guys. So Josh Pillsbury and Roche Gom working with Summit Insurance. So they primarily do commercial insurance. you know, large strata buildings, construction. So they're, you know, really good connection for you, Matt, specifically like on leasing side as well for tenants. So we didn't really talk too much about like single family home ownership stuff, but it's still relevant information. I think the thing with insurance that I find, even though like you as well, like we're in the industry. There's just so much, I don't want to say smoke and mirrors in a bad way, but like so much technicality in it that like you as a individual trying to review all this, it's just impossible to follow. So these guys are just like a ton of good resources. Pick up the phone, call them specifically if you're on the commercial side. I loved the show because we could just kind of ask all our dumb questions and have them answer them.


00:04:19 Taylor Atkinson
well for tenants.


00:04:57 Taylor Atkinson
Yeah, it was great. There's a ton of insurance that you don't know. And like, most importantly, you don't know what you don't know. Right. Like it's just things that you just don't even realize exist. And they are experts in it. Like having them, Josh and Roche on the show was like pretty eye opening that you're talking to experts about those kinds of things. And you should definitely get an opinion from them.


00:05:15 Matt Glen
Yeah. And even just the second opinion, whether you're buying or renewing or whatever, just like run it by somebody else. Priorities may shift in your life and your business. valuations so yeah i enjoyed the show and i think you guys will too so all right enjoy the show catch you guys in a couple weeks


00:05:34 Matt Glen
Welcome to the podcast, guys. So we have Josh and Roche from Summit. Can you guys kind of give us a quick background of yourselves and the company?


00:05:43 Josh
Yeah, I can kick it off. I'm Josh Pillsbury. I'm the co -founder and managing partner of Summit. So we're a tech -enabled commercial insurance broker. A little bit of a quick background of how we came to be because we're relatively new. We're a new entrant to the insurance industry founded in 2022. My background had been in insurance for about a decade. I started out on the underwriting side, working for a large U .S.-based insurance carrier, working on specialty corporate -type risks, and then actually left to work for a very early -stage pre -revenue startup that was called Apollo Insurance at the time. So what we'd do is we'd build insurance products, digitize them, and white -label them on a broker's website to turn their website into a Shopify -style e -commerce store. And we distributed that product across Canada with most of the brokerages in Canada. And then actually along the way, we ended up starting our own brokerage and selling a lot of the products direct to consumer, which really propelled the growth. But where this all led and sort of how this led to starting Summit was... We were doing a lot of small business insurance and personal insurance online, but we found a lot of sort of upper end of small business and middle market businesses were looking around for options online, but they were way too big to purchase policy instantly. But they were still too small to be paid attention to by most of the regional and sort of large brokerages out there. So there was definitely an underserved market. And so when we founded the business, really the thesis was... For all intents and purposes, we're a traditional commercial insurance brokerage, but we build and leverage technology internally to allow all of us that are commercial producers to really get a lot of time back in our day and spend more time advising clients and doing the things that really matter as opposed to duplicate data entry. So that's what has led us to where we are today. And fast forward about four and a half years, we're a team of 40 full -time. We're headquartered here in Kelowna, beautiful city. I'm from Vancouver. I moved here about five years ago. I'm definitely never going back. So love being here. based here. And then we have another team that's based in Winnipeg downtown and a few people that work remote as well. So Roche and I connected really early in the journey.


00:07:38 Roche
Yeah, Roche, I've known Taylor for a few years and obviously Josh had mentioned I've known him when Summit had originally started, but I only just began the journey with Summit last year. I've been in insurance for the last several years and working in finance for the better part of 10 years now. So basically joined Summit last year and just really liked the story. And they've just been on a really good growth trajectory and we're becoming a real player here, especially locally in Kelowna.


00:08:04 Matt Glen
Well, let's start with like the basics. What is insurance? Why should somebody have it? Like, let's not go too basic. But, you know, even for people that are in the industry, like Matt and myself and own properties, like it is a bit of smoke and mirrors sometimes. Like sometimes you just like the policies are so lengthy. So that's why it is nice to have, you know, somebody like, you know, Roche on the team that I can pick up the phone and actually have a conversation. He kind of, you know, breaking down in layman's terms for me. But yeah, like where are the, I guess, major liabilities that most people kind of. you know, miss out on? Where's the opportunities? Like, how do you guys structure a policy? Where's the value as a broker to come in and look at someone and go, Hey, this is what you're missing. This is what you need. Here's how we can help. Yeah.


00:08:47 Roche
Yeah. I guess the value there. I mean, obviously inherently there's the clients who are seeking protection for their most valuable asset, their business. That's one side of it. They're also coming to us because potentially there's contractual requirements legally. They need to have it, whether it's from the city or from a landlord. in the lease. So there's numerous reasons why they're coming to us for insurance. But yeah, really, when we're looking at these policy documents, they can be structured in so many different ways. Different insurance companies structure them with their own wording. So they can vary quite greatly. And being a national brokerage, we have exposure to a lot of different types of policies. So we can kind of see what... is appropriate for different types of businesses and structure them in a way that is optimized for that business.


00:09:35 Josh
I think the insurance industry, like you said, it's a lot of... From the consumer's perspective, a lot of smoke and mirrors, and it can be rather confusing. And, you know, I think when you're out there and you're looking for insurance options, usually, like Rush said, there's a trigger for it. It's like, you know, I got a mortgage, I need to show proof of insurance to the lender, or, you know, I just took a lease on, I need to show proof of insurance to the landlord. So there's the contractual requirement that usually triggers it. And someone is kind of going out there begrudgingly thinking like, okay, I need to get this coverage. But I think once they start actually thinking about the risks that they're taking on and they have a conversation with someone that knows what they're doing, they really see the value of it. And most people don't know there's 200 insurers just in Canada. So if you go to a broker, what a broker's job is, is to identify who are those sort of five to seven insurance carriers that are going to be the most competitive on your specific risk because it's not possible for a broker to go out to. get 200 quotes and run through those with a client. So part of the art of broking is really understanding, you know, where are you going to find those options and who are the most competitive for your specific situation. So hopefully that sheds a little bit more light and gives some idea of why people get insurance to begin with.


00:10:39 Taylor Atkinson
Who are you working with mostly? Are you working with like commercial tenants or like building landlords or like multifamily landlords? Like who are you working with mostly?


00:10:46 Josh
Yeah, we work with a lot of different types of businesses. I would say the core sort of industries that we work with are construction, contractors, property management firms, sort of major commercial landlords, multifamily landlords, hospitality businesses like restaurants, bars, hotels, and then professional services. So, you know, architects, engineers, you know, accountants. But we do do mostly commercial, although we do have a pretty significant portion of our business that we do personal insurance as well. We do it a bit more programmatically. So, for example, we insure around. 30 ,000 tenants across Canada individually. But we do that mostly through partnerships and affiliates that we have.


00:11:23 Matt Glen
Yeah. And we should preface this for the listener that this isn't like your standard single family house residential insurance policy. Like we're talking about, yeah, large commercial structures and lease agreements with like business owners. One thing, like I'll just start banging off some stuff that has always been interesting to me, like coinsurance clause. Do you want to maybe like... Give us a quick summary on that. Like, you know, if anyone has it in their policy, it is a risk. And then to get it removed, like there are some, you know, pros and cons to it. So do you guys kind of want to walk us through like how co -insurance usually comes upon someone's policy, how to get rid of it and like what's associated with that?


00:12:02 Taylor Atkinson
Just to add on to that, like, so when we do. Commercial leases, like a lot of times a landlord will want to be a co -insurer on the insurance policy for the tenant. Obviously, that ties into Taylor's question. Can you explain that? Those are two actually very different ideas there,


00:12:12 Roche
are two actually very different ideas there, what Taylor brought up and what you had mentioned there. I know Taylor and I had a long discussion about co -insurance recently.


00:12:20 Josh
Yeah, it's funny. With co -insurance, actually, I started my career working in the States. In the U .S., co -insurance was like a legacy thing. A lot of the older sort of guard that I got trained under. they were like, oh, we haven't even heard about co -insurance in 20 years. And then I started working in Canada and every single property insurance policy had this clause on it called co -insurance. So I kind of went through the same learning experience having already been in the industry for a while. And really for the listeners, what the insurance company is doing is they just want to make sure that you're valuing the property to the actual appropriate replacement cost amount. Because if you think about it, you could say, hey, this property is worth a million dollars. Really, the replacement cost might be $3 million. And so the insurance company has been underpricing it because you've undervalued the property. So really, it's putting accountability on the consumer to say, hey, we need to make sure that you're valuing this to what the real replacement cost is. Otherwise, we're going to penalize you on a claim. So the coinsurance is more so if a claim arises and it ends up being that the replacement cost was way higher than you stated. They're only going to pay out. a proportion of what the claim actually is. And we can get into more micro detail, but that's the intent of it.


00:13:27 Matt Glen
So to like oversimplify, let's say like properties worth in... Our policy, a million -dollar replacement, but in actuality, it's $2 million. And there's a 90 % coinsurance clause. So that just means they'll cover 90 % of the replacement of the million or the $2 million? No,


00:13:44 Roche
actually. What it means, when you see it on your policy, and typically on a commercial policy, it'll break out the property and the liability. But under the property section, it will show, in some cases, coinsurance. And it'll usually show 80 % coinsurance, 90 % coinsurance. 100 % coinsurance. What that means is, is that you need to make sure that that building is appropriately valued at 90 % of the true value. And then the calculation for the penalty, if it's not, is done separate. The penalty has nothing to do with the 90%. It means that you need to insure it to 100 % of the value or 90 % of the value or 80 % of the value.


00:14:23 Josh
Right. You know, if you have a broker that's out there and, you know, you want to have that removed, that's definitely a negotiation point. So it is something that's important to bring up and say, hey, is there an opportunity for me to get this coinsurance clause removed? That way, you know, if all of a sudden the cost of replacement goes up in a year. Due to a variety of different macro factors, you as the consumer are left holding the bag. You can get that clause removed. Typically, they just want to make sure that you have a formal appraisal. So you might have an appraisal from an independent professional that says, hey, this is how much the building is worth. And then the insurance company will then remove the coinsurance clause because there's a third party that's verified what the replacement cost is.


00:14:58 Matt Glen
Yeah. So we recently did that, right, Roche? And I guess the negative for the listener to try and... provide some context and education on it is obviously you need to pay for the appraisal and also your premium likely is going to go up because, you know, if you were underinsured at all, the value is going to go up. But then the benefit there is obviously you're covered, right? If anything happens, like there is no coinsurance issue. So you remove it and then like every... five years? Is it kind of then re -looked at? When do insurance companies say, hey, we've seen a large increase on costs for replacement value. We'd either like another appraisal or we're going to add in another co -insurance clause. Where's the timeframe on when it comes back into play? Usually these appraisals,


00:15:39 Josh
these appraisals, what they'll do is you'll pay for the appraisal in the last three years. And so the appraisal company, they'll actually send you, let's say, an email every year, giving you an update of what the current value of that building is. For example, we insured a building recently that was... you know, replacement cost of $60 million, 156 unit multifamily rental building. The appraisal only cost relative, you know, $600 and that lasts three years. So, you know, $200 a year to make sure that you get the value correct and you don't have that co -insurance clause. In that case, the client was, you know, it was very palatable for them. But, you know, for an independent homeowner, typically you're not going to go out and get an appraisal on your own home. Actually, more often the insurance company might actually come in and do their own appraisal of your home. after you've bound the policy. And I think that's where insurance can get a bad rap because sometimes you might say, hey, the building's worth one and a half million dollars. Insurance company comes in, says, well, actually it's worth 1 .8 and therefore, you're going to have to pay more on the renewal. That's the challenge of making sure that we communicate why that is happening. And that's the value of a broker is making sure you get that number right to begin with.


00:16:44 Taylor Atkinson
So that's funny. That is amazingly different than what I was mentioning before. We just like touch into what I was mentioning.


00:16:52 Josh
Yeah, it's totally unrelated, but it's another situation where, you know, when you get an insurance policy, you want to add, you know, an additional insured to the policy. So a way to view that is, you know, you get a policy for your home and you add the lender, let's say, you know, Equitable Bank or BMO as the additional insured. And that just means that they have a right, you know, it depends on each situation, but they basically will get notified if you cancel the policy and certain rights to that insurance policy.


00:16:59 Taylor Atkinson
So a way to view


00:17:16 Taylor Atkinson
A landlord would want that so that they could fix part of their... building they own as well if there's an issue?


00:17:22 Josh
Yeah. A simple way to view it is one of the rights they get is a notice of cancellation. So, you know, if I'm a tenant in the building downtown here in Kelowna and I cancel my insurance after I showed proof of insurance to the landlord, they'll become aware of that because they're an additional insured. So they can then come back and be like, hey, you know, why do you cancel your insurance a day after you showed me proof of insurance?


00:17:38 Matt Glen
you know,


00:17:42 Matt Glen
We just went over this as well. And this was suggested by Roche for my policy, which let me just open up my policy and start reading through that. So, you know, last year as every year with larger buildings, you have some issues, you know, like we had a tenant that had some water leak. We knew the origination of where the damage came from. It was within their unit, but it damaged. you know, units below them, which are also my tenants. And like in our lease agreement, which Matt, you're probably just talking about is for my lease agreement, we have like a 2 million liability that the tenant needs to carry, but it doesn't really specify much more than that. And like, as a landlord, how do you police that? Like if they go and cancel that insurance policy because they want to save money, you know, how would I ever know unless I'm policing them like every month and auditing them. So that's where like, that was a great. takeaway that Roche suggested hey if you put this in place then you'll be notified right so the nice part about that is i don't then have to go and police like i know that they have those policies in place you can just add like a clause like that to your standard lease right so then for you guys if you're representing a tenant and they go and want to lease a place


00:18:41 Taylor Atkinson
you can just add like a clause like that to your standard lease right so then for you guys if you're representing a tenant and they go and want to lease a place And then we get the lease. Like, is it good enough for us to send you the lease? Then you get a policy that kind of conforms to everything that the lease is asking for? Short answer is yes.


00:18:54 Josh
answer is yes. I mean, you want to make sure that when you're going through that leasing process, obviously you're going to be working with, you know, a commercial realtor, unless you're doing it yourself, you're going to probably have a lawyer review it. But what most people overlook is that there's always an insurance requirement section in there. And a lot of times what the landlords are asking for in many cases can be unreasonable, you know, in terms of what they expect.


00:19:07 Roche
And a lot of times what


00:19:14 Taylor Atkinson
Yeah.


00:19:14 Josh
One example of that might be a lot of landlords would. ask for sort of what's called like blanket contractual liability for any type of tenant. And that means that like, you know, if any sort of contract that you enter into as the tenant will be then covered under the insurance policy, like on a blanket basis, which insurance companies just hate that because they're taking on more risk and they have no idea what that risk looks like. That by default is included in a lot of leases, but all you have to do is just ask to remove it. And just make a reasonable explanation why. But most lawyers, they're not going to look at that and think anything of it. They're just going to focus on the boilerplate wording. So it is important to make sure that you have an insurance broker that you can send this stuff to and just get some simple advice. You're not even going to pay anything because brokers are all paid on commission. So it's more in good faith of just making sure that you understand what you're contractually obligated to do and what is unreasonable.


00:20:07 Taylor Atkinson
So would you recommend like a tenant looking to go lease a place to come talk to you before removing their condition to review the lease? I would recommend it,


00:20:14 Josh
would recommend it, but probably no one would ever listen because, you know, when people are leasing, they don't want to talk to their broker throughout the leasing process. So usually we're the last people there to the... They do it the day before they like take possession.


00:20:24 Matt Glen
possession. Oh, crap. A lot of times you don't even... So you write an offer for a lease review and then you don't even get the lease until like a couple of days before a subject removal.


00:20:25 Taylor Atkinson
A lot of times you don't even... So you write an offer for a lease review and then you don't even get the lease until like a couple of days before a subject removal. So like there's that to deal with also. We have situations where people like purchase a building and they're not...


00:20:33 Josh
have situations where people like purchase a building and they're not... thinking about the insurance until the day before. And then it's like, Hey, I need insurance on this. And then they just assume that it's going to be that sort of same day thing. And like I said, you know, there's a hundred insurance companies out there. There's probably five or seven that are a fit. It's not like we can just snap our fingers and get you a quote, you know, it might take a few days, but often we get that the day before, unfortunately.


00:20:44 Matt Glen
I said, you know, there's


00:20:55 Matt Glen
I'm laughing. Sorry. Cause I'm literally the worst client recently for this. Cause I put Roche in the exact same situation. Wasn't even really thinking about this. And like, for sure. I have a CRM and we follow like, for all the clients and all my clients are, you know, doing everything properly, lawyer introductions, et cetera. And so we're closing on a condo unit or closed on one in Penticton last month. And Emily, my wife goes, do we, do we get insurance for this? And we're closing in like three days. I was like, Oh my God, I didn't even think of this. So fortunately, like it was in my company. So I just contacted Roche and yeah, it was more on the residential side, but you guys were able to tie it into some of the commercial policies. But so the point is like, even me who should be way more proactive and I'm doing this stuff for my clients, just like totally forgot about it.


00:21:40 Taylor Atkinson
about it.


00:21:41 Matt Glen
So yeah.


00:21:42 Taylor Atkinson
That's funny. So what about like, we're recording this in the middle of the July in the Okanagan. And I think like Ontario right now is currently on fire. Like we're in fire season. Like does fires affect commercial insurance as much as it affects residential insurance?


00:21:55 Roche
Mainly on the property side, liability, not so much, but a lot of the times the policies are tied together. So what we'll try and do is if it so happens their renewal is in the middle of fire season and they own property, we can do things like a longer. policy period and push the renewal out a bit further just so that we're not fighting the potential because usually there's rules if there's a fire within 50 kilometers or 25 kilometers, the insurance company will not bind the policy. So if we can reduce that risk of them not being able to find options outside of where they're currently at or their current insurance company decides to not insure them for the following year, they're not in a bad spot. So there are tactics that we use, but yeah, it definitely does have an impact. on how we place policies.


00:22:39 Josh
Insurance companies have this thing, and this is standard across all insurers, where they won't quote new business if there's a wildfire within, say, 50 kilometers of the risk's location. And so in the Okanagan, you know, the wildfire is typically always within 50 kilometers of the entire city. So we've had situations where, you know, we had a prospective client that renewed and I think like end of August every year, and we'd always be able to come in and get them. you know, terms like well in advance. But then when it came to actually come time to bind the policy where they were going to save, you know, a ton of money. A wildfire was active in the Okanagan and they just weren't able to move. So they get in this cycle where they get stuck with the same insurance company every year, do things that are completely outside of their control. So to the point that Roche made, you know, there's actually a strategy, especially here in the Okanagan, where it's better to have your policy actually renew like in the fall, like late fall or the winter, because then you're going to get the maximum number of insurance options every year. Jeez, that's a good idea. That is a great idea.


00:23:38 Matt Glen
is a great idea. You guys don't want to be working in the summer. So you may as well like load it in November. We got the lake right behind us.


00:23:41 Josh
it in November. We got the lake right behind us.


00:23:44 Matt Glen
Yeah. That's a great idea. We're going to have mine renew on Christmas Eve. I think literally all my policies renew in the summer right now. Other than like one. Yeah. Jeez. Okay. Yeah. I'll jot that note down. Put that in your CRM.


00:23:52 Josh
than like one.


00:24:01 Matt Glen
I feel that there's a lot of when somebody's getting a policy, you know, this is relatable to single family homes as well as commercial, but you look at the premium on it and, you know, I guess the easiest way for the customer to go, okay, I want to reduce the premium or have more coverage is really to look at the deductible, right? So sometimes it'll be like, oh man, the deductible, like let's just say on a home is $2 ,000 and the premium is, you know. 4 000 bucks a year to pay for it well if we just bump up that deductible it lowers that is there kind of like a sweet spot like how does the math work in terms of like i know you guys are in the insurance game. So you always probably suggest a lower deductible and the best coverage because that's what insurance is for. But in terms of the cost approach to make it digestible for people that are insuring themselves, is there any kind of strategy to go, yeah, this is a good deductible, this is healthy, this is not? What do you suggest normally?


00:24:55 Roche
I would say we're not necessarily recommending the lowest deductible. I think it's definitely case by case and what is right for the client because... The question I typically ask is, what makes sense for you? If there's some property damage or something stolen, are you realistically going to make a claim? They stole, let's say, $5 ,000 worth of equipment. Are you going to make a claim for $2 ,500 or are you just going to pay for the stolen $5 ,000 because of the impact it might have to your insurance policy? So really, it's case by case. But generally, for a lot of the policies were... issuing is like $2 ,500 deductibles as normal or 5 ,000. But again, it really depends on the client. The only thing I'd add to is,


00:25:37 Josh
you know, thinking about it, the deductible is one way that you can get a cheaper premium, but there's a lot of other factors where, you know, it's just a trade -off. It's ultimately like how much risk do you want to take? There's a lot of coverages that you could, in theory, reduce to reduce the premium. But you can't have, you know, your cake and eat it too. Like you got to sacrifice something if you want to get a cheaper rate. And ultimately, like when you have a claim, we just want to make sure that we're advising you so you don't regret that decision and you understood the decision that you're making. And the most extreme example of that might be, you know, in some cases, you know, a property might be really old, for example, like 100 year old property that hasn't been updated in forever. And the rate that you would get for the replacement cost might be some sort of egregious premium. And people are like, you know, I don't want to pay this. You can insure the property for actual cash value. We as brokers would never really recommend that because when a claim does. typically, you know, that person is very unhappy because the actual cash value that they get paid out is quite low on a hundred year old property due to depreciation. So for us, it's actually just making sure that people understand what they're purchasing is the most important thing. And ultimately it's their decision of which direction they want to take it. But if we misadvise people, then, you know, the first person they're going to point a finger to is a broker. So we just have to make sure that we're, you know, holding ourselves to a level of accountability. you know, making sure they understand the product.


00:26:57 Matt Glen
Yeah. How do claims affect your policy, your premium, your opportunity to secure more insurance? Like obviously if it's a one -off, a legitimate claim, likely probably doesn't do a lot, but where should people not make claims and when should people make claims and does it affect like your whole portfolio on the personal side and commercial side, different companies, same ownership. But yeah, can you talk a little bit about that? The way us that are in the industry think about claims is that there's sort of two types of claims.


00:27:21 Josh
that are in the industry think about claims is that there's sort of two types of claims. There's, you know, the frequency and then there's the severity. So frequency to be like, how often is someone going to be making a claim? And then the severity would be, you know, what is the size of the claim? Insurance companies would... actually look more favorably on someone that had one claim that was massive, like a million dollars, as opposed to someone that had, you know. five or 10 claims that were 5 ,000 each because there's a pattern of, you know, making claims over and over. So they view it as more of like a ticking time bomb. So when it comes to, you know, advice or, you know, how do you go about making a claim? That's where going back to the deductible strategy, what are you actually like buying insurance for? Is it for so you can just make a bunch of claims on, you know, small events that are happening very frequently? Or is it so you're covering, you know, the risk of your entire property burning down in a wildfire? Because those are two very different situations and you might want to approach, you know, the deductibles that you're taking very differently. You know, the longer the short of it is that the severity of the claim actually isn't necessarily what drives the premium as much as it is the frequency of making claims. So I have a very same approach to that.


00:28:26 Matt Glen
I have a very same approach to that. I'm like, if, you know, my toilet leads to my house. And I need to replace some drywall below it, you know, and I sub that out to a contractor and it's a few thousand bucks. I'm likely just going to cover that. I want my deductible to be high enough that it's really covering like the large ticket items. So then how does it affect, like, let's say, you know, you have a hold co it has. five properties in it. So you make like two or three claims. So there is a legitimate reason to increase the premium. Do they increase it like across the board on every policy you hold on all five of those properties? Do they do it specific to the property? If you own multiple companies that are like, there's that division of separation, how do they analyze it, right? If someone owns, obviously, if there's a large landlord that owns like a hundred properties, should he not get some more favoritism in the sense of, oh, they haven't made a claim in five years on a hundred properties compared to someone that owns like one? How do they analyze it? work there you're probably not going to like my answer but when it comes to claims claims are definitely a driver of premium but


00:29:18 Josh
probably not going to like my answer but when it comes to claims claims are definitely a driver of premium but They're not necessarily, you know, the biggest driver. Insurance companies expect there to be claims. They understand that people have events that are totally outside of their control. And sometimes that actually doesn't end up making an impact on the premium in certain situations. In other cases, someone might have a million dollar claim and they actually get a rate reduction. And the reason for that is because insurance has their own market cycles. And right now we're in sort of what's called a softening market. So that means rates are generally coming down overall relative to where they were at. previous years. So insurance companies are sort of getting into bidding wars against each other on different types of risks. And so they might view someone having a claim as a really good opportunity to sort of... get in there and offer a competitive quote because, you know, of how the claim was handled with the previous insurance company. So that's what I mean is probably not going to like that answer because it's just like the classic smoke and mirrors insurance guy just saying like there's no like system to this, but it's more so to do with the market cycles and insurance that drive the most significant rate increases or rate decreases as opposed to like the individual risk itself. Why is there a soft market?


00:30:30 Matt Glen
is there a soft market? Like what is driving? the cost down right now? A lot of it is just capital inflow to the insurance industry.


00:30:35 Josh
lot of it is just capital inflow to the insurance industry. So when insurance companies have more capital available, they want to take market share and they're much more competitive. And so that's the function of a few good years of profitability. I know it sounds weird because we've also had a lot of catastrophes and sort of wildfires and things that have happened in the last few years. But, you know, rates definitely in many cases are coming down. And then, you know, if you're in a market like, for example, Vancouver, you know, that might be different than the Okanagan because, for example, earthquake rates are going up. So it can vary, honestly, like so wildly, depending on where you're located and sort of what the risk profile looks like. But if I'm overgeneralizing, rates are coming down because there's a lot more capital flowing into the industry due to the profits from the last few years. You're reading my notes.


00:31:21 Matt Glen
reading my notes. That was literally my next thing I wrote down in a couple of minutes was earthquakes. So like in a policy, and I've had clients ask me, like, Matt, you're laughing. This is interesting to me. Like, so, okay, you have the ability to either, you know, wave earthquake coverage or not. What do you do in Kelowna? I guess there's a risk of it, but like legitimately, how does that play out here?


00:31:43 Roche
that play out here? I believe the underwriters use a scale from one to five. And I think Kelowna is rated as a one out of five on their risk index compared to a place like Vancouver where it's higher. So again, I guess it's a business decision that the client has to make, whether or not that's something that they want to take on. Something I do know, especially for our clients down in Vancouver, high. They're requiring at least usually 10%, 15%, or 20 % of the insurance company. And you're looking at a big building, that's a big sum of money that they would have to pay. So there are ways that insurers are getting creative now with earthquake buy -down deductibles, where basically take out an insurance policy just to pay for the earthquake deductible. But back to your original question, though, I believe it's more a business decision on whether or not, or in your case, a personal decision. whether or not, you know, you see the risk is there. The earthquake risk,


00:32:38 Josh
earthquake risk, I mean, it all ultimately comes back to the cost of the reinsurance that the insurance companies carry. And so when you think about like the insurance market, there's like the consumer, then there's the broker that's selling the policy. And then there's usually an insurance company. And then above that, there's actually a reinsurance company. So what most people don't know is that insurance carriers reinsure the vast majority of all the risks that they take on. And so they're paying premiums back to the reinsurance companies for every policy that they sell or sort of across the entire portfolio. And in the last few years, maybe the reinsurance companies know something that we don't. And, you know, the rates on earthquake have gone up significantly in, for example, Vancouver. And that sort of has trickled down to everywhere else as well. But as a result of that, now people are paying like a very significant amount for earthquake insurance. And like Roche said, the deductibles are, you know, on the low end 10%, but usually 15 or 20. And so if you think about the value of a building, whether that's just your own home or whether that's a multifamily complex, if an earthquake actually does occur, it can be financially devastating, even from just the deductible that you're carrying. And so there's more creative ways now where people are buying these earthquake buy -down policies where they're reducing the earthquake deductible. The only reason a lot of them are carrying earthquake insurance is because the lenders require it. I think a lot of people would just pass on it if they could, but the banks that are financing the property are requiring earthquakes, so they're forced to purchase it.


00:34:05 Matt Glen
I mean, it makes sense now, but I didn't realize insurance companies kind of did that due diligence and were like, oh, you know what? There's a very good opportunity that there's going to be an earthquake. We're going to up the... The policy on that aspect, like they're hedging their own bets on what they think is going to happen. Like with forest fires, earthquakes, floods, everything, they just kind of like look at the market and go, yeah, we think there's a higher risk in this sector. So we're going to like back out of it and make it more expensive. Wow. Interesting. Yeah. You know, the market, like I said before,


00:34:33 Josh
and like you said, you know, there's definitely a lot of smoke and mirrors. It's shrouded in mystery, but you know, ultimately it's all about taking on risk and, you know, insurance companies, their business is taking on. the least amount of risk for the most amount of premium. in theory, but it's a very competitive market. So they have to compete against each other. So that's what really drives the pricing. But when everyone sort of realizes that there's a massive earthquake risk and that's, you know, flowing from the reinsurance markets themselves, then they're just really pricing it at the cost of the capital that they have to put out. So there's no real work around. I think it's actually an industry problem. And so in the insurance industry, there's been a lot of chatter around, you know, having a sort of government backstop for earthquake insurance, making sure that we can provide it a much more affordable rate. But we all know the pace that government moves at. So we'll be fortunate if we see that in our lifetime. But they do have some of the programs down in the U .S. already. So I think Canada is just trying to find a solution to make sure that those rates don't get out of control.


00:35:30 Taylor Atkinson
We need to figure out how to get some insurance on some tankers going through the Strait of Hormuz.


00:35:34 Josh
For sure. Yeah. I think that's one of the most interesting aspects is like, you know, even for me, I didn't. you know, fully clue into, you know, how big of a market it was for insuring, you know, the oil tankers that are going through the street of homeowners. And then, yeah, when you can't get insurance, you can't operate. So what are kind of some of the most common mistakes or common claims?


00:35:50 Matt Glen
are kind of some of the most common mistakes or common claims? Like, what are you guys seeing? where you're just like, oh my God, why do we see this all the time? Like, why does everyone miss this? Whether an owner or a tenant, like what's just low hanging fruit that you guys always suggest to do?


00:36:05 Taylor Atkinson
Like earlier, you were talking about like the frequency of claims, Taylor. Like, so we got evicted, like we lived in McKinley in 23 and we were evicted from our house, I don't know, a week or 10 days. And insurance gave us some money, a couple thousand bucks or something, to be out or a couple hundred bucks a day. Does that count as a claim? How does that classify? Would that hurt my insurance to ask for that? Pretty much our whole neighborhood was doing something with insurance. I was just wondering how that affected us. Counts as a claim now. It's public knowledge. Let's delete that.


00:36:34 Josh
Yeah, it's hard to comment, obviously, on a specific situation. But, you know, it does count as a claim. But the way insurance companies look at risk is, you know, they only look at five years of claims history as well. So, you know, if you've had a massive claim six years ago, the broker doesn't need to disclose that. And it's very infrequent that the broker would ever disclose that unless the insurance company really required it. So five years is kind of the standard. And for a small claim, it's not going to have a material effect.


00:36:58 Taylor Atkinson
So Taylor kind of touched on this earlier. Like, do you have like a credit report for you? your insurance claims or like, does every company just kind of know what you do with them? Or like, if I just go to a different broker and go to get insurance, do they know all my past claims for different companies?


00:37:10 Josh
Well, there's no centralized database for claims to put it simply, but if they find out that there was a claim that wasn't disclosed, then, you know, that would be grounds to, you know, deny like a future claim because of the information that in the way it was presented, unless it was just like truly an honest mistake, which is very rarely the case. And then. You know, getting back to the original question, common mistakes, like, you know, I think the most common mistake that a consumer or someone who's purchasing insurance often makes both in personal, but probably a bit more in commercial as well, is that they think that if I go to like five different brokers, like I'm going to get, you know, a bunch of different options and I'm going to be able to get the best rate. But really in the insurance industry, there's what's called like market reservation. So basically the first broker you go to when they send it to the insurance companies. those insurance companies won't quote any other brokers for that same risk. So every single time you go to a new broker, you're basically just wasting your time and their time because they're going to send the submission out. They're not going to be able to get you a quote, but then they might find one insurance company that's uncompetitive and then bring it back to you. And then now you're playing this scattered game of getting many different options. Really, the best advice would be to find a broker that you feel confident in to represent you, similar to a realtor or a mortgage broker, and run with them. And then if you find that you're unhappy after working with them for a couple of years, then just choose a new broker and work with them.


00:38:31 Matt Glen
work with them. I have the same conversation lots. It seems like the thing now is of the last year, like, hey, I'm just reaching out because I want to shop around. That terminology kills me because I'm like, just find someone you trust and you want to work with. they'll do the legwork. You're like,


00:38:46 Taylor Atkinson
like, that's what the brokers do is they shop around.


00:38:47 Matt Glen
do is they shop around. Yeah. I'm like, literally if I submit your file to Scotia and another broker does or TD or whatever, it's like, then we all look like idiots and no one's getting the right service. Like it's just find someone you trust and it's going to do the right thing and, and go all in with them. So yeah, it's a bit of like, need to provide it. A bit more education on that. The underwriters, they get pissed off too, because they see the same customer from five different brokers.


00:39:08 Josh
see the same customer from five different brokers. And then they realize they're like, oh, this customer is just wasting everyone's time, including mine. So then you're actually disincentivizing the underwriters to quote you. So what most people don't realize is by going to multiple brokers at the same time, they're most likely going to end up in a worse situation when they do find a policy than if they just chose one.


00:39:08 Taylor Atkinson
see the same


00:39:30 Matt Glen
Yeah, for sure. What can people do? to their physical property or anything in contract to kind of help with the insurance policy? I'm thinking like the security cameras help obviously like fire suppression, which, you know, has to be to code anyways, but like a new roof windows, you know, security personnel. Like, is there something that you guys generally see like, Hey, that's a great investment. It's actually going to reduce your risk as well as reduce the premium. All of those. Yeah. I mean, you pretty much nailed it.


00:39:56 Josh
much nailed it. I would say anything that is. going to improve the property like should a claim occur so fire suppression systems updating the electrical so for example if you have a you know an older property that's aluminum wiring like insurance companies are just going to rate that higher than if you have copper wiring so really just keeping the building up to date and you know when you think about it on an individual property level like one sort of say rented home and say you're a landlord you might not notice the impact as much but if you're someone that's looking to be like you know scale up a business and buy more homes in the future, or maybe do some multifamily, it's a game of pennies at the end of the day. And the insurance rates can really add up year over year if you're not updating these properties. So it's really about thinking about what's the long -term sort of value that I want to be adding into this property. Obviously, there's a lot more to it than just reducing the insurance premiums. And then when a buyer might be coming in in the future, like you're going to get the benefit of having an updated property. Plus they're going to know they're not holding the bag on an insurance cost or an expense that is just going to get out of control in the near future. But yeah, I would say there's definitely like in multifamily, which we do a little bit more of, like water leak detection systems are becoming a lot more common because water damage is definitely an issue that is driving costs significantly. So insurers will give you big discounts if you have a water leak detection. But there's always the cost benefit. You kind of got to figure out if it's really worth the long -term investment. It's not just an insurance thing, but that's the benefit that you'll see from keeping the property updated. Yeah,


00:41:25 Roche
property or liability aside, it ties into the question you asked before on what kind of claims we're seeing. These days, a lot of cyber claims and something that actually reduces premiums quite a bit is just simple two -factor authentication. We've seen rates like F just by having that in your business. So yeah, there's a bunch of different... ways to lower premiums. But yeah, different insurers have different requirements. So it really comes down to the broker making sure that they know what is out there with different insurers and what mitigation can be done to overall lower premiums. If there's one theme,


00:41:58 Josh
there's one theme, like how do I get my insurance premiums lower? You know, it'd be ultimately, I think, just holding the broker accountable and asking them, like, who have you sent this off to? Like, which insurance companies have you approached? And what has the feedback been? because that'll give you a lot more information than just, you know, them presenting that one option to you every single year, because you won't have visibility into all the other insurance companies that are out there and what they quoted. And what you might find is either, you know, oh, like I'm actually getting a lot better of a deal than I realized I was because everyone else is like double the price. Or now the broker feels like, oh, I have to like share this information with you. And I only approached one insurance company. Like now I have to actually go do the work because otherwise I'm going to look. a bit dumb here. So I would say that just making sure that you're getting the most value out of the work that the broker is doing and how they're positioning your risk in the market is going to reduce your premiums significantly. And then yeah, sharing with them like... this is how i've updated my property this is all the risk management that i've put in place that's a story and ultimately you know a broker's job is to tell the best version of the truth and like in many cases like they need to jump on the phone and explain things to the underwriter and if you arm them with more information it's really going to give them the ability to sell the risk a lot better and reduce the premium well


00:43:11 Matt Glen
How do people find you guys? Like obviously if business owners or landlords have, or tenants have, you know, renewals coming up or they're looking at buying a property or leasing a property, how do they get in touch with you guys and where can we find more about you?


00:43:23 Josh
Yeah, they can find us. I mean, downtown, we're sort of right in the heart of the downtown center of Kelowna up on the ninth floor in the block. So that's on the corner of St. Paul and Bernard. We don't get a ton of walk -ins just because we're commercial and business owners are busy. So usually they prefer to phone us. You know, our website is summitcover .ca. if they go to our website summitcover .ca they'll be able to find how to contact us and get a broker reaching back out to them same day awesome thanks guys appreciate you answering some random questions from guys that don't know enough about insurance that should but uh there's a ton of stuff like man the knowledge that you guys need to have just to handle this stuff is wild so yeah appreciate you being a good resource and hope to uh keep working with you in the future appreciate it thanks thank you very much you guys


00:43:47 Matt Glen
thanks guys appreciate you answering some random questions from guys that don't know enough about insurance that should but uh there's a ton of stuff like man the knowledge that you guys need to have just to handle this stuff is wild so yeah appreciate you being a good resource and hope to uh keep working with you in the future appreciate it thanks thank you very much you guys