Insurance and Commerce Committee- Senate and House

Won't call this main order we're running a little behind their still another meeting going owner crawl still the wall here in so well we're going to start on without those there are several of them that serve on this committee that are over there as well take care of some other business for the state most of up they were saying I appreciate your own coming here today. The to give testimony in this one a letter be known to the to the committee we had asked several insurance companies to come in speak for themselves they basically told us no without responding with some of the ideas and suggestions in rules implementations for their policies that they have. They have come turn her head the other way on us if requesting him to come I want that to be no rare one here it has been mentioned by some others there may be some other repercussions that we take on those that did not come just to face the base before us because today with the friendly meeting then we call to have them here just cannot explain to us what they're seeing in the insurance companies. With our business and they did not come in and a sale is coach here this committee take up into that he and so will just add from from this point on what we're going to do where there may do so painters or some other methods may all from one more friendly. Welcome to come here and speak before us see if they turn their head once again but time will tell what we do on that so that being said will get started in my culture representative magics and thing when I had. Thanks in adhere I just want to thanks there are hill for bringing this to our attention for bringing everyone here I do want to read it reiterate what he said very disappointing if people are choosing not to come here or just an information gathering process at this stage so certainly we're going to continue to talk about this I do want to bring up one other thing that's not on the docket for today but something that came to my attention frankly through an arkansas business article few weeks ago was hospital reimbursement rates in arkansas and how low they are again I know we're not discussing that today but hello they are in comparison all of our surrounding states so that's something i'm getting more data on at this stage but that's something we're deafing with to consider continue to have a conversation about so if there's anyone out there who's listening or wants to discuss that certainly want to to be involved in there thank you they're being said runner asked everyone got a copy of the minutes we need to go through those if you haven't already done that in itself. Approve those minutes. I have a motion in the second old and favor say the poll same sign they're being said minus have been approved. There are now we're going to move to here the interest parliament get mister alama plain commissioner to come up here in your through a. Some information with us. Your would please earn issues of the records. However it's alan cleaner state insurance commissioner and with me chief deputy insurance commissioner russ galbrith and director of our compliance division mr jimmy harris. If you've been around this might just most of you have you probably interacted with them and other colleagues uh at the insurance department appreciate their support I thought that I would give you some prepared comments about the sort of what we see is the state of the insurance market particularly the home owner's insurance market here in the state then if you're specific i'm sure you might have some specific questions and and comments and we'll slightly address those if that's not okay mister well is if you're as you're likely aware of property insurance premiums have been increasing significantly and anytime this happens there's there's a burden on almost every or candidate and we're sensitive that if the insurance department. At the insurance department we review rate increases and also policy coverages offered by insurance companies license to do business in our state we always make the utmost effort to ensure that arkansas will have a well functioning insurance market and. I with reasonable availability and affordability and those are a couple words you will hear me say probably a couple more times of availability and affordability a review of insurance news would quickly illustrate that arkansas not alone as we face these unprecedented conditions in our in market behavior. So over the past year. Here in arkansas review of financial data submitted to our analysts and we have a team of financial analysts and examiners who do nothing but review the solvency of insurance companies doing business in our state will these and analysis consistently indicated the storm related claim expenses had a significant significant impact on the solvency of a number of our insurance in our state and bringing them dangerously close to no longer offering coverage shower citizens in fact one company you may have heard united home insurance of per gold arkansas one of our few arkansas domiciled insurance companies was taken into receivership are department due to insolvency. We are now paying the outstanding claim to our state's property in casualty guarantee find and so that those claims are being taken care of the storm related claims of twenty twenty three were was the world said apparently appears to be a direct calls of the demise of you not at home and two other carriers with arkansas policy holders camera and mutual and first auto insurance or also and receivership in our are guaranteed final simply paying claims on on those carriers as well they are dominant solid and other states of the regulators are primarily responsible for them but are guaranteed fine will pay the outstanding uh claims on those as well those two companies there another company couple of companies has just simply ceased operating in our state no longer offering coverage and they're citing that the weather patterns are presenting more wrist and they are willing to ensure. Other companies are limiting the number of new customers they choose to insure in arkansas in order to limit the amount of nurious they take on. As an insurance company and some of their decisions are being enforced on the bottom of their reinsurance carriers who were having a less of an appetite for stormer the storm related risk that they're in our state. As of december thirty first insurers have paid over four hundred and eighty nine million dollars from claims related just to the march thirty first tornadoe and so this and this amount is in addition to the subsequent severe weather and hail storms that have that came about in the several weeks and months after that. So nationally the severe convective storms. Thunderstorms tornadoes hail storms they have accounted for sixty eight percent of all whether a related losses in the first half of twenty twenty three resulting in a financial impact of thirty five billion dollars. So thinking about the insurance carriers in the health of the insurance carriers we look at loss ratios at when we so the with anything over a hundred they're taking their paying more out in losses than they are in bringing in premiums so in twenty twenty two the average loss ratio of all our insurance companies writing home and owner's insurance was a hundred and twenty one percent there was twenty twenty two and a twenty twenty three is a hundred and thirty one percent so on the average our insurance carrier paying out more than they're bringing in this is kind of simple math better that some so we'd look at those ratios when they're trying to justify our rate increase because it speaks to their solvency in their ability to stay in business. The. So as we discuss strategies for arkansas consumer premium relief we're all were in impacting being impacted by more than one carrier reference certain deductible and claim settlement restrictions that arkansas has an our market that they that were not present in surrounding states so after discussions was surrounding and similarly situated states the department confirmed this to be true and we issued bolt in seventeen twenty three lifting the prohibition. In arkansas and separate on a separate deductible for a wind hail damage and broadening the time frame on actual cash values endorsement for windhail damage roofs that could be added to a policy and you may have seen or heard about this bulletin and and and being issued previously arkansas allowed an insurer to offer an optional actual cash value acv settlement endorsement for went hail damaged roofs over fifteen years old going forward arkansas will allow a mandatory endorsement with approved notice to allowed a while so don't own replacement cost policies for windhail damage roof said age seven any insurer choosing to add the endorsement to policies must submit the notice to prepare approval becomes a jimmy shop in the in the department will ensure the changes are boldly noted in any communication so not lost in any fine printer policy documents we don't want to surprise this to our consumers. These policy changes in the higher and the allowance of her rate revisions should help stabilize the market and however we will continue to see some property insurance home owners rate increases through twenty twenty four we think we always knock on wood that that there will have a better weather a year. So hopefully with a return to historical norms of frequency and severity the allowed rate increases will have the effect of softening a really hard market while maintaining robust competition among the arkansas insurers which gives our consumers more choices from with the seat coverage and to shop around for better rates we really want to avoid more carriers leave in the state or become an insolvent. Forcing us to take them into receivership. So while there market conditions that are driving this along with the other state regulators at the national association of insurance commissioners the nac. I wanted to dig up into this a bit deeper because it is a nationwide problem problem and so just this past friday the ic announced that it was issuing a property in casualty market data intelligence call which will cover eighty percent of the us home owners insurance market to better understand the market dynamics. In this effort would gather data for more than three hundred property insurers operating locally and across the country. The template that they're using the we're using and directed to our insurers will ask for data at a zip code level on premiums policies claims losses limits deductibles non renewals coverage types and all asking for seventy day to points for our insurers to report to us so ultimately we hope to answer what's driving affordability in availability. Our insurers changing limits deductibles and coverages in the policies have insurers concentrated they're underwriting exposures and geographic areas are exposed to catastrophic events how has the competitiveness competitiveness competitiveness of home owners markets changed and our insurers moving in to an out of certain geographic areas. And how is the cost of residential home motors insurance changed by geography. I saw a ninety days the insurers will have this information to the NAIC and though all together the data will come up with some conclusions for us to work with an outshould be happy to get back to you to as this data is compiled with the conclusions that we come up with at it from this level any state regulator myself included has ability to request data from insurers and you'll hear from the trade associations here today. But we were fortunate to need to be any ic was able to give us a unified way to do that because the with almost every courier in writing in arkansas rights and other states as well so we can coordinated our effort so i'll i'll be in there with my my prepared comments and certainly glad to answer any questions receiving comments you have my colleagues here will be happy to answer questions too so. Thank you commissioner. Appreciate that would you explain me how you all have going from the unit we went from thirty to twenty nine to fifteen fifteen the same what kind of data digital use to come up with that number is grabbed out there well there there were some analysis to written on jimmy talk about that just a little bit late I mean makes her understand your sign thirty when there's amount done at the roof replacement act on the roof okay several years ago it was a thirty year route we back after twenty year roof now might be a little bit off of my years and we're back off to the fifteen year attender now we decided seven years how do we come up with that and how can we say that's good for the consumers okay. Those are good questions because there are a lot of confusion with the bottom. Um. I would say at the time this bulletin is issued. Eighty five percent of the policies issued and arkansas already had a roof schedule of some sort on. Before we made any changes to the current state of our. You know rules for roof schedules. I talked to I want to say twenty two a surrounding and similarly situated states I didn't include coastal states outside of our border state and I didn't include states were winning hail was not a period. Out of those states I found one west virginia that prohibits any type of roof settlement on a replacement cost policy. Also I found that arkansas was more restrictive in their roof in their allowance of a roof schedule in all but two states the at those states would be alabama uh allowed to schedule at ten years. And georgia could only have a mandatory schedule after fifteen which is where are. Where we were before we allowed this relief with bought them. Yeah. Most states that are surveyed allowed the application of this roof schedule at a zero. Um. I would say wireless he taxes allowed it at five. Alabama like I said was a town. Seven felt like. Okay a compromise looking at the risk at the roof schedules that were submitted to me. I would say at ten years you know there might be fifteen. Fifteen percent appreciation I mean it's not a large amount even at that evening thirty year old appreciation which I would consider it appreciate it on a thirty year single it's only at fifty percent on most schedules. This. We I don't know if it was clear that we we allowed. An optional placement of this roof schedule to all insurers and when their roof was ten years old. An insurer could offer this for you know. And then they could mandatorily place it on the policy at fifteen. The only changes they can now mandatorily places in the policy at seven worth proper notice to the insured I have to review every single notice form that accompany is going to sound for instance here is here as an example of one and bright red letters that I required them to. We are changing how we paid for a storm related them and I wanted on a single page. So it's clear the changes that are happened. The other change is a deductible. We allow a. Separate. When hail deductible now. Previously required every insurer to offer an all parallel deductible one one number so I have five hundred thousand dollars this is reductible for all period. Arkansas was an outliner and requiring company is to do that they current place and all per operate i'm sorry separate wind hail adopted. On all their policies on all surrounding states. Was that means for the insurer it is. For when in hail damage roots if there is a one percent adaptable that's one percent of your coverage I mounted dwelling them out the amount you have on the structure three hundred thousand dollars then your roof deductible for wind and hail damage would be three thousand dollars okay. If if your house you know a samage bar fire then there may be some other all parallel deductible of a thousand or two thousand whatever whatever that consumer chooses would apply to that period but only wand and hail damage on roofs and exterior surfaces. Final side. You know most most of them are schedules but there are some limitations on cosmetic damage which would be the bo. The. Yes thank you for that critic will go to central margansa. Thank you mischairman which can be sure in france thank you for being here. I want to do follow up and this is partially a better particular case mister ju assisted on a machine statements with the head of problem that they're about two hundred and thirty percent increase in their premium. And this is elderly channel money in his wife that it was quite up a burden in their mister stands in the art in the audience or thank you for helping him find alternative coverage which worked out but i'm a more concerned eight times you you get a case like this where someone is head in extremely high increase in their premium for but not up big house type thing is this is there a trend here that the department is seeing or was this a more isolated incident and end I don't want to get too deep into the details but you're aware of them and I just want to see is is this something we're seeing as a trend as opposed to count about one off thing and I understand how companies might have certain kinds of claims we were tough talking to colleague earlier about a hurricane or tornado if you're insuring a whole bunch of houses in. And sender call wheels are here but in win and the tornadoe comes through and then you've got a disproportionate amount of claims and in financial hit to your company because you happened to do a lot of people in that area that is understandable but i'm talking about from a a more geographically dispersed or other otherwise dispersed trend of of claims coming in and and if you don't have ready answers certainly we appreciate it if you're providing them but I was just wondering is this something that charles saint lately. I'll briefly address that me may have some more granular detail but it's horse that type of percentage of an increase I think that's extraordinarily high was probably a good call to to shop in around for sure it is and why a particular policy was attributed that that that said a facts is definitely a it's an underwriting question that we don't always know the answers to some of our prints from the trade associations might be able to explain why some of those changes happen so drastically but I don't have a good answer for you that I would say it's not a trend that we see in terms of just the right increases would you I would say well first of all in arkansas we do not allow insurers to get offer risks solely due to a weather claim. So if a tornadoe goes through literal and wife sell houses and rips off a bunch of roofs those insurers. Are required to stay on that risk if that's the only claim. In some situations there and maybe claims there may be water claims there are maybe fire claims theft claims other types of claims that are going to assess they are sorry surcharge. By the insurer and sometimes these insurance are going into a claim with excellent claim history but on their policy there might be a twenty or thirty percent claim free discount which they're gonna lose if it's a far theft or mysterious disappearance claim they're running at a surcharge thirty or forty percent. In a room especially now. The insurance value that the the one on their home is most likely going to be increased by the insurer caused some of these insurers found that several other structures were under insurer. Um. And there's probably gonna be a write increase so you lose a discount you get a search hard you increase the insured value and you get a ride increase all of a sudden you're you're you're getting some pretty pretty monster percentages. The. I would imagine uh there will be some similar situations and if anybody has a constitutional that is in that situation please contact us i'm in that that is what they pay us for and that's what we're here for. Okay thank you do we have left open from a march or thirty first to. You know I would say we did a data call on that and we had data through i'd see six months from the about. I think that ended in november november thirty thirty first at that point I think there was probably ninety five percent of of auto claims closed uh roughly ninety percent personal lines home owners claims close most of the claims that remind up in our are going to be. Large commercial claims that that you know we've got engineers and insurance companies go showing back and forth. That the vast vast majority of those claims were handled quickly and and I gotta say they they did I found tastic job. Getting money into the hands of our kansas as quickest so he said home ownershire ninety five percent I add so bad now personal lines is is somewhere between and i'll include auto and home and there is going to be somewhere somewhere close to ninety five percent what was the hold up on the large commercial properties you know people people work there they have jobs for the insurance company too but i'm also for that working man out here I absolutely you know when when you're doing with two and three and four million dollar claims there is going to be a lot of. Often times attorney involvement on on the climate side to ensure that they are getting. Uh everything they're entitled to of the policy but larger claims do do take time especially when it's not a total loss you know you're looking at at roof you're looking at windows trying to decide or how much of the structure is damaged how much is usable you know how much is it the summer left open because they're paying for for loss of use you know any number of different. Different coverages thank you for that sir representative or something thank you mr chair and I don't want to get a head of your presentation do you plan to address this mitigation resiliency models are you finished presenting. If they are in coil well no just just in general what other states are doing for mitigation research and see encouraging people to be all back with more resiliency and as some states are doing grants that are funny by insurance department some some people are doing tax credits is have you discussed recommending there to answer the discussed it among ourselves and and I think I have passed along to to some member along the way the it's very popular around the coastal states and for obvious reasons okay home is in the process of passing a reservation model now or the answer he act solely landlocked state and unknown that that that's doing it and what that does is it it it. There would be money that the department would have that I think alabama does a ten thousand dollars grant so you with a yeah that twelve oh one on certain item portal opens and and people replying for the fees ten thousand dollar grants and they go very fast and people will have to use them to to fortify the roofs to certain standards not yet called there is actually a fortified standard that is out there that makes the roofs more resilient in there some other aspects about the structures that you can use these these grant money that represented fergusons referring to and and that the other side of that is you have to have a contractors qualified to do that can you shed along a more color on that or for those of us who are familiar with like you're referring to yeah and in in in alabama they call it strength and all about my homes and it's so it's a program administered by the insurance department there mississippi has has one as well and that's that's really. And if the theory is that that uh necessarily did that the data that I wanted to have before I recommended to you will it drive down rates I think what it what it does as it makes makes the homes more research to to to wind particularly and then they're less likely to have to have to file a claim with their insurance company which I guess keeps the rates that rate state a stable and so that's and don't have the data from alabama and how that works i'd like to have that for proof of I recommended it to you really to do anything to add to that we've we followed that through our coastal states are fair amount yet just some examples of that would be uh they have the thank all roof straps that they attach to the roof that helps strengthen it they use is different types of nails maybe longer nails or wider nails or something like there may be more nails on singles four to five garage doors it's really just trying to strengthen the house so that there is no penetration of wind because once there is some type of opening and a house usually the house goes we've seen videos from the there's a there's a storm center in south carolina that they they do tests on and once that that that roof is lifted or once that door is breached then usually the house goes and so this gives fox money to either that you know and in in new construction or to to remodel to add those things so that it helps make the house more resilient yet I went we had an apartment in ween that had the tornadoe it was about ten percent more to do the ringshike nails in the seal in all that but there's no concurrent compensation from insurance they're just going to pay you for a normal roof so I know these programs have worked you know per app having my impression is they work pretty well and other states I guess the question is we whether you go with a great program or a tax credit program you have an opinion about that. I would say I haven't seen how the the tax credit program would work i've had the the grand program described to us a few times and it it's the the people in my market counterparts now about most in great praises to it about the program so would be happy to get them out the legislation to to leadership the much you see what we're talking about see what what to my one do it would involve you you know money in a bit of a bus administering it probably there are two to the grant program and and then there's against there's also a certification like I said to vendors who would would to do that type type of work but it is definitely worth looking at. Okay thank you i'm an assured more color on them because II was a little familiar with that I knew there was a lot of members out here that were not from where you're with it and talking with channel a more light on that in representative for us and answer when the questions that are that I actually had was but the increase in cost on she's a roughly ten percent for roof so. I look and directly somewhere probably point ten and twenty percent to do your entire house maybe when only twenty five. You know there's there's different levels of foreign if others forty five roof was forty four at home so there's different levels of certification than all this can be seen on your quarter for homes is what I don't familiar with on that part of it where I was going to get most figure figures from. The representative period. Thank you chairman mr commissioner appreciates all being here couple questions you brought up the insolvency on some of the companies do you know the estimated amount of claims that are remaining from the insolvent companies and then all another note of that since they're being paid out the guarantee find what is the balanc. I don't have the answer to either of those questions about their great questions we're not worried about the solvency of the guarantee find that I think we're this what i'm my deputy receiver mikes are going is told me but and then the domain one we're working down as the united home one and in there's so we're continuing to turning out payments every day on that but I don't he would know of the top of the sand and income with that information i'm sorry that's okay near the follow up this chairman on its is where the company's changing their their policies the endorsements. Is a signature required from the consumer wind and endorsement is sent on renewal such as. You know a changing year deductible on the winn and hale from you your standard deductible to a percentage in making sure they understand it's a percentage of the coverage and not a percentage of the claim. I've been in the interest business thirty eight years and I don't do pay and see any more than god but I had more constituents call me during the tornadoe to unto explain their policy to then i've ever had before but when I even had claims and that's one of the main confusions they always thought it was a percent of the claim not the percentage of the coverage though thank you that's that's also a very good question. The percentage deductible I think a lot of that confusion will be cleared up thanks to yall during the last session when you pass the bill requiring any time and insurance company applies any type of percentage deductible that that percentage is also next to it and I am out of case so there is it's it's going to be very clear how much it had doctor awareness. Uh regarding a signature no when it a policy in casualty policies are our endorse which happens all the time for different. Different coverage changes generally that is you know the the the consumer is notified and at least thirty days. The. Should be well marked we expect insurers to work with every one of their producers to so that they understand what's going on so if they can convey out to their clients we are doing speaking and gaugements out you know big or or and I see what's the other one they far you know trying to try and to interact with agents making sure that they understand what's going on in the market and so that they know that they can cost or not. We're not we're trying to make some very available to every insurer and and producer and. The. Representative richardson. Thank you mischair so i'm on a preference this with just a bit of hopefully not too long of a story apparently in my neighborhood where I live in northwest arguments i've been fill we've had a large number of hail claims from a storm that happened in april not a typical i'm sure but i've been beaten up over the last eight months or so by a number of constituents in that area specifically relating to a an individual insurance carrier and and i'll share that in an offline conversation at some other point but II guess my question comes around to these these individuals have had to file refill reserves refile and go through multiple times with this specific insurance carrier in order to to finally get a resolution and and repairs done to their individual property whereas other individuals in an adjacent home either side of them in one case or right behind them in another case it's an immediate response from the insurance carrier one adjustment and boom they're done the they're taking care of the repairs that is at a typical kind of situation this is like I said this is an a specific carrier in our area that that that is. Every single person that's come to me has has said this is the this is the company i'm dealing with this is the problems that i'm dealing with i've spoken to multiple roofing companies they all say the exact same thing if you've got this carrier you're going to have this problem with them i've spoken to the carrier that are the insurance provider themselves that got me absolutely nowhere with that and I have a number of constituents that i'm still trying to help through this process so my question I guess is is this typical is this AAA a behavior that we should expect from providers or just something that we can and how do we address that. One of the no no that's not typical and we would expect an an encourage any constituent of yours that's having that experience to reach out the house. Again that that that's what we're here for we will contact the company work through that individuals claim and comply and get them an answer. Yeah. They're here to pay claims that that's what they're here for now and if we're not doing that and we should have conversation right so so please let us know what what's going on. Okay thank you very much yeah I just I just like to add just to have it on record our consumer services division is there for the consumers of are concerned and if they have an issue like that they can always call us and in at some point they can call commissioner call me call jimmy but our our number is one eight hundred eighty five two five four nine four and that's the consumer services division at the department and they take hundreds of calls thousands of calls a year you do a really good job and I think last year they recovered an additional six million dollars for consumers so it does work. The. Representative ladyman. Thank you mister chair and what we're I want to hand on to what center johnson talked about his individual constituent and i'll give you my personal situation I wonder if other people are going through this same thing one of the companies that you talked about that's leaving the state I had insurance with them and they gave us a day that we're going to be gone so you got to do something by the fifteenth of this month and so you know my my background in industry I would go get three or four quotes and I would look at the you know our level and see which one's best so I requested six quotes. Only two companies would even quote me. For replacement insurance and one company was a hundred percent increase the other company was two hundred percent increase and a double my deductible. So. I'm sure there's other people in that similar situation and at least get two choices one of those I had to go out alive in jones borrow I had to go out of the county to get a second quote so a situation in anybody in that situation what what are our options. As the hard question I guess i'll take it but yeah that's a that's we we hear those stories and and the and i've talked to many insurance agents who said they spend most of their days given bad news and that's some of the bad news that so what you're hearing is not earn you know it the only of the only instance of that so it's I don't I don't have that answer for you on that other than. What when I hear of others is shopping in around and continuing shop it sounds like you did everything you could to to to get your coverage and that is that is what we're hearing in this ultra hard market right now that you know we hope that if we're you know we all hope it's consumers of insurer instead if we uh that this going to change over the upcoming months but there's there's not a good answer representative like men other than let's make it you get you have something i'm not sure who your carrier was the part of the reason that they are leaving is because they weren't charged an adequate premium. And so there's there's in any time you're moving from a united house. Or off you know there's another one that's leaving this day armers they're non renewing everything this year there's a real good chance that that there's going to be a rate increase these carriers had over two hundred percent lost for a shows last year I mean they're their beat up that's that's why they're they're having to to pull out the state. Um. Surplus lines is an option. I know you found a quote if there is something available in the surplus lands market. That is a at least twenty percent less. Then what's available on the admitted market. The surplus lines broker can write that coverage okay that's not going to be covered by the guarantee fun. But it is it is out there for certain you know situations like a consumer with maybe large water claim and you know some other weather claim that they might be looking for some other claim that might be looking for coverage or that might have been non renewed by one of these carriers that are leaving the state thanks gonna have one more question on there two of the people that I asked and they said they couldn't quote and they said well we're not quoting in your zone where you live. Because we have a maximum risk assessment for that area. Is that something that's normally is that need you know I think carriers are definitely looking at their concentration of risk if. You know if if if there are overly concentrated in one area. Uh for instance cross county and win and that county gets hit and and every structure is damaged then that that's going to affect that carrier. So I think. And the entrance it over and the interest of solvency that that's probably a good idea for carriers to be keeping alone that thank you. Thank you representative in it. Thank you mister chair add a question i'd like to go back to it represent the ferguson was talking about what the tax credits in the incentives is that four states offer these you mentioned alabama were the other states do you know. Alabama necessity and oklahoma's draft or passing has a proposal in their legislature now in a believe that the one is florida so it's all coastal states. Alabama's the one that. Okay thank you where was anybody. Are you mischeric mr mcclain you'd mention that the department had taken into receivership some different providers when that happens in your paying these claims out of your guarantee find is there a maximum amount of claim that you pay out in the guarantee find the bargains all property and casually guarantee fund has a limit of three hundred thousand dollars per class that set by internal policy or is it set by statue and so for those claimants in in specifically i'm thinking in our agriculture and the community whose farm equipment can be far north the three hundred thousand dollars per piece of equipment. What happens to the balance of that and then shipping that over to our home mortgages where we would have holmes that could have mortgages at a higher rate in that word as that leave our financial institutions that are carrying those mortgages. Yeah I think there since I think intuitively there I think there's some exposure there that we need to be need to be concerned about because that is the limit of the for an insolvent insurance company that it still happened to the united home most of them not all the ones had claims were under that limits I think in car dodge to bullet in a lot of ways but and the scenario you describe it does leave the consumer exposed so it's not just the insurance company that that that has the exposure is not just the consumer but also our financial institutions whether it be our our local home bankers that are working with their local constituents on home loans auto loans farm equipment could affect them as well aren't thank you. Representative boyd i'm incentive thank you minister chair so now that i'm senator boyd i'd like to before asked my question i'm in a disclosed to the committee that i'm a licensed health and life insurance agent to my knowledge i'm not appointed by any of the companies that do property and casually but I could so i'm just making everybody aware so that leaves me my question just to follow up to represent a revense question on the three hundred thousand dollars a guarantee. Is that pretty much what it is across the country or to other states have a significantly higher number is that something we really need to look at adjusting so so where is arkansas on relation to everybody else thank you I know the summer lower but I don't know what the range is if I can find out but I would say II would you know what what's the little the fdic limit for financial institutions so I don't know and I would say at three hundred were were probably on the area thank you. Santa clark thank you mister chair mark knowledge of the insurance industry is a negligible except that I stay in it. A brb for a couple of weeks once that seemed to have been owned by an insurance car because of the library of books it was there and I must not have had a lot to do because a read the book on the history of I don't know that it's called homeowner's insurance but homeowners and insurance in the united states and the fires in northeastern towns and son and so when. The question was entered while ago about the overrepresentation in certain areas I learned in that book that that was outside good industry practices that they that they learned that you could only sell so many insurance claims in a community otherwise you're over exposed if something happens to that community is that not corrected that bad practice are outside normal. A good practices and telling insurance and nothing that's a great question for your trade association folks and come up here but that's what they tell us is that they they when they do comes to where they sell insurance where their right insurance and look at that concentration so that they're not over exposed one particular area so that's why they may choose to just stop writing in a certain geographic area. Okay would assume yep makes it what I read it it made a lot of sense thank. Thank you sandra clark so no other questions here i've got to let two last questions for you for yall we talk about the march thirty first storms came through what about the straight line we ends about a month later. How many of those claims are open so i'm going to brought that and twenty twenty three you know I had the big tornadoes. Which. Was an expensive amount for for every insurer in the state. Um but I think weren't hurt them more are these hail events these repetitive events and hot springs I know there were several that year in march you know big baseball size hail I mean that stuff damages everything and those in order is this this repetitive. Claims that are bumping up against reinsurance caps for these carriers it hurt you know i've I think state foreign paid out more in claims i'm not I know in twenty twenty two I don't know if you want to be three but more dollar amount in hail claims in arkansas than any other state in the country saved one. So I mean that hail isn't issued in arkansas large destructive hail is an issue what about the straight land we installments it came through covered such a wide area yeah I mean they do have a percentage on those claims that are open you know because. We you know for for a large event like a tornado we can request a uh you know a data call where we can request information but we we didn't request and information on those end individual okay thanks sake on that one last question seemed recall will is not here I guess this week for you commissioner where we add on the the wind insurance claim for the water porter system there. The. Yep there's actually some movement on that that have been emailed on the last couple of days in it but none of it was directing at me so that I think that the the department emergency management is getting together some response information and if you want to and and and coordinating trying to get some resolution to that it was a difficult insurance problem but I don't think there's anything in the action points that we're working on now for the wind water and that I think we've resolved what we could do with that and in answering the type of policy that they they had in the in the kind of the maybe not enough coverage that was going on there jimmy did dig into that one a little bit more for us but we don't have anything pending at the agency on the wind water project right now and all all plan would you get with the center call will how absolutely process thank you time precious everything that you have done you were always great to work we have appreciation everyone of you appreciate your members and call anytime we can be of assistance thanks sir. Up next we're going to go with the robert gordon. Mister orden if you would introduce yourself up. For the record who you're with what you're going to cover in telstra going lower insurance rates so my name is robert gordon and I am the senior vice president for the policy research and international the vision of the apcia which is the american property cataly insurance association and we represent a majority of the property casualty home author in business insurance industry. So i'm gonna talk a little bit about the the state of the market and I think is the commissioner just talked about frankly it's it's not terribly good at this point insurers core business is protecting people then helping them recover from catastrophic glasses and. I'd like to say that our industry is extremely strong and stable and profitable and i've had to testify both at the federal level and international level before about the strength of our insurance industry in our state regulation system but the commissioner talked at just a few minutes ago about the extraordinarily hard market that were in that's dangerously close to companies no off no longer offering coverage and today I would talk a little bit about why our market is in such dire straights including an arkansas and a little bit of thoughts about what we can do about it so the largest credit rating agency in the united states that specializes in analyzing the insurance industry is ambest. An ambust for the first time and ever in history downgraded from stable to negative the entire personal lines auto and home insurance sector. It said at three consecutive years of billion dollar losses ranging from twenty seven to forty eight billion and each of the last three years I limited to me a repute is to say a members if you didn't notice you do have that power point package in front of you there. Yeah and in any of these charts any of the facts anything you're interested in happy to provide you with all the data background on the citations and so no i'm appreciate that mister chairman so ambassadors downgraded the entire personal lines industry both home owners and ado and it suggests that profitability for home and auto insurers and then their term is highly unlikely so they're basically saying that our industry is in trouble auto insurers are facing the worst three years of losses and they am best records. And homeowner's insurers have now suffered five consecutive years of underwriting losses. Fact i'm getting questions now from some of the media saying we'll how how are the insurers still in business and that's becoming an increasing question and that's resulting in some of the decisions to pull back that you've seen in some of the states. Insurers capital in twenty twenty two. Plummeted more than seventy three billion dollars so that that's not just lower profitability that's actually contraction in a time of record inflation our industry actually contracted by seventy three billion dollars in the surplus is still not recovered for twenty twenty three one of the largest rating agencies overall s and p they predict auto insurers are going to have an eight point seven percent that underwriting loss so another restaurant losing eight point seven sands on every dollar and they predict that home owners insurers will have a twelve point one percent loss that's the worst and over a decade. So are challenge is simple supply and demand economics insured costs and expenses are rapidly escalating much faster than rating crazies. In an industry that's losing money. Is not going to attract new investment capital. And so people are saying well how come insurers are pulling back well in some cases it's because they no longer have the capital available and they're not making enough they're not make enough of profit they're losing money in the can attract new capital. So is a consequence we're now seeing a vehicle not only affordability challenges but we're seeing availability challenges all across the country like the member indicated and and that's really causing friction and i'll i'll go into some of the data as to why. So this is a graph of the insured catastrophic losses globally you can see how much they've been increasing roughly doubling over the last five years and this is arkansas specifically and you can see our console the last couple of years has had a very very significant catastrophic losses particularly in twenty twenty three uh hitting. Record levels that the green bar is the record number of severe storms the red line you can see spiking up as the disaster costs last year then the black line I know there are a lot of lines on here but the black line increasing that's the five year rolling average and you can see how much that's increased the last few years and now fire exceeds a billion dollars. Now there are a lot of false narratives out there about why all these insurance losses are creasing some people are saying it's all climate change and people are saying well just. A greedy businesses insurers are driven by hard data everything we do is actually driven in the doubt in this cases. Relatively straight forward and the number one cause of increasing insured losses and the corresponding rate increases. Is the rise and exposure values and replacement costs so in other words people are living in homes and their working and buildings that cost the whole lot more to repair and replace now than they used to and people are driving cars. That are a lot more expensive in cost a lot more to repair than they used to in a lot of people are now building those more expensive homes and buildings and higher climate risk regions or regions that are becoming climate risk here. All of that increasing weather severity the II say that the demographic shifts in the inflation that's the top cars you then add on to that some of the increasing weather severity over time the legal system abused the regulatory cost those all contribute but it's it their secondary factors it's really the demographics in the inflation these two graphs show nationwide and then for our concern specifically so the left graft shows the spike and the replacement cost of structures in other words how much it would cost to replace all the buildings in the united states you can see how much that has increased over the last couple years the right graph is the arkansas housing price index that the federal reserve war tracks and you can see how high that his increased as well people again are moving into more expensive homes or their expanding their current homes and it's a lot more costly to replace so the average insurance rates have now had to adjust. To a housing stock that has become more than forty two percent more expensive to rebuild just over the last three years. That's way beyond uh the the homeowners increase rates in our concern. And that represents most that forty two percent of the increase in the cost to rebuild the building stock that represents most of the fifty one increase fifty one percent increase in insurance claims costs. On the rate graphed homes and arkansas appreciate roughly similarly about a fifty six percent increase over the last five years which again this more than the increase in the home honors insurance rates. This just a general inflation side the dot and line show food energy shelter they're getting more expensive for everybody and again much higher than the producer price and access trapped by the bureau of labor statistics which represents what insurers are actively actually collecting on home owners and auto insurance. But also you can see on this slide that uh. The input costs specifically for insurance so for homes the cost of construction has increased much more than the homeowner's insurance and on the right graph you can see for cars how much more of the cost of new cars and use cars and car parts. Car rentals have increased so much more than the underlying insurance costs so insurers are trying to catch up and this is this is an enormous gap right now that is why insurers have been losing so much money and why our capital has been contracting. Legal system abuse secondary but significant costs the left side you can see the nuclear verdicts took a little breather during the pandemic but now it's continuing to escalate but on the right side you can see the costs from class action lawsuits has been claiming as well so the more there's litigation and our industry the more they're about faith claims the more that has to get rolled back into consumer rates. And then regulatory burdens are increasing and most i'm sorry sir i'm sorry to interrupt you if I could for a second i've got I know this is not arkansas specific I don't think but I have a little concern with coming legal system abuse when we're talking about property claims that I mean II would probably just in my experience think that just your average person is going to have trouble finding an attorney to take any sort of a property claim I mean II don't see legal system abuse as an issue in arkansas in this type of situation or frankly in any in my opinion and I am an attorney I don't say that um but I do not do any top of this I get a lot of phone calls or people say hey they won't i'm like i'm not gonna do that I mean there's no money in it they're not going to you know it's it's just not worth it I don't think they can find the turns to take these top claims at least in arkansas I can't speak about that I don't know if you have any thoughts on that if you think i'm correct on that I know this is only referencing class actions but i'd I just don't see it I think if you ask the average our cans and who's abusing the legal system regarding these tap issues it's going to be the insurance company frankly but that's my opinion that love to your thought no I appreciate the question i'm actually going to be testifying again tomorrow in louisiana and we have a case on the weekends again there were a law firm filed I believe this is either tens of thousands of hundreds of thousands of cases often times with injured parties they didn't actually I believe dispired and they're continuing actions against them uh tens of millions of dollars lost from that we just gotten obtained reform in florida florida had some of the I think it was somewhere long lines of seventies something radio something perceived quickly listed arkansas yeah we're not worried about those American family ends up paying for the legal system and and I will tell you it is an important contributing cost for the insurance industry that's been increasing and work we're happy to get you some statistics on there. So and if I want to move this along I know but if you have any do you have any like specific cases or specific instances of actual abuse in arkansas the stat things I just don't see it frankly I think we have a very good system as it is now you know we have something called the rule sixty eight offered judgment as you know where someone can make an offer and say you know if you don't accept this offer and we go to trial and you get less than you pay our costs but that's a wonderful tool for people to to use bad faith or litigants so I mean I think we have a very strong system now but do you know of any cases of real abuse in arkansas especially we're going property that you could did you could speak representative all again i'll go back and will will drive up some examples for you on our late they i've been focused on the economics a day so but happy to bring you some examples in the near future thank you. Up the other one of the other cost factors is the regulatory burden insurance is one of the most competitive industries with several thousand property casualty insurers uh the standard that the department of justice uses to analyze competitiveness of industry the perfect alhorsemen index insurance is not concentrated incredibly competitive I know I heard some comments earlier from. Uh some of the represents some of the senators talking about the importance of shopping around with all those carriers despite that there is a sort of historical relocate regulation in the insurance industry and that ends up creating a lot of state friction and in some states uh leads to a lot of market failures in the availability I will say the arkansas regulation has definitely been one of the uh superior states in terms of the regulation the department's done a very good job overall but even in states that are well regulated there's a real lag time for insurers when they're increasing class to have those reflected in their policy so insurers have to identify the inflation indicators than they have to actually quantify those put those into filings file of those with the department to department looks at those and then once you're allowed to use those then you have to wait for policies to roll over which might take six to twelve months so you think about a grocery store that can reprice its goods on a daily basis while insurance companies it might take a year to to price those in and so there's a light time then that's why you're seeing a lot of the the very high supply inflation from twenty twenty two and twenty twenty three is still rolling into the twenty twenty four. Ah rates. Here's some arkansas specific combined ratios and this is essentially the underwriting losses. In arkansas the result of more expensive homes insurance cost input inflation weather we have a conversation on legal obvious as well in arkansas the underwriting losses for home owners in twenty twenty two which is the last year we have available specifically on a state my state basis was a hundred and fifty three point seven. Which essentially means for every hundred dollars that insurance is taking in his premium that's paying and losses and expenses a hundred and fifty three dollars and seven seventy seven so it is it is a incredibly high underwriting loss it's the fourth worst in the united states. So among all the states are concerned right now the home owners essentially the combined ratio which is your losses and expenses over premium it's the fourth worst in the united states and you can see in that pink line that four over the last five years have been over a hundred which is just what you need to break even on your underwriting. Author his historically been better in arkansas but you can see even auto hispiped up to a hundred and fifteen in the last year available and on the right side you see on the commercial side commercial property again combined ratios ensures hammers in money very very high net underwriting losses. In the commercial auto while it's been better and frankly better than a lot of states you and that's been spiking up as well. So if insurers. Are not able to quickly close the gap between losses and rates than an affordability crisis quickly turns into an availability crisis and that's what we're seeing at a number of places around the country and that's why you're seeing some of the insolvencies and arkansas we have increasing demand for insurance with the more expensive cars and homes and inflation higher weather losses. But the insurance supply is decreasing because the insured losses are increasing faster than the rates are insurers capital contracted at the reinsurance industry lost twelve percent of their capital in twenty twenty two and they've been recovering so there's less reinsurance available so that that is why it's harder for insurers having to pull back from some areas because they they can't afford those aggregations and they can't get as much insurance in in certain reinsurance in certain regions so. I know II was just talking to one of the largest insurance companies in the world last week their ceo and II said well your model used to be there's no such thing as a bad risk just a bad price and he says no now we're having to look very closely at our aggregations of risk and and we have to limit our aggregations in any particular area in one of the top brokers who were sitting next to a said yeah it used to be that we could get just one or two insurers to ensure come a large commercial building now in a lot of cases where there's a climate risk we have to get fifteen insurers to share those risks so the market is getting it's is the commissioner said extraordinarily hard and the aggregation exposures in the last have gotten much much more challenging. And that growing mismatch between demand and supply for insurance capital that's why the credit reading agencies have downgraded our industry that's why they've said we're now negative rating. That's why we've been having losses the last several years and that's why we're seeing availability crisis and some of the states especially where some of the rates. Get suppressed. This left graph shows the available insurance capital versus the gdp and normally uh insurance premiums very very growth and insurance premiums very very closely tracks the growth and gdp here you can see again there's less in less capital for a growing economy that has greater insurance demands the one on the right is the same thing for insurance capital that blue line that's going up to the top right at the graph that is essentially the need for insurance in the united states and the red line is the available reinsurance capital which also contracted in again less availability and so that's creating a significant mismatch that is increasing the coverage gaps in this country. No I want to spend a few minutes on. Solution so short term is the commissioner said you know people are going to have to shop around they're going to have to decide or consider what deductibles they can afford agents will will help. Get the right match and coverage is long term though the market is not going to fully stabilize until not only is is the gap between rates and losses closed but we're also going to need more mitigation and resiliency solutions I know there are a lot of questions about that insurers are the main funders of the entities developing mitigation and resiliency solutions for cars and homes and we've developed safety standards that are not only saving lives but helping make insurance more affordable and helping protect communities and there are number things we've listed here II know there was talk about the fortified standards and again happy to provide more data on this but there a number of the goal states that use fortified standards alabama has actually the greatest number of fourtified above code certified homes and they also have been able to achieve one of the lowest insurance rates in in that area. Uh. We also in this is actually oh I was gonna say ibhs which is institute for business some safety that insurers find they're also developing ground breaking research on hail driven losses I know hales been a real problem in arkansas so we're coming up with some breakthroughs in the science to understand hale and figure out how to make roofs more resolution to hail damage and and mitigate that hail damage. Uh ibhs is just this last summer uh released an installment on impact resistant shingle performance ratings I know that doesn't sound very exciting but it's basically building more resilient roofs and it gives information to consumers to let consumers choose higher performing products to increase their home resilience. These last two charts i'm gonna show you their brand new and we've had a lot of policy makers who said well okay you talk about all these resiliency solutions. What's actually the cost benefit once the bank for the back so we've sort of collected all of the different scientific agencies talking about the different kinds of resiliency in mitigation and where you get the most bank for the buck clearly it's a new buildings meeting the enhanced building codes is where you get the most bang for the buck but again happy to go into that just to give you a little example though this was done by one of the top reinsurers the chart on the left shows hurricane in if it it hit florida in nineteen seventies versus today the grey barrest the losses in the seventies and then according to this reinsure the increasing weather severity ads about twenty to twenty five percent of the costs over that time period the demographic changes which I talked about as the main cost driver more people more expensive homes that adds another hundred and eighty hundred ninety percent. But florida's very strong building codes has mitigated about ninety to a hundred percent of those original nineteen seventies losses so it hasn't fully offset the demographic increases but it has a major cost savings I have that same graph it's not arkansas specific but golf coast you can see similar analysis although the mitigation overall in the golf coast hasn't been quite as strong as florida so we saw some anormous benefits of hurricane even in even though that was the second largest hurricane it just an incredible amount less damage than it would have done if it's not been for all those building standards so it's. A huge benefit and that that's really where you're going to get a lot of the bang for your back and try to mitigate the long term trends of these increasing costs thank you very presentation sir we do have a few questions for you we won't take questions from members only first if they have been time that will come back to the non members of the communities for time site centre boyd. Thank you mister chair so first of all on the tortax i'd like to see that information if so if you'll either make sure it is shared with the whole committee or to to me as well as representative matters then the. If you were jocket that information stay up and still send out all the committee yeah okay. And then there used touched on it but I still want to ask a little bit more so mitigation resiliency so there's a lot of. More government involved in that so whether it's regulating and sand how we need to build homes better or we need to design cars differently I get that but that seems like that costs more and on some counter is gonna drop up costs even more but what is the insurance industry done as far as offering to people hey if you will go do these mitigation resiliency things when you build over reduce you know because it could be driven by the market as well so i'm trying to understand this balance between is that the role of the government or is that the role of market to do that in the answer is potentially both so you think about cars in the insurance industry it's fun to the institute for a highway safety and it's done all the crash testing on cars when you hear about cars having a certain star rating that's that's all done by the. Energy that insurers fund and insurers over time have determined which cars are more likely to create more losses in the underwriter on that basis so people who drive safer cars pay lower insurance rates than people who who drive more expensive cars insurers in many states do that same thing providing discounts for mitigation although ensures do like to see that there are some sort of a track record that it works sometimes states will adopt a mitigation standard but they don't necessarily enforce it or implemented or those questions about the contractors. But over time and I am happy to share you lots of examples of insurance discounts that are provided for mitigation standards in again it's it's also interesting because some of them don't always work as expected so like with the auto discounts we found that uh some of the lane changing uh warnings even though that really annoying because they beep at you those actually save a lot of money the anti lock breaks while it's a great technology uh people have responded by tailgating more closely saying well I have anti locked break so it's not so bad if I talk. At one of one of the biggest new scientific mitigation developments is a fire safety standard so just really incredible new fire safety standards developed last year and a pc I hope lead portions of a federal wildfire commission issuing recommendations. But one of the things that it would suggest that people do is create a essentially a five foot perimeter around their house of you know gravel or some other nonflammable surface well my house have got beautiful palm trees and some nice bushes around my house it's going to be really hard for my family and for most americans to sort of change to saying okay instead of having bushes around your house and then a sidewalk. Next of the road instead we need to have anywhere where your wildfire risk you need to have a perimeter around your house those are going to be changes changes is I think the member said about using better things to tie down your roof that's one of the most effective things you can do to mitigate and ensure is often do look at that but that's something we're constantly testing is i'm sorry if you can't remember who was somebody talking about the the nails and the roof and the tie downs those are all really really effective and so. Over time when they're shown to be effective insurers offer discounts in the market's been very competitive and and i'll provide you with some examples of that as well thank you sir representative brown thank you mister chair mr gordon made statement earlier and I wanted to clarify something you had said that the cast on claims was about a hundred and fifty three dollars to every hundred dollars in premium paid is that for a specific claim or is that premiums paid by the whole group I mean it's it's a group of insurers only paying a hundred dollars on every hundred and fifty that the coming out of that group paid to that group yet so so it's it's the combined ratio on what that means what all of the insurers are paying in our arkansas for home owners insurance and twenty twenty two not only claims payment but expenses also and that's sort of a last ratio that looks at the just the claims payment and then the combined ratio includes the expenses as well you know we have to have the adjusters look at it you have to have the underwriting cost of the marketing costs and so forth so what usually the combined ratio is what insurers look at for your overall underwriting profitability if you're if you're over a hundred combined ratio you're losing money on your underwriting if you're under then you're making at least some amount of profit and and that's what we're seeing in. Arkansas specifically is that the home owners insurance is ending up paying out far more in claims and expenses than they're taking in and it's about a hundred and fifty three point seven percent which is a extremely high it's the fourth worst in the country thank you brown representative lunch from. Thank you I had a couple of questions could you go back to this particular slide that says demand supply mismatch and explain to this chart a little more to me. Yeah so normally for primary insurance. The increases in premiums roughly go up with a gdp and that sort of max into it of sense that is the economy grows there's going to be more cars more houses more buildings more more businesses needing coverage. The last couple of years because our insurance surplus contracted by seventy something billion from all the losses while the economy is still growing that means there's more and more demand for insurance and less than less supply. And then the graph on the rate is a more granular analysis on the on the reinsurance side showing the demand for insurance overall that's increasing while the reinsurance capital went down and that's been one of the big factors in the marketplace is when the market was really soft a few years ago reinsurance was relatively cheap historically then so reinsurers have a much lower attachment point meeting much lower level disasters they would provide coverage for an insurers who are increasingly relying on that reinsurance. When the reinsurance industry in twenty twenty two whilst twelve percent of their capital they naturally said alright we're going to have to not only charge more money but we're gonna charge insurers higher deductibles and we're going to have a higher attachment point meaning only bigger disasters well then twenty twenty three like in arkansas you saw all of these. Big disasters but they're not the kind of ten billion twenty billion dollar catastrophes are going to trigger all the reinsurance arrangements and so that really hurt especially a lot of those smaller insurers and that's why they're now having to pull back they don't have that reinsurance available anymore at the lower attachment points to to cover their their aggregation expose okay I just one followed to that and then I have two more questions what why this day appear in twenty twenty. Well that was because of the uh the pandemic so there was a lot less business activity so the demand for insurance for example for workers compensation okay so that's all up together renters insurance has gone through the roof and these are small clients that are there capped at twenty thousand dollars and maybe two or three months of living expenses if something burns down. And there were we've lost another carrier in arkansas can you elaborate on what's going on with that really hurts people yeah it rant in it's it's it's hard breaking for insurers too but you also can't sustain the kind of underwriting losses that were seeing so was the. Is is you see more and more of the damages and claims and and i'm happy to get you renters i'll try and get you some more specific information on renters insurance but it's. Essentially just like is americans we all go to the grocery store you're paying more for your eggs for your mouth for your bread in the cost of new car so skyrocketed for all the lines of insurance it's the same thing and a lot inflationary cost and puts are going up even more than the overall cpi okay we're seeing a issue and i'm sure other people are too in northwest arkansas with uninsured drivers just a few phone calls already this week from people that are being hit the driver either eventually is caught and they find out you're here illegally or this person just didn't bother to get insurance. Is there anything we can do to come back to some of that cause the cost is just gonna go up. They are don't state don't say stay home now II you know hopefully there are some technology solutions that can grow with that police enforcement there are a lot of states that have done programs to try and address and reduce the the number uninsured drivers on the road so happy to get back to you on that thank you and i'll get out of the queue and let somebody else in. Our representative last year median tell you what you want to hear representative. Sorry I was talking a yeah II know we have the national flood insurance program in california has the fair fire program to allow home owners to forward insurance regardless of the risk. Do you see us moving to a place where the government is going to pick up more and more of those hibit related risk in the insurance market to allow affordability that short answers no so actually II work for seventeen years in the house of representatives this committee staff and this was one of the issues I worked on a great lane one of the the top insurance analysts said that these state representative markets are the magic hiding place for risk that people want a high. You know california actually is it's just a bit of a musical chairs where they're saying anybody who's in the market if there's a big event in the fair plan loses money all those remaining insurers have to pay that difference so now you're saying in california also has a horrible underwriting ratio for those homeowners insurers and by the way now you have a government subsidized competitor with below market rates whose losses will be paid by the private sector that doesn't work at all that situation in florida has led to florida citizens at times becoming the largest insurer in the state and they're all was trying to depopulate it it's a constant process of trying to reduce that and reduce the subsidies. The nfip is sort of AAA similar problem and that it's never been able to charge actually sound rates and so the government keeps having to forgive very large sums of money with the nfi p and when they actually proposed moving to actual rates there was enormous political push back understandably because there are a lot of people and fixed incomes living in houses that suddenly have to pay more or so it it's not the solution the solution is to try and be in the curb on the cost drivers. Thank you mister borden may I ask the follow it yes and so I want to ask you what I ask the insurance commissioner these great programs are texts credit programs to for reservation did we had a header they pay we had a more round long enough to know if they actually redashinsurance rates are what what's your opinion and is one better than the other nine. So the mitigation is now very well proven to significantly reduce the losses and so i've worked with coral logic and some of the other firms that analyze and they look after the storms have come in which houses are standing in which ones aren't mitigation is enormously helpful. II can't see whether the tax credits or or or grant serve are better what I guess our view would be whatever gets more medication in the market and then again happy to provide you with lots of examples where insurers are providing discounts once the mitigation efforts are proven. Mister goren if you would hang around april we'll get out of the committee made some other members might have some questions for you to love to do that thank you for your testimony sir thank you mister chairman. Mister wartesdale. Same thing for you please enter yourself by the record who you're with how you're going to lower insurance cost. They sent a war tuesday all I would ask association at the mitchell's insurance companies i'm a regional vice president. And arkansas on the texas in the in the southwest. I need to get this however point. And remember we are talking about arkansas. Yeah. Yes sir. Okay get thank you for have me here standard hill representatives in committee members I mentioned I am with the national association and mutual insurance companies where we work very closely with the apcia together we we represent pretty much all the property casual insurance companies in the country including an arkansas. Just real quick at a glance we are we have seven of the top ten public as we insurance companies that are membership fifty percent six percent or o sixty percent home in thirty morning. And not business arkansas exactly little formatting issue here for arkansas it members who do have a copy of this one as well we're about the same penetration and and market here in arkansas so this little closer we had at name are co coin the phrase a couple couple years ago about the new error risk we're in a time now it's never been up. As we are in the side in the history of the other industry we have extreme weather arkansas nose that extremely well inflation at all time and then all time but strongly a highest since the ninety since the seventies back in june of twenty two at night point one percent economic pressures a reinsurance and robert mentioned is estimates anywhere from twenty to forty percent higher and then there is litigation abuse I know we can argue about the extent of the litigation is a cost driver in a very significant way for our industry and most importantly for pauls dealers. You've seen the the turbulence their insurers that have been leaving california because of the conditions there losing and has had issues florida significant. Property casually insurance issues fortunately there have been some reforms in florida but. Obviously the natural disasters in florida had been significant but the legal environment is also been a very big challenge for insurers and that in that state. So i'm i'm a few charts I don't have as as much as robert provided which which is good so when it meant a lot of duplication but just looking at premiums and general home on her premiums the united states if you this is chart goes back to nineteen ninety six very gradual increase and nothing significant nothing way at a whack I think you would see the same. Sort of trajectory and an arkansas deadly little higher as we get up from twenty twenty one twenty two the combined ratio that again has been mentioned several times today on a national level trainings for up and down in the last twenty five years and then we come to arkansas which has had a lot more bullet volatility in that area and again this goes back to nineteen ninety six but looking at really from twenty fifteen on and then certainly at the twenty twenty twenty twenty one twenty two we have a hundred basically a hundred and thirty six percent the mineration I know we've already heard these numbers. I believe we don't have I think robert may have showed numbers from twenty three but I know II was speaking to a memory recently it was about a hundred and sixty so the bottom line is the the industry is hurting. Rates are going up for the simple reason that we are the industry is losing too much money you cannot sustain a business when you're losing a hundred and sixty dollars for every hundred you bring in so that really kind of suck summed up the state and. The conditions here in arkansas if you look at And arkansas is unsustainable so rates need to follow this this is just a chart on basic inflationary numbers over the past twenty three years. As we all know in inflation and spite. In the june of twenty two afternoon point one percent these are just selected cities and in the general area houston dollars and land I didn't have one for for little rock per separate that's that the cpi so inflation has been. And incredible issue for everyone. At the grocery store at the gas pump and property casual insurance and insurers are no exception to that. This is just a selected chart on. The cpi for repair of household items again general increase over years but spiking in the last couple years as supply chain issues took rude a labor shortages led to cost increases and ingesting favorable economic environment. Put your surprise index for materials that are needed and building against spiking up twenty nineteen twenty twenty twenty one because of the panemake there has been some softening that the good news I think overall is that things are starting there or realize you know the economy is showing its resiliency and that is kind of how I want to finish is while things were bad now in addressments are being made there is a normalization in the economy that should be well for the future. Just another stad on bedroom furniture again a typical item that would be replaced in it and a total **** is twenty eight hour hearing and things that those that sort pick spikes in twenty one twenty two starting to see a little bit of relief and those are stables. And then again I know this is also about property home owner but II did want to point out and again robert dimension is new car prices in the last three or four years have just gone through the roof they're more expensive. They're very high tactic semi conductors and we are slowly moving towards ebs at a very slow rape eventually those will become more prevalent in the marketplace so when you have very expensive automobiles they cost a lot of money to repair and we're saying that in the industry. Just you know we want to talk today about the weather the tornadoe from last year hail when in so forth and i'm from texas tornado alley to me is always been. Texas oklahoma kansas it is shifting east I think we all know that it's not a surprise and if you look at the graphic on the the only state and is completely covered by this new values is unfortunately arkansas so storms are going to be I think of the reality as you know and. Taking up from representative for resident others. Really focusing on the upstream issue of. Resiliency and in mitigation I think is going to be the key one thing that. That is important to know his policy makers dealing with this with insurance is that. Focus on what you can control now which you can't control you can't control the weather connected to supply chains building cause labor market but what you can control you can control building codes. You can grade a more. I'd say. Fair legal system to deal with these issues obviously the regulations that you put forward are in your control and as you deal with insurance policy issues that too is in your control so. As we look forward II really think it's important to think about the built environment. The storms are going to continue. We know that so we have to and that this is true everywhere but particularly in arts build. Homes and businesses that will will stand this kind of weather the was mentioned before by by bought a robert and others the ibhs is a really fascinating organization they do a lot of research on on when hall. Wildfire as well. They're funded by the industry. We take people there for field trips frequently I would welcome this group if you're ever interested to see their their laboratory basically and and south carolina just yourself at charlotte that picture there is a recent trip it name hosted with the ibhs and they're looking at roofing material that can withstand hale and their hill apartor so that really is the future the end who was mentioned earlier about strength and albama I wanted to mention it here. Grants to eliminate residents for providing when residential when mitigation. I know there was also a question about funding at this program is actually not funded by the state or the federal government it's funded by insurance policies they provide a fine that is used for these grand programs and there's a similar bill right now I think commissioner mcclay mentioned in in oklahoma then I personally involved with and there's also one in kentucky. So. I guess the the long story is or make a long story short. Focus I think it's very felt important to focus on the future and making the environment that built environment more sturdy and more where the hearty so that. The. That can be really the solution insurance as a downstream it's a downstream solution or downstream remedy that the upstream is where the focus needs to be to make our art community stronger for the future so. Is it a nutshell. To have a quick question for you probably not what i'm going to talk about per dumb just real quick so you're from texas I was gonna ask you but I think you said you are from texas yesterday that correct yeah I don't know how familiar with it but would you say there's lawsuit abuse litigation abuse in the state of texas. Well it's harder to define what less who use this but at me it is a it is a challenge for assurers and billing every state texas is. Probably had eight eight trending in in a more positive direction we at lawsuit reform several years ago but I am I can't tell you whether it's better a worse okay I was curious about your opinion on after that if it is better worse and i'm sure you're not going to know and I don't want to put on the spot but can you can you think of or do you know of any really specific cases that are agreed just in arkansas that you say would be a good example of why this is happening I want this is on this hand out that we have you probably don't have the names of II don't specifically in arkansas you know some of this is presentation kind of bounce from national to local I mean should it litigation is a litigation uses a big priority. Fornament national level. Excuse me they know it is for a pcia it is just a tremendous cost driver okay increases cost policyholders ultimately pay for understand that and it says litigation reform and what we're talking about mainly today's property we're talking about homes and buildings and these are contracts you know are there's called a tort tax which I have problem with that nominature that's not a tort this is a contract between someone who has a policy and who their contractually obligated with theirs contracts why we had to pay the policy so the the term tort tax I think is. I'm just going to queue but I don't think it's actually accurate but having said that in my opinion or can you just want to be paid the fair claim of their house or their car where the roof and if they're paid fairly they're not going to litigate so there won't be any litigation you have no litigation cost if things are just settled fairly would you agree with that. And it's of course everyone wants to be treated fairly and I again i'm not getting a new specific case or specific set of cases it's just informed me high level theoretical view. Litigation of these nationwide is an issue for the insurance industry thank you. Center blake johnson I guess I work out in the field. Can like you you risk that we as a farmer equipped equipment cars and increases input cause. Crazy weather same thing you're talking about. I don't have anybody to go and get it risk mitigation fee for. I can't come to any money in the latest liberties. Increase my revenue. By making everybody else pay for it. On the way I can do it is is basically insurance that it worth a crowd. That's subsidized by the federal government don't know how make it any better and I get a cheap the their farmers at cheap that you have to do that one at over three years. But I mean I deal with the same reassure talking about when the flood there is nobody for her firm best to come to. Then I mean I get where you're coming from it. Everybody in the state's gonna pay for. For where you skills and. Where for us to go. Hey III understand that center II don't walk in your shoes on and i'm sorry II think the programs that we were mentioning the mitigation programs are a really I wouldn't compile your programs but they're close to that they're they don't scale well right now but it's it's a good start to really understand what is the best way to create structures and communities and and and buildings to withstand these types of perils that were having and. My help is our question in there anyway should should there be more than a three to five years that you base rate increases owners in this whenever you feel like you're losing money well II think it's it's really based on the needs of the market if it if if. And visit now this is property insurance with the supplies of any business if you're losing money hand over this you cannot be sustainable you cannot exist any longer and that's that's the place we are end today hopefully. Things will mitigate. Certainly the economic outlook is is is looking better so you know hopefully over time that it will eas. Antermark johnson. Thank you mister chairman and mr tuesday I have followed this the same you're talking about an alabama with striking the homes on the wind and all that. I seem to recall a prisonation at in coil maybe a year or so ago both about this weird type thing and also other. Building methodologies and constructions in a believe one my colleagues mentioned something about not having certain flamable plants within a certain parameter of your your structure and things like that do you recall is there some. He entered t association or expert that i'm trying to remember it's it's probably the ibh that was. Doing their presentation or because they are there really the research organization. And that research is what is more resilient than again they look at wildfire they look but it was about building materials both in a not just beep struck but but fire resistant in correct and some of the things that and again i'm not one of these people that believe you have to mandate everybody do use this technology but most carriers I think would give for example you know you have a smoke alarm and you have even a burglar alarm in some cases you your premium will be reduced because you're doing thanks to mitigate losses i've just I will try to reach out the folks that you mention just to see if cause this was an in depth thing I think we should look at because if it for example a builder goes in as a subdivision that has these criteria for all the houses then people know that you know you know we've done this prohile on trying to find a affordable housing and for long time it was interest rates and things and and maybe now that's going to make a comeback because right but uh if we can lower the. That the risk to the carrier then that that savings can be passed on and make that housing more affordable so so thank you for that i'll i'll reach out to them and try to get something that perhaps we can develop a little more yeah and would be helping happy to arrange a a tripper or some visit from that just just the power point would be great okay it was very good thank you so much I guess thank you the senate power point to staff representative artists thank you mr chair to represent a mad excerned about litigation arkansas doesn't have public adjusters do you find that states that have public adjusters are more literacy yes expand on that. Yes I did that there are a man on a specific data on that but but they're definitely situations where public adjusters do add ten to twenty percent to to a claim and. And there have been lawsuits surrounding that so yeah it is a it there is an anquire model which you're probably aware of that's work in its way through on the proper way to to legislate that profession okay thank you for that representative round thank you mister chair my question is to do with trees and one of the things I noticed after the tornado and the straight line we ends is there were a lot of holmes damaged in my community simply because of trees that fell over or gigantic branches that fell on people's rooms. Um. I cut down my last picture he couple years ago but I can't do anything about my neighbors who have bigger trees within six speed of my house or twelve feet if those trees go I mean my house no matter what I do my house is going to be damaged is there any our insurance company's going to start looking at how many big trees you have in your yard when they underwrite your property i'm just curious because I think they should yeah that's one of the problems with taking resilient actions is that you can do everything to make your home better but your neighbor it needs to be more of a community wide neighborhood approach. That the newer the newer subdivisions they all have ornamental trees but I live in the older part of town and the the name of our town is sherwhole does that give you a clue we have to hands and tons of gigantic trees in our community talk to your neighborhood II don't know what other solution there is well I just I was just curious at mean how if trees had done a tremendous amount of damage was at just that one of your concerns or something that you've observed sure I mean II think it's it's it's always a good practice to make sure that their trend is I mean the responsible actions that you have taken to make sure they've trend and take a garage but that's on the property owner to make sure that happens thank you mister tiers they'll have two letter to last questions for you only as if we have another two thousand eight or is inflation comes down are the insurance rates only come down they can stay up at the rates will come down when when the industries and a healthy situation to make that happen and inflation going down labor shortage is going away other other types of. Normalizing the economy once that was yes or no III don't make rates I don't recommend regionals were up to the individual insurance companies and they will make that the most sound decision when it's at the proper time so that's annoying. Yes okay next question is I must meet somewhere in your presentation at no point here you say rights were coming down. III can't that was for the criteria to be there thank you for your testimony so I thank you center they appreciate it. Next will have michael salaform bureau. Mr lambert adding so your name on the list. Please separate the record thank you my name's michael sal on the vice president of underwriting for farming mutual insurance company of arkansas been with company eighteen years I spent the first ten years as a claims rep manager are property claims for the next four years and i've been in the united side for three years now a manager reinsearched program are underwriting gatlons the type of risk will right among other things but I will say before it gets started i'll appreciate the former year old showing up today you know you're the only ones here I think you'll take took a little customer in product but I do appreciate that you don't know really what that means that this company to whatever your plans were they get changed appreciate it. On fake yeah we actually were meeting with reinsurers today and so that was they they had come in town and I didn't know if I was going to be able to make it so what I want to do is just make a few comments everybody's gone before me they've done a great job explaining of what's happening so I don't want to do at nausea and just repeat this over and over and over but I do want to offer the opportunity for questions and i'll try to answer some of your questions from our perspective from an actual insurance company's perspective so that you can maybe get an idea where we're coming from but what you've heard you've heard inflation insurance the value is part of that reevaluating homes to collect to put the coverage amount of the item at the right value that directly reflects or we're going to collect enough premium for that rears. So what happens is if we don't have at home at the right value in the same home and sit next to it at a lower value that costumes as much about home over here is not being charged the the adequate rate so when they have a claim they're basically getting their claim paid for the same out this one will but their collect but they've been paying into the system was premium so a lot of their rate complaints that are happening is just this inflationary effect that's happened in homes being revaluated frequency huge problem one of the things that I don't know it's really been discussed here yet now we we've talked about aggregation of of risk but an arkansas you just think back in arkansas over the last twenty years what's happening in the rural areas there there's less people there so in the state as far as a spread of risk there's less people in those rule areas or moving into the metro areas you have more and more homes that are just sitting right next to each other. We talked a lot about wandering tornadoes tornadoes are very tragic events they cause a lot of damage they make the front line news they do scare us as far as how we're going to handle those and pay those claims and get those people but that's done what keeps us up at night what keeps a separate night or the hail storms we we've talked about that when you look at hot springs last year big big hell of it happened there was two to three hints hail that was on the ground for a hundred miles a track of a hundred miles. There's a lot of homes that get damaged in that that generates a lot of claims and that's that aggregation of risk that we try to figure out how do we manage that. Reinsurance costs reinsurance calls to the huge huge part of what we do we are a single state property company some of the companies they mention that i've left the market or been become insolvent they are a regional company so their smaller companies those are those companies like them and eyes were hit really hard with ring insurance costs and I saw a report from guy carpenter which is a a broker in the reinsurance market last year and twenty twenty three on average companies had about a thirty five plus percent rate increase that's average you take a company that got hit hard on or we call the property cat program that's the big tornadoe of the big television some people were seeing a hundred hundred fifty percent dollar for dollar increase on the reinsurers. The other part of that is the retention that's like your deductible on your home owner so what it is you have a big event come in and want to make up a number here let's say it's a hundred million dollars all these losses it costs us a hundred million dollars well the reinsurance market might have a retention for us as twenty or thirty or fifty million so we're gonna we're gonna basically write the check on that first say forty million and then they will come in and pay dollars for dollars. Well by large there was a huge increase in twenty twenty three on the retentions and this affected everybody small company's big companies everybody so we're retaining more that risk and we have to charge the rate to make up for that. Uhm. Exposure management it talked about aggregation how do we spread that risk as much as possible this certainly does affect you farm bears a member organization the insurance company is is a service we provide a members and and this certainly affects the people that we have moving into these petrol areas even if you go to the small towns go to win there's not much outside of win everything's right there everybody lives in this this really small area and so we have to figure out how to manage to to produce our exposure in those areas. These weather patterns whatever it is whether it's better reporting data is forced capturing those events there does seem to be an increase in weather patterns but as you've heard before it really comes back to the state like or console it it's the hail advance that they're certainly affecting us you have talked about the mitigation residency and certainly a lot of other things to talk about how much does that help both of state like us I don't know. Deductibles the same way that our catastrophe retention goes up we're having to increase deductibles but one of the reasons we're having to do that is it directly affects the rates the consumer pays our goal is provide affordable available insurance to our membership and we have to either pass that cost down we have to do something about policy to put more risk on that consumer so that that rate can stay down that is not our goal it's not what we want to do but unfortunately in this environment those are decisions we're having to make with that I would just want to go and turn out over a kind of data recap on everything that was talked about i'll take any questions okay thank you sir representative lady thank you this may be a loaded question i'm not sure but with rates going up. You don't say i've got a million dollar house in my equity is not thirty percent of that and whatever so if I want to go just ensure that house partially and take the risk on myself. So you know about if I lose thirty percent my equity I lost that but at least it covers my cost of the house and that under water so is that something that your company or most companies would allow i've had some of them tell me what we got insured. Out of the end or whatever you don't talk about a typical health or hl five homeowner policy that's this just a generic home owner of typical home owner it's going to be somewhere they're required to be insured around ninety to a hundred percent some more there that's going to be the minimal and it goes back to that scenario I refer earlier you have two million dollars home sit next to each other one of them is sure for a million one of them insured for five hundred thousand were both of those homes that roof is going to cost sixty thousand dollars. So if I let you put five hundred thousand on this one you might be paying in half the the insurance rate so that's why so really the only thing that you can do to take on more than rears is take a heart about the book and that'll directly be reflected in your rates. Is that answer your question thank you. I don't remember when I come in. Or call but usually it's been coming in too a discuss home owner insurance. Do I tell you what to buy you is or do you determine what the value is so let's say it's a new piece of business come to his typically there's been a real estate transaction the customer they know what that cost is most companies are going to have some type of program in the background without interior the the basic features of that property that's going to return a certain value and so the for the most part is pretty accurate and now it has factors by zip code and is it a track home is it not attract home as it had break three tab shangles architectural singles so there's going to be a way to evaluate that and that was it a hundred percent perfect i'm not going to sit here and tell you it is but there by wedding their entire book that way so that it should be reflected in their rates over the whole board there are several programs out there that are used for it and those can be made generally can be made available to consumer. If if if requested but much question is there are am I determining the value or you determine the value it's a more talking about what you insure you will you will you will determine the coverage amount coverage a amount for the home as long as it fits within our guidelines but we will input the agent more into all those attributes on your home and it will return a value and then we will require your coverage a to be within a certain percentage of that replacement cost it could be ninety five percent or could be hundred percent good but welcome in and say the homeless. Three hundred thousand dollar house was two hundred thousand your. Gonna say no it's not right if you say it's three hundred and november so it's two hundred i'm already you know it comes to seller we're going hot will become detects in our insurance we're going low and that yeah so it comes back to honor expertise I mean I can look up on zillo uh so i'm asking the all not say no this is the this is the value that we have to insure it for correct we do say that so we shouldn't be under ensuring on value well what happens is you've had at home on the book. For twenty years nannam papa they built their house twenty years ago for a seventy five or hundred thousand dollars will tom has rolled on and for whatever reason and we may be pondered at inflation guard every year it's built into a policy but you go through a period of twenty one twenty two where you see values increased twenty or thirty percent so now we have to do this big job to catch a month and so that that that's what happens and it's a hard conversation for many many insurers because they're looking at it saying well I know I bought that house for hundred thousand dollars twenty years ago why don't want to put three hundred thousand dollars insurance on. That there that is a hard conversation to have with the consumer yes but but again if you're. Doing your job and there are any in that's a good explanation is part of the increase in insurance as a these houses have gone way up in value in the last breers but if you're doing your job then when it comes to for a claim i'm not under because i'm not i'm not going back and looking at what my house built twenty years ago or moved into twenty years ago is bay today if i'm continuing to renew with the same insurance company correct and industry remind you that unique scenario that happened was that twenty one twenty two when they increased so much that caught the entire industry off guard and when we we only get to change that coverage amount once a year that's when that policy. Whilst when the policy renews we can't make a change without the consumers consent midterm right and so you you run that renewal and december twenty twenty one the inflation really takes off the the first part of twenty twenty two you get back to the end of the next year and that value has gone up twenty percent in this a big jump for the consumer that that's what occurs is the renewal dates of the so when we're we're printing money in in the money in our pockets as devalued as we said here it cost everybody. Thank you there are no other questions board centre hammer has not been here today he always has lots of insightful questions he likes to ask in he is watching live online and he sent me a question performed and we got to make sure we send her hammer on the record today though he said that this farmer will have a history of lowering premiums after inflation deals. Are in two thousand eight or hamilton take based off of the tree instrument you're right well and that that serve that's a good question i've had to go back and look at our history I can tell you there have been times we have lowered rates but it really just to it depends on our experience and and we follow those rights with the insurance department and they have approved it I could tell you right now there still is a right need out there for most companies and most consumers should expect that for now but I appreciate appreciate the creatures town and just so you'll know as far as in my area you go to the claim check the tornadoes and strike land winds i've never had a single complaint about I don't appreciate often and you thank you for being here. Next we have jason tennet with cs bank and miss lori trucked in park so banker association. Please introduce yourself for the record in proceed. All right well thank you for for having me here today all sorry i'm a jason tenant i'm with cs bank based in eureka springs arkansas where. A carol madison booned counties in arkansas and and barry county and southwest missouri and lorry it called me yesterday and asked me to come down to i'm going to have to echo all the things that have been said here because I know they're real on the insurance costs than any insurance rates and that sort of thing but i'm gonna hopefully be able to give a little bit of the concerns that we have in banking and in the mortgage business the impact that these rising costs are going to have because we're already seeing it a little bit are bank then again based in eureka springs of who was a lot of commercial lot of lodging a bed and breakfast etc we're seeing the deductibles become a real factor in a lot of the insurance that's there because they are primarily going to the percentage of the value of those buildings most properties the home owners in our area because the rest of our market is very rural. Is it has the split deductibles as have been talked about earlier where certain things are flat right deductible in halen wind or percentages are concerns are the impact that in the suddenness of this impact especially to the home owners that are out there cause so many of these people escrow their taxes and insurance which as you know kies in two year monthly mortgage payment. A lot of those folks are going through secondary market which means of course they did the loan may be at our bank or a bank and then it sold off and it is now service by wells fargo jp work and chase some large servicer. And when they come in and eight have an insurance claim of hail which we do have a lot of hail and I echo of what formula said. And they suddenly now have a depreciated roof value a higher deductible because of the percentage. They can have as much time twelve thousand dollars that's going to have to come out of pocket that allow those folks don't know they had and are we're going to have they were going to have and haven't maybe in the past and that's a real concern we got especially if you get into first time home buyers have load a moderate income bar was a just reality as a lot of those folks aren't going to have ten or twelve thousand dollars laying around insurance company pays the claim it's made to the mortgage holder and the bar. The the bar were has to send that check to the mortgage holder will work in the mortgage holder will we'll pay that will play the riffer when the roofing when the roofs put on in the roof is proper inspection. Well that puts that bar were in such a really a pickle if you will because now they're coming to says the local bank or some somebody of that sort to say hey I need ten thousand dollars to help the finished put my roof on and it's a real it you can so I think you can probably understand the challenges that are there another example for us is we are also we're we're a big aglender we are big in the poltry business in in northwest arkansas and our bank. What we've seen the changes to insurance for the farmer that has politely houses where they deductible is now per house instead of just one big blanket policy is another real concern that's that's coming out so you're a farmer that's raising chickens turkeys etc and you've got six houses in you have damaged to five of them you know certainly there's a five thousand deductible on each home are on hold on each house uh gets at the home to a chicken I guess but it is all I think that's that's the point that in and it really hasn't hit yet I think that's the thing I want to point out to is it really has an affected. The market too badly yet because it's pretty new but it's a head wind that I think is got our industry very concerned and I think it's something that's going to be impact for coming down the line so that you don't everything okay that's and that's just no less ties into all the things that the reality that you've been hearing for the last couple hours from the insurance industry not know it is reality that is just a concern that we have an announcement national and national issue but you know we we've got to try to figure out some way to to to help these folks because I think it's going to become an issue down the line thank you would you expand a little bit on what's going to to ask for account saying people who are working hourly or by the week what's going to their well you know obviously i'm going to and how you are going to counteract the okay thank you the the only espiral side of things they can allow it as I said earlier a lot of those folks they just make their monthly payment they have their mortgage and it's surprised with their taxes or interest and insurance is SR s rode into that. The the mortgage companies going to pay that as scroll payment now they're going to pay the insurance premium they're going to pay the property taxes. Then there's going to be a shortfall in that end in so you're home owner then gets a letter that says your mortgage account your espiral account is twelve hundred dollars under under water you can either pay that at one time or your payment is going to go up. Uhm and you know the tantrue question senator the the the only thing that really the mortgage holder can do is. He's a raise the payment or because it has to be it has to be paid in the consumer has to pay it and with all the cost and you know with groceries gas cars that we talked about here today uh that's just another expense that gets up there and if rights don't come down they'll stay up here so it's going to be impactful in a negative way to the expendable income that these people have because they got that they've got to pay it you know they got to pay for it morgan's holders were going to require you to have insurance you can't go without not having insurance you know another concern if for people that don't have mortgages if they have these lower payouts for roofs what a lot of people can do is just have the roof patched they're not going to they're like going to pay the extra money and so that's going to devalue the homes and cause things to be even even harder and that's that's what that's what we've you know we're concerned about too but that answer your question yesterday just got go step forward and those escrow accounts go up and i'm not sure if you are holding mortgages or not in the individual borough rich you have out here cannot make the additional payment because they don't have the money worry about it well it didn't hit that it goes in the four closure that summit at all it is it's it's your payment it's it's tied into your payment and if your payment goes from a thousand dollars to thirteen hundred dollars then if you can't if they can't make it they you have to sell the home or it's a irritant in the pillar he said situation. Representative later thank you okay just I just wondered with the insurance going to inflation have you seen the average cost of new mortgages going down side house sizing more down the understand my question that you mean the amount of the dollar in the loans themselves will wear little unique in northwest arkansas that the price is really haven't come down any up there very much but it it is slowing the sales of it because you know and when you have to factor in the the cost of insurance young it did the insurance cost up for an in in course once people are buying then they're they're really getting all that disclosure up front so they kind of know when they're going into it but it's slowing down the market somewhat even though it's still really good it come up here to the night national averages it's it's still really good but that it's it's easier the cause we are now up and in our neck of the woods starting to see a price declines a little bit for homes that are for sale interest rates have a lot to do with that too but this it's it's this whole picture it's a whole picture of again replacement costs are way up but I think the biggest concern that we have is an industry is going to be the existing mortgages that are on the books right now that's that's that's as much concern as we have with anything. Thank you thank you so any other questions. Saying none thank you for your time sorry thank you all for having this drug and you want adding things okay thanks. Okay yet that this time. Can I jim make an exception for you sorry if I assle fast I mean you're johnson takes to me jungle over there so to address of misretended concerns about mortgages I have that same concern. Uh before well while we were considering making this change I read start to arkansas banks and tiny old artists simmons and wells fargo because that is an into the purchase a lot of mortgages I had concerns due to the definitions and fairly main freddy mac requiring a replacement cost policy for those ones so I did not hear back from any of those institutions except for wells fargo they said they had minor concerns but they're they're they're not going to. Submit anything to the department uh on record. Yeah. Due to the fact that this was standard practice in most surrounding states. Uh II took that to to understand that that there's not going to be uh for closure crisis or you know any any issues with these particular policies that that do require replacement costs one of the reasons why we were so hesitant to allow it is because we at the department has always considered a consumer protection issue trying to protect the definition of a replacement cost policy because i'm not sure that I would call a replacement cost policy with an activity endorsement on the roof I true replacement cost policy letting in I would not call a replacement cost policy with an asavian doors or roof schedule is what we're were calling right a complete replacing the cost policy I mean thank you. However. The definition of that has changed over time and you know industry wide not just an arkansas. Going to the the poultry houses in the greater houses and open a starting together up and very well I can see twelve twelve houses from from our back back ports not hours neighbors so I understand the issue with availability with these checking houses I think there could be an issue in the next few years a lot of these houses are older structures and they're all built right on top of each other. You know you can get out of want to go to the go over next while the new farmers are building for resiliency unit taken a sixty acre lot but not ten you know ten spread in their houses apart on diagonals or whatever spread and the matter of the I know a lot of farmers don't have that luxury but as the I think the newer ones build and replace the older houses they are allowing you know not building around each other spreading them out thank you very sir seeing no one else on here i'd just like to say appreciate your one common staying with this today hopefully wasn't too difficult on yall the hard questions that everyone had today for those who are watching online or those who are here that did not come to speak from the color state insurance companies I look forward to here in from you all in the future that we have some things we need to discuss and would like to whether we do it voluntarily are we go through JPR issue as a painter so we'll hear me all one where the other thank you very much we're jerry.