Insurance Has Changed, Will You?

Welcome to the Construction Disruption Podcast, where we uncover the

future of design building and remodeling.

I'm Seth Heckman of Isaiah Industries, manufacturer

of specialty metal roofing and other building materials.

Welcome to Construction Disruption, the podcast committed to bringing

value to home improvement and replacement contractors.

Uh, this is a bit of a different style episode for us.

We'll be rebroadcasting, a training we recently gave on the changing landscape

of homeowner insurance and roof coverage.

Uh, we have all seen the headlines in recent years, none of them.

Very good.

Uh, headlines talking about, you know, the increased frequency of severe weather

events, record losses of, uh, by carriers, uh, carriers, dropping policies and

leaving states entirely, and a crisis, even one level up from them, uh, affecting

the reinsurers out in the market, uh, pushing them to the brink of bankruptcy.

Uh, so listen in on this training, as we dig into all of these factors,

uh, review how carriers and and legislators have responded to those

conditions and really changed the market in which we're all operating.

And, uh, start discussing ideas in ways that we understand we

need to change our businesses.

As a result, uh, this is insurance has changed.

Will you in our time together today?

Uh, I really wanted to review what has, uh, truly been a crisis in the insurance

industry over the last few years.

And, uh, cover how it is affecting, uh, and really dig into how it is affecting

our businesses and our customers.

Um, my goal for our time together is that we'll all hopefully leave with a

more holistic view of what has occurred, uh, not just isolated experiences we've

had in our own markets, um, but this bigger picture and context of where

this industry is going across the country and, you know, leave better

equipped to lead our businesses, uh, through those changes moving forward.

Uh, I'm excited too that we'll be, be joined in a little bit.

Uh, by a special guest who will share how he is leading through these changes

in his home improvement company.

And, uh, give you some great ideas and strategies, uh, as well.

Uh, and all of this is important because I don't think there is any disputing, uh,

that severe weather events are occurring at higher rates across the country.

You know, hurricanes, wildfires, uh, hailstorms, tornadoes.

All of those, uh, events and conditions are happening more frequently and

in areas and regions that, you know, might really up to this point and, uh,

recent years rarely experienced them.

Uh, previously, you know, in the past, in our business, uh,

this would create significant opportunity, uh, for our businesses.

We would get out, uh, start knocking some doors and, uh, be ready to help

folks rebuild, uh, and eventually be compensated handsomely, uh, in return.

But as we really, we've all seen, uh, times are changing,

uh, things are changing.

Uh, the claims process is taking longer.

Uh, carriers are more difficult to work with.

Uh, pol and policies are truly falling short of what is actually required,

uh, to make those homeowners whole, uh, after one of these weather events.

Um, this really hasn't, uh, just suddenly occurred this year in 2025,

um, but really has been a trend over the last seven or eight years.

Uh, it began and the regions hit hardest by these events.

And then the rest, you know, those of us in the rest of the country, uh, started

getting caught, uh, in the fallout.

Uh, so just as some review of what those, uh, conditions and, and what

these last few years have looked like, uh, specifically in those most

severely hit areas, uh, Florida is obviously near the top of the list.

Uh, whenever we think about these type of ev uh, of events,

hurricanes, uh, specifically.

And for those of us paying attention, they've been in the, uh, the news pretty

frequently the last couple of years, uh, as they have tried to respond to

this crisis and, and made changes to this market, uh, there in Florida.

Uh, they were really forced to do that after, uh, they dealt

with h Hurricane Michael back in 2018 and Hurricane Ian in 2022.

Uh, with those storms together generating a total of over 50 to

$60 billion in insured losses.

Uh, so carriers are carriers experienced huge losses after those events.

And, uh, something I learned in preparation for today that was going

on while, uh, in addition to that.

Uh, Florida hosted over 76% of the country's homeowner insurance lawsuits.

Uh, so they had some loopholes and conditions there that, uh, made it

a very litigation happy environment.

Uh, with over a hundred thousand homeowner insurance lawsuits

being filed in 2022 alone.

Not the most friendly environment for all parties involved.

Uh, looking beyond Florida, Louisiana comes to mind as well.

Uh, and really over these last seven to eight years, again,

this timeframe we're looking at.

Uh, during that time, Louisiana was, was hammered by four major hurricanes, uh,

just in a 13 month span, uh, resulting in tens of billions of insured losses.

Uh, hurricane Ida, which all of us remember back in 2021.

Uh, that storm by itself was, uh, over 10 billion.

Uh, so this many storms and such a, uh, short period of time, uh,

pushed carriers beyond what they had.

Ever planned for what they had ever tested for, uh, resulting in at least 11

carriers in, in the state of Louisiana becoming insolvent, uh, and many others,

uh, leaving the state in that process, choosing to no longer write business,

uh, in Louisiana moving forward.

Uh, so that's Florida, Louisiana.

Uh, third, uh, top of mind for all of us are the wildfires being experienced

in California, uh, in recent years.

And, uh, for those of us in this business, uh, noticing the headlines

that have come out of that state, uh, here where regarding State Farm and

others, uh, dropping policies just ahead of the wildfires, uh, this year.

Um, those conditions that the, uh, state Farm making those decisions

on those policies really dates back to, uh, 2017 and 2018, uh, where,

uh, the state experienced two major wildfires, uh, back to back.

And at that time, uh, California law was, uh, unique in that it mandated carriers,

uh, could not use any future forecasting and calculating, uh, their premiums and

instead had to use a rolling 20 year average of costs, uh, in order to, to

put those costs on those premiums and get the, that costing approved by the states.

Uh, so you had these two wildfires back to back, uh, in 2017 and 2018.

Uh, but those two years were simply lumped in with the other 18 years

previously, up to that point, uh, many of which were low cost, low lost

years, and it really wasn't, didn't make that significant of an impact.

Uh, so when carriers started doing their analysis and calculating their bottom

lines, uh, they know, knew that they had to make changes, uh, which resulted in

State Farm and Allstate, the nation's number one and number four, uh, largest

insurer and many other smaller ones as well, uh, began in California, declining

renewals of homeowner insurance policies and ceased writing, uh, new, new policies.

Uh, so this was all that groundwork leading up to, uh, all those folks getting

dropped in, you know, 23, 24, who then no longer had coverage, unfortunately,

this year when those Palisades in Eaton fires, uh, came through.

So these were the headlines.

These were the news making stories, uh, across the country

that we all, uh, know about.

Uh, but while these huge losses were going on in these, uh, notable

markets, and most definitely, uh, wasn't isolated there, uh, though.

So in addition to what was happening, uh, in Florida, Louisiana, and California.

The rest of the country was seeing a much higher incidence

of severe convective storms.

Uh, these are the storms that produce high winds, hail and tornadoes and nationwide.

Uh, there have been, when we start, uh, running the numbers, six times as many

billion dollar loss storms, uh, the, just these convective storms, six times as many

of them, hailstorms, tornadoes, et cetera, uh, in the years since 20 or 2001 as

compared to the 20 years previous to that.

So since 2001, we have had six times as many of these storms,

billion dollar loss events than what we did between 1980 and 2000.

Uh, these storms, uh, resulted in over $60 billion in 20, uh, 23 alone.

Uh, so not just isolated to these major markets.

We're start seeing a greater incidence and, and higher losses, uh,

nationally, uh, which has meant that, uh, all this severe weather across

the country has resulted in carriers losing money on their underwriting

six out of the last seven years.

Between 2017 and 2023.

Uh, so 2023 is the most recent year that we have this data.

So be in that six year, uh, in that window there, uh, they were losing,

uh, that's a six year window.

So it, they, they were losing, uh, five out of the six years in that timeframe.

Uh, they were losing, uh, money on their underwriting.

And then, uh, the most recent, uh, data again that, uh, in 2022 and

2023, uh, it's showing that these carriers are paying out $110 in claims.

For, for every $100 they collect in premiums.

Uh, so underwriting this business of, uh, calculating a premium, what you're gonna

cost for this insurance, uh, charge for this insurance, and then weighing that

against the potential for a claim, uh, is notoriously, uh, low margin business.

There's very little margin for error there.

Uh, so this type of flip started having, uh, dramatic consequences,

uh, pretty immediately.

Uh, if you'd like to learn more about this, I recommend acquired podcasts,

uh, episode on Berkshire Hathaway.

It's a good one.

Um, but these, uh, these insurance carriers, they, they, uh, they play this

nice edge on claims versus, uh, premiums.

And here in these recent years with all of these events, all, all of these losses

they were incurring started, uh, looking pretty bad for them, uh, pretty quickly.

Uh, so, and these losses, uh, were started by all these severe weather events.

Uh, but then, uh, they were compounded even more by something we are well aware

of, uh, in our businesses where, uh, since COVID and beyond replacement construction

costs have increased by over 30%.

So the news just keeps getting, uh, worse and worse.

So, uh, just covered a lot of ground, uh, trying to give again some of

this context of what's going on.

Um, but also, you know, I wanna say, uh, the goal here isn't to start painting

this like sympathetic, uh, woe is them picture of the insurance carriers.

Uh, this is the business they're in, and we all have sort of stories

and examples of, uh, them, well, not fulfilling what we believe is their

obligation to an individual homeowner.

But again, uh, trying to look at this greater context of where this,

what's been going on in the market.

At the macro level, the big picture level.

With all of this, it's easy to see that this model paying out 110 bucks

in claims for every a hundred dollars in premiums and losing money year

after year, uh, it's easy to see that this model isn't sustainable.

Uh, and the problem really extended another layer, uh, up beyond the carrier,

uh, where we've all, uh, many of us have seen recent headlines that there's not

just been a insurance carrier crisis.

There's been a reinsurance, uh, carrier crisis, uh, the insurance

for the insurance companies.

Um, before allowing, uh, you know, uh, carriers to write policies in

any state, uh, those states typically stress test carriers to ensure their

ability to survive, you know, a one in 100 year, uh, catastrophic event.

Um, some states even set the bar higher than that.

I think Florida was like a one in 130 year event.

Uh, carriers aren't capitalized themselves to, you know, just be sitting

on enough cash to be able to write, uh, those checks if that event occurs.

So this is where reinsurance comes into play, where insurance

companies go buy this reinsurance, uh, in order to cover those gaps.

With all these recent events in those key states and then across the country

as a whole, uh, those policies, claims against those policies had to be made.

And reinsurers then started sharing in the cost, uh, resulting in reinsurance

costs increasing by 37% in 2023 alone.

Uh, so reinsurance, uh, it's interesting.

It's, it's largely funded by the selling of insurance linked securities,

uh, most of which is generated by selling, uh, a bond called

catastrophic bonds or, or cat bonds.

Uh, with all these losses, in addition to claims being made and,

and cash being outlaid, uh, demand for those bonds thus dropped.

People didn't think he could make money buying the bonds, so

they spent their money elsewhere.

Uh, so in addition to the cost going up, uh, the amount of dollars and

funds available for reinsurance started dropping dramatically.

Uh, so it was more expensive, there was less of it available, uh, and

even some states like Louisiana and Florida, uh, had to even take steps to

start subsidizing reinsurance there.

Uh, so carriers can meet stress standards and, and continue operating.

Um, so it's, it's been a mess.

Uh, all of these factors coming together, it's, uh, created a mess

for these carriers, created a mess on the state level, and, and thus we're

seeing the fallout then for us in our businesses, uh, and our homeowners.

Um, but taking a, a true view of what, you know, what this picture

looked like, what this data has meant, uh, insurance companies are

in the business of making money.

Uh, they obviously couldn't continue operating at these losses.

Again, dealing with these reinsurance challenges, uh, and really the,

the entire infrastructure, uh, of this industry was, was imploding.

So again, we all have our stories of, of carriers operating unjustly, uh,

but changes really did have to be made.

And, uh, the, those areas of the country that, uh, we already covered, uh, the

areas where, you know, uh, the industry was most affected, really started leading

the way in what those changes were gonna look like, uh, for the carriers, the

policy holders, and then even us as the contractors in the mix, uh, as well.

Uh, so when we start looking then here at, uh, what changes were made and, and how

that then started affecting the market.

Florida has really been the most aggressive in, uh, legislating reform.

It outlawed, uh, first and foremost, it outlawed the one-way attorney fees

and the assignment of benefit, uh, contracts that drove all those lawsuits,

you know, against 76% of the country's total lawsuits were happening in Florida.

Obviously not creating a friendly market for those carriers.

Uh, so the new legislation outlawed, uh, the key factors that

drove, um, uh, that litigation.

Uh, and then Florida was the first state, uh, we know, uh, that we

started hearing about carriers, uh, mailing letters to homeowners with

roofs older than 10 years old, uh, requiring them to replace the roof if

they wanted to maintain their policy.

Uh, so this is where we first started seeing that that tactic,

uh, be enacted by the carriers.

Uh, this new legislation, uh, did address that where it limited, uh, carriers.

From dropping policies solely due to roof age for roofs younger than 15 years.

Um, but when you dig deeper in, in what homeowners are finding, uh,

roofs older than 15 years, uh, if you have a roof older than 15 years,

you have to have it inspected.

Uh, and it must pass that inspection, uh, really with an expectation that it's

gonna last at least five more years.

Um, so for all, you know, thinking about what this means for those homeowners,

for all those homeowners with a, with asphalt shingles or cheap tile, uh, that

are 15 years old, uh, they maybe have been bought an additional five years

with, uh, with this new legislation.

Um, but for those more temporary roofing solutions, um, they're

still gonna be in this cycle of replacing, uh, those roofs earlier

than they thought they would have to.

In addition to these couple of changes, uh, the state now allows policies

to include a separate or additional deductible for wind or hail roof

damage, up to 2% per home value, or 50% of the replacement cost for a roof.

Uh, it allows carriers to enact premium increases, uh, more frequently

than once a year, uh, if reinsurance costs increase, so giving carriers

more flexibility to price ongoing.

As mar as the market changes, uh, these are increases to policies that on average

are already at 4,000 bucks a year.

Uh, for the average homeowner, our policy in Florida, uh, law used to

require a full replacement if over 25% of an older roof was damaged,

and now that threshold is 50%.

And, uh, the, this new legislation regulates how contractors can

advertise storm related roof replacement services in Florida.

So a number of changes here we hit on quickly.

Uh, when we look at the list in total, uh, it's easy to see, quick

to see that little of these changes are in favor of the homeowner.

Uh, and definitely none of them are in favor of contractors.

Uh, but the state really had no choice.

Uh, they made the choice, uh, or they made the decision that some insurance coverage,

uh, was better than no insurance coverage.

Uh, and, you know, so as this was going on, they made this choice.

They knew they needed to make the market more friendly for carriers.

Uh, so it was interesting as all this, uh, was being passed, uh, there was a, a quote

that came out by the Florida Insurance Commissioner, uh, in an interview.

He, uh, he had in an event that got all of us in metal roofing, pretty excited, uh,

'cause he came out and said, it's probably time to look past asphalt shingles.

You know, these products that are guaranteed to last 30 years.

They don't last 30 years.

They just don't.

But we, we really liked the sound of that, that got us excited.

Think there may be some increased opportunity down there moving forward.

But a couple of weeks later, he had to walk it back, uh, and he made the

comment, there is no toggle switch to suddenly change roof types.

So that was the end of that conversation or any sort of, uh,

maybe grand legislative opportunity we felt like we had, uh, down there.

Uh, so Florida was most aggressive.

They made all those changes.

It's been a little bit simpler in some of these other states, uh, Louisiana.

Really had fewer options after sustaining, you know, so many losses

over such a short period of time.

You know, those 11 carriers went outta business, many others left, uh, and those

that remained really, uh, what's been a common trend is they stopped writing

policies in the most vulnerable areas.

So if you're gonna get hit by a hurricane, we don't wanna be

the one insuring your property.

Uh, so this really resulted in a dramatic increase in the number of policies held

by the State's Insurance of Last Resort.

Uh, and the law states that as a deterrent, uh, to keep, you know,

folks from, uh, being on that, uh, that program as best they possibly can.

The insurance of last resort has to be the most expensive insurance on the

market, uh, which meant that the state increased premiums by 63% in 2023 alone.

We do a lot of business in Louisiana, talk with a lot of good folks down there.

And unfortunately, we've heard from many of them that they're now paying

$10,000 or more, uh, for a premium on a, on their homeowner insurance policy.

Uh, the state tried, uh, to incentivize insurance discounts by offering some

grants for, uh, homeowners who are, uh, upgrading to fortified home standards.

A fortified home is a building standard that established by the insurance

industry itself, uh, that's very similar to Florida building code requirements.

Uh, so the state made these funds available as grants for

homeowners who are, who are trying to, uh, make those upgrades.

Uh, but the funds were obviously in short supply.

Uh, the discounts were of little relief when you compare them with

what these increases had been.

Uh, and the construction cost to build to these standards was significantly higher.

Uh, so really little traction was made on that front, uh, either.

Out in California, uh, like I mentioned, that previous legislation

that forced that 20 year rolling average, uh, in terms of pricing out

policies, uh, they did away with that.

Uh, they now allow carriers to, uh, price with that future forecast

and under, uh, a forecast on if the prevalence and or frequency of

these wildfires is gonna continue.

Uh, and then also pricing in these reinsurance cost changes as well.

Uh, it's interesting out there.

Uh, the California Department of Insurance also has the option of

surcharging all policy holders in the state and one fell swoop if they

need to, to help, um, cover losses.

So, uh, in a, in a recent year, every policy holder in the state had to pay

50 bucks to help co, uh, cover some of these recent fire losses that have, uh,

have occurred, um, and their insurance of last resort is growing, especially

in, uh, supplemental fire only policies.

Um.

To supplement for the private carriers not wanting to write them.

Uh, unfortunately, it's, it's interesting.

We really have not yet seen the effects on these recent fires.

The really big ones that happened this year, you know, estimated

that the Palisades and the Eaton fires were over $50 billion in, or

excuse me, $20 billion in losses.

Um, and what's been interesting is that California has had to take

the step of issuing a moratorium on any, uh, policy, non-renewals,

any drops and, um, moving forward.

And that, uh, moratorium was for all of this year.

Uh, and that is set to expire in January, 2026.

Um, so unfortunately it sounds like there's gonna be another bloodbath out

there early next year of, you know, premium increases and non-news once

insurance carriers are allowed, allowed to start making those, uh, adjustments again.

So I wanted to cover, you know, some of these nitty gritty, uh, details,

uh, to again, give the picture and, and help us all understand that the

legislative reform being passed, how states are making adjustments to

really address what this crisis looks like, uh, is clearly aimed at making

markets more favorable for carriers.

Uh, states have decided again that some insurance coverage is

better than no insurance coverage.

Um, and remember how I said that, you know, demand for those reinsurance bonds

had dropped, uh, in those years limiting the amount of funds that were available.

As these changes have been made, uh, demand have gone back up again.

People now think you can make money again at insurance.

Uh, so the, the market thinks it's trending in that direction as well.

There is no, uh, light on the horizon.

Nothing on the horizon that, uh, indicates legislation is somehow gonna bring us

back to, you know, full RCV coverage, $500 deductibles and, and guaranteed matching.

Uh, it's simply, it's simply not gonna happen.

And we're really seeing the effects of this nationally, uh, where premiums

have increased by over 34%, uh, between these years of 2017 and 2023.

Uh, and we're seeing these reforms that have been addressed in some of these first

markets, like separate roof deductibles and a CV coverage, especially actual cash

value versus replacement value, uh, being written into policies just in other areas

of the country, just like in Florida.

So these, uh, these changes really hit home for us when, uh, Meredith Miller,

our founder's wife and, and the mother of Todd Miller, our president, uh, she, uh,

received a letter for her, uh, from her insurance carrier last year, uh, after

a hailstorm and tornado hit our area.

Uh, this is a picture of her beautiful 30-year-old, uh, metal roof here on

the right, um, 30 years old, just as secure and beautiful, you know,

today as it was first installed.

Uh, but her, she got this letter and, uh, unilaterally her policy

was changed to include, you know, a separate higher deductible for wind and

hail roof claims, a CV only coverage for a roof more than 10 years old.

Uh, and it denies matching coverage, uh, despite Ohio being a matching state.

So not sure yet how that is legal, but they're trying, so, uh, weighing

I guess how many fights they'd have versus, uh, people just rolling over.

And this is in Ohio, uh, one of the most mild environments in the country.

Uh, I was having a conversation end of last week with one of

our customers in Michigan.

Uh, he said half of our leads right now are homeowners who just received

a letter from the insurance carrier threatening to drop their policy if they

don't replace their roof in Michigan.

This isn't Florida, Louisiana, Dallas, Oklahoma, Michigan.

Um, so what, what does this all mean for homeowners?

How does this math, uh, play out if they're living in a $300,000 home and

need to replace their 10-year-old, uh, roof, let's say, uh, the true,

you know, replacement cost for that asphalt shingle roof is 20,000.

But when you start factoring in some of these other dynamics, uh,

it's first going to be that amount.

It's first gonna be deducted, uh, by what are, whatever that,

uh, depreciation schedule is.

Uh, you know, 17% came out of a policy, uh, I read from a homeowner

in Wisconsin here recently.

Uh, so right off the top, uh, $20,000 to replace.

Um, but we're gonna take off 3,400 bucks in depreciation from there,

if you have one of these 1% to 2% of home value deductibles for roof

claims, uh, just like that, another 3000 to uh, $6,000, uh, comes off.

Bringing the true claim value at the end that that homeowner receives to somewhere

between 10, uh, ten five and and 13 five.

Well, short of the $20,000 it costs, uh, to get that roof replaced, you

know, if it was even approved for full replacement, which we know that's even

more difficult than ever to get approved.

But even if they do get approved for a full replacement, their claim

is gonna be way short of what they actually need to get that project done.

Uh, and you're left standing in the front lawn with them trying to explain

why all of this is the case and help them come up with the difference.

So that's the impact for the homeowner.

This is the reality that really we're gonna have to educate them

on, uh, that they're gonna be facing at some point in the future.

Uh, impact on you and, and our businesses.

Uh, this game has changed dramatically for those of us that have done a

significant amount of restoration work over the years, uh, where legislation

against those, uh, assignment of benefit contracts and, uh, an increased number of

class action lawsuits and, and litigation against roofing salespeople operating

as public adjusters when they're not licensed to do so, really has put the

fight back on the homeowner that they're responsible for, uh, fighting, going

round by round with their insurance company, trying to get, uh, paid

what they're due, uh, for that claim.

Few homeowners are gonna have the time and energy, uh, to walk through that process.

That's just the reality.

I was, uh, working with some folks here recently that, uh, they had a legitimate,

uh, claim probably, but at a certain point they just responded finally with,

to me, with, eh, we will live with it.

Uh, they were done.

They got tired of it.

Uh, and I think we're, we're definitely gonna be seeing that, uh, more and more.

Uh, and what that means is then for our businesses, we're gonna be doing

more repairs rather than replacements.

Uh, whether it is because they only got approved for, for the repair or whether

it is that claim is so short of what the replacement cost is, the homeowners will

only be able to be approved for the, uh, or only be able to afford the repair.

Uh, and we're seeing more and more of our customers contractors across the

country struggle with this additional dynamic of what actually getting paid

for the work that they, uh, do, do.

Uh, I just read a policy that gives carrier, uh, the carrier

180 days to pay 50% of the claim.

Think they're letting that contractor make 50 points margin on that job.

Absolutely not.

So that contractor is stuck in a spot of carrying that job at a loss for up

to six months, uh, creating all sorts of cash flow issues and challenges.

Um, and if you've been paying attention, uh, you heard about the

Acculink a you heard about Acculink, uh, one of our industry's biggest

CRM and project management programs just getting acquired by, uh, Verisk.

I didn't know who Verisk was when that hit the news, but, uh, learned more that,

you know, it's a data, data analytics firm serving the insurance industry, but do you

think they want all the data and ACU links to make you more money or to make their

partner insurance partners more money?

Uh, the writing is on the, the wall there as well.

Uh, and really taking all of this into consideration, taking this

holistic picture, uh, from our perspective, the data really is clear.

The picture is, uh, very much clear that ultimately insurance has changed.

Uh, and the question being asked to all of us is, will you.

Are we gonna understand where this is going?

Uh, or are we gonna lament and hold out hope that somehow carriers and

their just goodness of heart are gonna start, uh, being easier to awarding,

more claims and easier to work with.

That's certainly not gonna be the case.

And we, we need to start making, uh, strategic decisions in our

business to addressing this changing market, addressing where it's

going and, uh, still be successful.

Uh, regardless.

Uh, so to spark some ideas, uh, I'm ex and really hear how someone

out on, on the, uh, on the ground floor in, in dealing with this, with

homeowners are, is making changes.

Uh, I'm excited to have Brad Black, uh, owner of High Performance

Roofing in Frisco, Texas.

Uh, joining us today for, uh, on this session.

Um, Brad and his wife, we've known him for a few, uh, few years now.

Uh, they really are building a great company and, and out of all the

contractors we work with across the country, one of the ones leading

with just a great level of foresight, understanding where the industry is

headed and strategizing accordingly.

So, uh, Brad, thanks so much for joining us today.

Yeah, yeah.

Glad to be here.

So,

I know you're obviously dealing with this day in and day out

in DFW, uh, with high performance, but know you're involved in some,

you know, mastermind groups and other industry connections, uh, here in what

others are facing across the country.

But I guess just start with, was this a pretty, uh, clear, you know, are

you seeing this picture play out, uh, in, in your operations and really what

are the most significant or common changes you're finding in home policies

that, uh, for homeowners that you're working with as compared with what

those policies and, and the process looked like, you know, a few years ago?

For sure.

So, um, in the past, um, so I've been selling roofs in the

Dallas area since, um, 2014.

And then my, my wife and I started our company in 2016, so about 10

years, actually in about two months.

And in the past there would always be ebbs and flows in insurance

carriers, maybe being a little more lax, maybe getting a little tighter.

We'd always know which companies, you know, were a little better than others.

But in the last couple years it's really shifted.

So kind of what you were talking about, um, in the Dallas market too, uh,

specifically just being so competitive.

So I think what happened for us, um.

There's kind of a combination of things.

'cause our market was a very, um, before like 2020 cover

your deductible kind of market.

Mm-hmm.

So most every roofing company just went ahead, found a way to, to basically

get the homeowner a free roof.

Right.

So most homeowners also got used to that.

And so the challenge now that things have shifted, uh, deductibles going

up, um, it's not like they all went up at the same time for every

homeowner and they all realized it.

So now when we have a new storm, what happens is you'll have some homeowners

who maybe still have a 1%, and then you have some homeowners who have a 2%.

But both of them think they should get their deductible covered.

And then, then us as a company.

Uh, back, you know, when the law changed in 2019, we really made a decision we're

not gonna cover deductibles anymore.

And, and usually even before that, the way a homeowner kind of got help with

their deductible was, you know, collateral items that maybe they were choosing to do.

We just do the roof and the homeowner would kind of offset that with

the a CV funds, which is the kind of the legal way to do it, right?

So, um, but a lot of the roofing companies, even a lot of the big

ones, even the ones bought by, um, you know, uh, private equity and

which some of those are even linked to the insurance company, they're

still covering deductibles right now.

Um, and so that makes it very difficult.

But what's happening though is there is a shift in homeowners starting to realize,

okay, there's something shifting here.

Um, I need to do something different.

And so us as a company, our goal is really educating the consumer on why

they need a better roof than, um, and not just put the same roof on.

They always did.

So one of our challenges is breaking that, that mold.

'cause you have a lot of these homeowners, they might have changed their roof

out three times in the last 10 years.

And so they got used to just being like, oh, you know, I'll just, it is interesting

the homeowner's mindset because um, this is what makes them almost not care

who changes their roof and how good or bad they are or whatever, uh, because

they're not paying anything for it.

And so when you're not paying anything for something and you know, or you think

you know, that you're gonna get it paid for again, next time if anything happens,

someone could knock on your door and be like, oh sure, I'll work with you.

You seem like a nice guy.

Um, that's starting to shift.

So we, we, um, so in the insurance industry too, I, I, I have an insurance

broker friend here and actually made a video with him and, and kind of

interviewed him on the changes what's going on with the insurance industry.

So he gets on calls.

In his side being an insurance broker and a quote from kind of a leader

in the, one of the insurance kind of organizations was basically like,

Hey, we're done being a homeowner's, um, home maintenance company program.

Because a lot of homeowners would be like, oh, great, I got a claim, you

know, now I can get my fence stained and new gutters and you know, kind

of fix my house up 'cause I got this money coming in from the insurance.

Insurance companies are like, we're done with that.

And so what I've noticed with these deductibles, 2% we had, we had a homeowner

the other day, they have a 5% deductible.

Good.

That's

great.

I mean, that's basically like, you're not insured.

I mean, you might as well not even have insurance.

Um, and so yeah, we're having to really be better about, uh, offering financing,

um, and the value of having a better roof.

So that way next time there's, you don't have to file a claim, you know,

because you're, you're better protected.

Um, but when you have these other.

Roofing companies still go in around telling the homeowner they'll cover,

or at least a lot of 'em now will just cover, you know, half their deductible.

'cause if it's 2%, they're like, I'll guarantee I'll cover you 1%.

That's kind of what they're doing.

Um, and so what we're doing now is, uh, so we, we kind of created our own

trademark name for the metal roof.

We call it the Texas Proof Roof.

And, uh, really our marketing that.

Um, and then also even when we do asphalt shingles, we're always doing class four.

Um, you know, your, your better rubberized asphalt type shingle because that's

really what the homeowner should do.

And ideally we just have to sit down at the kitchen table and, and show 'em the

numbers and why putting on a better roof, um, and investing in your home now is, is,

is what you need to do because of these insurance changes and the homeowners.

Um.

Oftentimes just haven't heard about it.

A lot of the homeowner's policies have changed and they don't realize it.

You know, they get a letter in the mail, they don't read it.

Um, their deductible went from 1% to 2%.

They have an older and 10 year roof.

So now it's a CV policy.

We're under that more, where now you have a 2% deductible and an a CV policy.

Um, and so the homeowners, you know, you have a, a $30,000 roof, but the insurance

is only paying out, you know, 15.

You know, they, they might get half of the coverage.

Um, so yeah, that's, that.

I, I would say that's the biggest challenges and I think what we're

doing, um, and then that cash flow thing you're talking about, um,

insurance companies just dragging out payments has really affected us.

And so just the financing is a big part.

Um, really if we can have the homeowner just finance, even the whole project, let

them just keep the money and they can.

From insurance and, and we just do the roof.

Uh, that's the ideal that we're really trying to shift to right now.

And the, the biggest challenge is educating the homeowner, um, and,

and getting them to realize that the roofing companies, um, that are

offering to pay their deductible are not their friend, um, because

they're, they're gonna cut corners.

Um, I, I literally, I have a, a friend, literally a friend at church

who works, ended up going to work for a different roofing company.

I was actually trying to recruit him at one point, but now he

works for another roofing company.

And he was kind of bragging to me about how cheap they get their

shingles, how cheap they pay their labor, because when they recruit

sales guys, they're paid on profit.

And so, um, they can make more money, like he can make, he makes more money there.

Because how cheap they get their stuff.

And I even asked him, so what are you guys doing about the deductible?

He is like, oh, all the big companies come deductibles.

That's the way you have to do business here.

Um, so that's kind of the challenges we have.

I mean, they have, um, now like 30 sales guys are doing like 42 roofs next month.

Um, they're like crushing it.

Um, and it's super frustrating to see, it seems like the companies that are

doing things the wrong way are the ones winning right now in, in a way.

I don't know if other roofers are feeling that.

Um, I think there is gonna be a shift.

I think we're in this transition period right now, though, that if

we stick to our guns and say, Hey, no, we're gonna focus on quality.

I'd rather do less roofs.

You know, better roofs have good margin, uh, or appropriate margin anyway.

'cause what's happening is these guys, it's a, it is like a race to the bottom.

Um, yeah, I mean they're, he's just going around.

Finding the homeowners that don't want to pay their deductible and

putting the cheapest roof he can on there is, is really what he is doing.

And I feel like our job is to educate the consumer to not do that.

Um, and because he's just setting them up for a big disappointment in the future.

'cause if five, 10 years from now they have an a CV policy, they have

a 3% deductible, they basically have no money coming for their roof.

And then the roof actually does get damaged.

They have a, a leak, they have to replace it.

At that point, they're gonna have to finance a way more expensive roof

'cause it's of inflation and all that.

And they're not gonna have much insurance help for it versus someone

who put on a, a really good roof and they avoid that, that, uh, having to

replace it or file a claim or anything, um, is, is gonna set them up better.

So that's, I.

Absolutely.

And those are, yeah, frustrations and changes we're hearing from plenty of

other folks too, of, uh, which I, yeah.

Market forces trying to, you know, and competitors push you into

committing fraud to either go outta business faster or end up shut, uh,

sharing a jail sale, sell later.

It's like those are the only alternatives or the only endpoints of, you know,

covering those huge deductibles.

And, you know, our, uh, in the news just this week, there's a huge fallout

from one of the big PE backed groups in the country, home improvement

space that, uh, declared bankruptcy.

2,500 people are out of a job and a bunch of customers lost deposits.

And it is just an absolute mess.

And it's showing those, uh, big companies can be.

Giving the perception that they're killing it.

The volume is vanity type of, uh, reality when no, no profit is

actually coming in and it's just a house of cards ready to fall.

So it's encouraging that, you know, consumers are at least getting tired of

going through these replacements, seeing this upper trajectory and deductibles

and pushing you guys for, you know, better solutions, which, you know,

you can then come and be talking about and really change the conversation

and not just be in that race to a bot, you know, race to the bottom.

But it, how, um, how are you inter trying to introduce that or to

how, and train your salespeople to introduce those alternative options?

Where in the, where in the process do you start trying to have

that conversation with folks?

Yeah, that's been a, uh, I would say a little bit of a moving target.

Uh, just trying to figure that out, be, because if you try to

introduce it too early in the process, homeowners can get scared.

Of the price and think, oh, this company isn't for me, and then end up

going with one of the other companies.

Versus if we can get 'em to the point at the, where we have their claim, we

we're sitting at the kitchen table, we know how much insurance money they have

and we can show 'em the demos, talk about the changes in the industry, and

the homeowner really understand that.

That's when you can, the homeowner will realize, okay, it makes more

sense to invest a little bit more in my home instead of just trying

to, to, to do the cheapest thing.

A good example is literally just yesterday.

We were doing a, uh, a roof in a, um, a, a nice neighborhood in the Dallas

area, kind of a 55 and older community.

And the homeowner that we're working with, he's, I mean, he, he paid

for a couple upgrades, uh, putting a really good rubberized asphalt

class, four roof on with like solar powered ventilation, everything.

And there was a few homeowners around him that hadn't replaced their roofs yet.

And these, these are kind of older storm damage.

And so you're, you kind of wonder like, okay, why have these other

homeowners not replaced their roof yet?

Well, the homeowner right behind him, uh, I was with one of our sales

guys and we both knocked on the door together and she was like, oh, maybe

you can help me, uh, with my roof.

I need to have a repair.

I have a couple shingles that that blew off on the top.

And I'm like, oh, okay.

Have you, and we, we kind of just got to talking and she's like,

yeah, Allstate denied my roof like last year, about a year ago.

Um, and, and then we were, um.

Basically talked to her on how we can get that turned around and,

and, you know, through appraisal process and things like that.

'cause she just didn't understand that she just, Allstate came out denied it

and she just thought, okay, well I'm just gonna have to pay for repairs now.

Hmm.

Um, well one of the first things she just assumed we were

gonna do is cover deductible.

She's like, oh.

And, and a lot of sales guys right away that, um, that don't

cover deductibles, they would try to explain it to her right then.

Like, oh yeah, we follow the law.

We're not gonna do that.

That would've totally scared her off.

We, we kind of just ignored when she kind of made these comments that

she kind of assumed we're just gonna cover it or it's gonna go away because

we really need to get her to the, you know, kitchen table, sit down.

Like, and sometimes as a salesperson, they feel like if they spend all that

time, like meeting with the adjuster, going to appraisal, getting the roof

paid for and helping this person, and then they would get there and

then they would go do someone else that would cover the deductible.

Most homeowners actually wouldn't do that.

Um, just because you, once you spend that much time, build that relationship

and they see that you help them get to the roof paid for, then when you

sit down, you explain how it works.

I feel like she would, um.

End up just paying the extra amount, you know, or her portion of her

deductible, you know, 'cause we do some complimentary upgrades.

So as long as they pay their deductible, they're getting a class

four roof, um, and they're getting the insurance discount and all that.

So it makes sense for them to do that.

But to try to explain that to 'em when you're just standing on

their porch the first time is, is usually a hard way to do it.

And so we're really training our guys to like, hey, just take 'em through

the process, serve them, help them.

We're gonna tarp her a roof, we're gonna help her get her claim approved,

uh, through just doc, you know, our documentation and all that.

And then we'll, we'll kind of cross that bridge when we get there.

So that, that's kind of what we're having to do.

Just so the homeowner can go through and build the trust, educate the homeowner,

and she can realize times have changed.

'cause she just thinks it's just like it was 10 years ago.

'cause she hasn't replaced her roof in over 10 years.

So she's thinking that.

She'll just get her deductible covered.

So that's, that's her mindset.

Um, really interesting.

And it makes total sense.

Um, you know, you're not asking the customer to make decisions

until they have the information they need to make that decision.

So, and, you know, just delaying it and getting all the pieces in place

to give yourself the foundation from which to have the best conversation.

So, and that's encouraging for all of us too, that yeah, have a little

faith in the humanity of your serving.

You know, you'll have the occasional one that'll leave you hanging,

but, um, most folks, they're gonna understand what you've done for

'em and value the relationship they have with you along the way too.

Yeah, and I think another thing too is once you sit down, you

can like show them how if they finance the, the out-of-pocket portion that

they have, that the insurance discount they're getting in a lot of cases, covers.

The payment on the financing.

And so their actual net out of pocket can actually be zero in a

lot of cases, but also in the future is protecting 'em more to actually

save money in the, in the future.

So if they just really have to see that times they can't keep, and she noticed,

she said her deductibles gone up since even she filed that claim a year ago.

So that also gives a sense of urgency, why not to allow, 'cause really

insurance owes for that claim that she had already filed, which the deductible

would base be based on that, what it was a year ago, not what it is now.

And so if she were to wait and just do nothing and pay for the repair, not

only is she paying out of pocket money to, for the repair, she knows she's

gonna have to replace file a new claim.

Maybe.

Maybe she wanted to wait for her next storm.

Her deductible might be double at that point.

What it is, what it was a year ago.

And so right now is actually a good time to create a sense of

urgency for homeowners to, if they have damage, they shouldn't wait.

They, they need to just go ahead and do it and then put on a better roof.

So get your roof upgraded now so you're protected for the future, so

that way you're not dealing with a 3% deductible, you know, or, or 2% for sure.

Mm-hmm.

Um, a lot of the carrier, I mean, I've heard stories about State Farm

even trying to leave, leave Texas too, kind of like they've been

abandoning California and a little bit in Florida and stuff too, so, um,

well, it's gonna be interesting and those guys carry a

lot of weight and so they have seen that when they hold back from these

markets, these mark, you know, the, the states make changes to get them

back 'cause they don't want the alternative of not having that carrier.

So they may start using it as leverage too, but.

I'm just curious on that, um, just spit balling, you know, what, how, how much

more frequently are you, you know, having to take jobs to appraisal and, you know,

how much more frequently are you guys having to rely on, you know, supplementing

to get the profit you need on a job?

Uh,

yeah, I mean, I would say, uh, kind of how we do it now is

we always have to supplement a job.

I mean, I would say 90 plus percent of the time anyway.

Every now and then you'll have where we meet with the adjuster and he writes up

a, a appropriate amount that that works.

Uh, but that's pretty rare now that it used to be probably about 50% of the

time that would happen and the other 50% you're really relying on supplementing.

And then we never had to go to appraisal.

Um, but in the last two years and then, uh, up to this year, I would

say 50% of our claims were taken to appraisal to get, to get paid.

So we might.

Initially look at 'em and then, uh, go ahead and try to supplement initially.

'cause you have to create a dispute anyway.

So it's like you need to have an estimate sent to them with documentation.

And then when they come back basically saying, Hey, we're not paying for that.

We, we used to try to keep supplementing it and we let it sit, you know, for

30, 60 days and then go to appraisal.

But now our time and process just got ridiculous.

So now what we do, it's basically about a, about a 10 day timeframe.

If, if we send in our estimate and they reply back one time, basically

denying most of everything, we just immediately just send an appraisal.

We have our appraiser reach out to the homeowner, um, build that

relationship and then send in the, uh, request for appraisal.

Wow.

And what happens?

What happens sometimes is they go ahead and do the appraisal and they

get it done relatively quickly.

Or the insurance company says, whoa, whoa, whoa, before you go to appraisal,

you know, let us look at your supplement again, or let's do a reinspection.

Um, I just had one recently where, um, you know, it was Allstate.

They, they said, Hey, we'll do a re-inspection.

The guy that came out was great.

He looked at everything and, uh, wrote up a very fair estimate that we

really don't even, don't even have to supplement, maybe a few little code items.

Um, and then you were good to go.

So we didn't even end up going to appraisal, but we

had to threaten appraisal.

The homeowner did, you know, the homeowner had to take that step.

Um, so we're having to do that probably 50%, maybe even more of the time.

Which

that, you know, 10 years ago when you started and we were, you

know, we've been working with folks too.

You didn't hear about that hardly ever.

So No, I didn't even, I didn't even know what

an appraisal was 10 years ago.

Yeah.

Me, if someone asked me what an appraisal was, I couldn't even tell 'em.

Yeah,

no, and that's obviously, uh, we get really excited and have

some vested interest in the Texas Proof Roof program with our castlewood

shingle and trying to provide folks a, a better product moving forward and

just getting out of this constant cycle.

But, you know, not only is it's better for the homeowner, getting them outta this

cycle, but then it's a game changer for you folks when you're able to do all that

work, all that extra work you're having to do no matter what now on a regular basis.

But if you can convert that into a higher margin, you know, bigger ticket item

like a metal roof, build a whole lot more value, you know, you can be rewarded

for it and, uh, you know, totally, you.

Change the conversation and, um, from the whole, yeah, raise to the bottom,

cover the deductible, all of that.

So no, appreciate what, uh, what you guys are doing and building and, you

know, have appreciated the chance to learn, learn from you along the way.

But the wrap before we wrap up here at the end, uh, we'll give everybody a chance to

ask Brad questions and, uh, here as well.

Uh, so Brad, thank you again for being super gracious and

sharing all of that with us.

Yeah, my pleasure.

So we just wanted to finish here with a couple of quick ideas and

to, uh, in addition to, you know, sort of what Brad has been sharing on, um,

things you might wanna start thinking about in your business of responding to

these changes, uh, in the market and, and how we're going to be able to still

accomplish our goals moving forward.

Um, in addition, Brad touched on it here of a video that he

had with his, uh, insurance.

His friend in the insurance business, but really love what they're doing as

well of in their marketing, taking a very educational approach to get out in front

of this with consumers of, uh, building a brand of that expert who cannot come

alongside and help them navigate this, and then help them also avoid it in the future

with these, uh, more premium solutions.

Uh, so definitely under, uh, recommend this, recommend that you follow Marcus

Sheridan, uh, get read his book, endless Customers, and, um, really start leaning

into, uh, taking this educational approach, answering the questions of

your customers to, uh, become the known and trusted brand, uh, in your market

and the one that can best serve them.

And encourage you to start thinking through, uh, what that opening the

conversation to, uh, more premium options looks like in your sales process.

Uh, again, for the interest of the homeowner and your company

of, uh, getting, uh, sort of insulating yourself to, uh, from

this, uh, this current arrangement.

So wherever that falls in the process, um, in the sales process, you know,

maybe some, uh, scripting like this where you ask, are you aware of any

changes to your home insurance policy that has affected your roof coverage?

Uh, and regardless of whether they say yes or no, uh, following up with something

like, you know, unfortunately we're working with more and more homeowners who

find their insurance coverage falls short of the true cost of replacing their roof.

Uh, would you like to consider options or once we reach the point,

know what your claim value is?

Uh, would you be interested in considering options that might cost a

little bit more, but leave you better protected and eliminate the need to

save for future unexpected expenses?

Or another version of this that we've, uh, and others have been using, uh,

something like, because of these changes we are all having to consider ourselves,

uh, to some degree self-insured.

Do you want to do that by investing in a better product now to

leave yourself better protected?

Or do you want to be in the position of saving a little each month

hoping that you have enough when the time comes, uh, that you need it?

With this type of scripting, you can start just introducing this idea of

maybe there is a better way to do this than just replacing the roof with

exact exactly what's up there now.

Uh, and, and really help homeowners become aware of a

problem they didn't know they had.

Uh, Brad said it, most homeowners aren't even aware of these increased

deductibles, a CV policies, all of this that is gonna have a significant impact

on them and change what this looks like now versus the last time they looked

like, uh, they replaced the roof.

Uh, so making 'em aware of that problem, if you can then solve the

problem, uh, you then build a whole lot of value in your solution.

Uh.

As a metal roofing manufacturer, we, we obviously believe that

metal should be depreciation proof.

It'll perform just as well 30 years or 40 years from now as it does today.

Um, but that's probably a futile fight with the carriers at this point.

Um, what, but, um, what we have had success with is, is helping

homeowners who get that letter from the insurance carrier saying you need to

replace your 10 or 15-year-old roof.

So we've outfitted some of our contractor partners with a letter, something

like this, that, uh, they can give homeowners that talks about that.

Uh, the roof hasn't degraded, it carries the same warranty, it carries the same,

uh, testing data and performance standards at year 15 as it does at year zero.

And replacement isn't necessary with our lifetime non prorated

warranty for that homeowner.

That becomes a pretty simple conversation, uh, and we've had

a lot of success helping folks.

So if you can get out on the front end of, again, helping them avoid this in the

future, uh, that, uh, can be some value.

So if this would be of interest, get with your territory manager.

Happy to help, uh, with that as well.

And then, like you heard, uh, from Brad, if homeowners are having to pay

more than they expected to pay or.

What they, you know, never expected to pay.

Uh, then we need to offer financing solutions to help cover that gap.

Uh, and if you're already getting them into a monthly payment, uh, some upgrades

to increase that monthly payment by a little bit, uh, is, becomes a much

more, uh, interesting conversation, uh, rather than, you know, talking

about gross dollar numbers and, and thousands and thousands of dollars.

Uh, so it cannot encourage everyone enough to get set up

with a good financing option.

Here's some examples of companies, um, we've known our customers to work with.

If you want a more detailed recommendation, uh, don't

hesitate, uh, to reach out and we can, uh, help you with that.

We have no in interest or, uh, we, no kickbacks here, uh, just,

uh, passing along some connections that we've made over the years.

Well, thank you again for making the time to join us today.

Uh, we so greatly appreciate our relationship with each of you and, uh,

hope that again, you'll leave with a better understanding of what's led to the

market, where it is today, um, where it's.

Projected to keep going.

And, um, maybe some new ideas for how you can respond to it.

Uh, again, we're not successful unless you're successful.

And we would love for this studio, the start of a conversation on,

uh, ways we can support you.

Thanks so much for tuning into this episode of Construction

Disruption from Isaiah Industries.

Uh, hope that this overview of the changing insurance market and some

of the ideas that were shared, uh, helps you, uh, begin to lead your

business, uh, through these changes, uh, to ensure that you still accomplish

all your goals moving forward.

If there's any way that we can ever help you do that here at Isaiah, uh,

please do not hesitate to reach out.

And please watch for future episodes of our podcast.

We are always blessed with great guests.

Don't forget to leave a review on Apple Podcasts or give us a thumbs up on YouTube

until the next time we're together.

Keep on disrupting and challenging those in your world

to better ways of doing things.

And don't forget to have a positive impact on everyone you encounter.

Make them smile and encourage them to simple, get powerful things we

can all do to change the world.

God bless and take care.

This is Isaiah Industries signing off until the next episode

of Construction Disruption.

This podcast is produced by Isaiah Industries, manufacturer of specialty

metal roofing and other building products.