Zachary is joined by John Kinkopf, President at Haudenschild Agency, a combination financial and insurance advisory company based in Northeast Ohio.
Zachary and John examine how the insurance industry is evolving to meet the demands of emerging technologies such as ridesharing, Airbnb/Vrbo, and cybercrime. Part 1 highlights include:
Visit our website for information about our legal services related to emerging technologies.
Zachary is joined by John Kinkopf, President at Haudenschild Agency, a combination financial and insurance advisory company based in Northeast Ohio.
Zachary and John examine how the insurance industry is evolving to meet the demands of emerging technologies such as ridesharing, Airbnb/Vrbo, and cybercrime. Part 1 highlights include:
Visit our website for information about our legal services related to emerging technologies.
ZBP - Zachary B. Pyers, Esq.
JK John Kinkopf, President, Haudenschild Agency
ZBP
On today’s episode, we are going to be speaking with John Kinkopf, the President of Haudenschild Agency, an insurance agency based in Northeast Ohio. John, as we start talking about insurance and emerging technologies and the transformation you’re seeing in the industry, if you would, before we get into all of that conversation, could you tell us a little bit about yourself?
JK
Sure. Thanks, Zach. So, I graduated 33, 34 years ago, accounting degree. Worked as an accountant for a couple years. Had the opportunity to come aboard Haudenschild about 30 years ago. Started as a salesman, became a sales manager. Was fortunate enough to be able to buy the agency in 2002 with my wife’s cousin, and that made up our third generation since 1937, so it’s definitely a family owned, small town situation, but we’ve grown tremendously from that point.
ZBP
If you could, tell me, where are some of your offices located?
JK
Right now, we’ve got three primary offices. One of them is in Loudonville, Ohio. That would be our original location, which is, for those folks in Ohio, right near Mohican State Park. We’ve got one in Wooster, Ohio, and we’ve got one in Independence, Ohio.
ZBP
Wooster is, for those of you who don’t know, is actually my hometown, so I’m very fond of Wooster, Ohio. If you could, explain to our listeners what your role in the agency is. I know your title is President. I know you’re obviously an owner, but explain to us what you’re doing on a day to day basis.
JK
Let me tell you a little bit about what I do, and it’s evolving here, actually a lot based on what we’re talking about. I’m a salesperson, but I negotiate or discuss things with our carriers, whether it’s particular campaigns that they have or problem areas that we have. I work with our producers making sure that they’re ready to go. We work with continuing education. We work with, again, getting our processes better, and we are doing a lot more technology and making sure that that’s going the way it should be, these kinds of things, and then overall, just making sure. I’m self, I’m an entrepreneur, so I’m part-time maintenance, part-time sales, part-time manager, but mostly I’m in sales and it’s more of a sales management role for my team than it is anything else.
ZBP
One of things that I know is a topic or a hot topic for a lot of our listeners in many regards is, how is technology changing our everyday lives. We are doing kind of a miniseries, for lack of a better term, as to how technology is impacting the insurance industry, and so we’ve spoken from a carrier’s perspective on a recent startup in the insurance space, but I’m really curious to hear how technology is changing the agency perspective and what you’re seeing from the agency.
JK
That’s a great question, and to tell you when I started the agency in ’91, we had one computer in the entire office. Everything was done with rate books, so I could go on my set of daily appointments or weekly appointments, grab my rate book and meet with somebody, meet with Zach, ask the three pricing questions there are and through a series of different pages, calculate a rate. It wasn’t easy, but it was simple if that makes sense. Today, that same calculation is done with somewhere between 40 and 60 data points depending on which carrier we’re talking about, depending on which product we’re talking about. Some of that information, we’re gathering as an agent. Some of that information, the carrier is grabbing through its various vendors or opportunities that it’s using, and we might not know what all of that is. All that being said, that goes into a unique premium development, and the best answer I can give you is, 30 years ago when I started, Zach, you were my neighbor. There’s me and we had another neighbor. This is a fictitious story. We all have the same house in the same development. It’s a $200,000 house. It’s frame. It’s on the edge of town, and we’re all trying to insure it for the same amount. It would be very likely if we take the same deductible that that premium is within pennies of each other. Today, because of all of those data points, we have a situation where I had I think it was three or four folks who were going to buy the same house. They were all looking to do their research on the same house. We gathered all of the information and provided quotes for all of these folks. (A) - they were about 20-25% difference high to low, and two of them were not with the same carriers as the other two in terms of what was the best rate for them, so the variables matter greatly here. It’s harder to predict as an agent, and the worst thing, the worst part about this, and I mean this sincerely, is when you get your renewal and you said, my rate went up $50.00 or 10% or whatever, sometimes I can explain it, but with this new rating process, it leaves the agent fairly ignorant to how that true calculation is made, so it makes the service part a little more difficult. We’ve got to dig a little deeper. And then I guess the last part of that, that’s on the premium calculation side. On the coverage side, who would have ever predicted we’d have cyber theft or cyber crime coverage? We’d have identity theft coverage, we’d have equipment breakdown coverage for personal lines? This was just stuff that was unheard of, didn’t even exist 15, 20 years, so (A) trying to understand what the carriers are trying to do with that stuff and trying to understand how the consumer sees that, how they market that, whether or not they are going to buy it becomes a much greater discussion than just the fire and wind discussion.
ZBP
It’s interesting, as you’ve mentioned, especially with some of these additional endorsements. Some of these are risks which frankly just, I shouldn’t say didn’t exist, but certainly didn’t exist in the same capacity you see today, and so you see, I think, carriers probably responding to some sort of demand to write policies where there’s a demand for that insurance, like identity theft or cyber crime coverage, but the risk is increasing. I mean, I know just from recent press coverage and I know you’ve seen it, there’s been a number of cyber crimes that have made national news, with the Colonial Pipeline attack, with a lot of these where cyber crime has become a big issue, and you’re right. The risk just wasn’t there to the same extent about 15 to 20 years ago, but now is ever present in our society, so that’s really interesting.
JK
We see in our senior market folks talking to their parents and finding out the senior thought that they needed to buy so many gift cards and they had to wire money, and we don’t find out about it, the kids don’t find out maybe until a year, at least months or years after it’s happened. Most of the time, they don’t know if they have coverage. Usually they don’t have coverage and they’re embarrassed to tell anybody, but the amount of stories that I’ve heard of how often that happens in our little area is remarkable. I would have never guessed. It’s really stunning to me, honestly.
ZBP
Stunning. It’s obviously a sad reflection on our society, but yes, I think it helps to prove the point that you’re getting at as to why this coverage is necessary, at least to be offered in the capacity that it is. Kind of switching gears here just for a moment. Obviously on this podcast, we talk a lot about emerging technologies, and I would love to hear how you’re approaching some of these risks from an agency perspective because when we think about the risks, at least from a lawyer’s perspective, we’re often thinking of it in terms of liability and who’s “liable,” but there’s a whole other end that we’re aware of that is, is there insurance for the risk. But then the question becomes not only is it there, but from your perspective, is how do you identify that risk that needs the coverage and how are you as an agent working to figure this risk out and address it. For example, you take the ridesharing situation.
JK
Again, this is some fun stuff. It’s fun to do this to the extent that it’s been around a little while. We’ve learned about it. We’ve had some experiences, so I’m more comfortable talking about this than maybe I was three or four years ago because we got some water under the bridge, but it’s unlike, the one thing I will tell you in thinking about this whole conversation, Zach, is it’s unlike any other insurance there is because it’s not like this is a commercial auto or this is a personal auto and coverage always exists. If you’re actually deeming ridesharing private, there are moments throughout that entire day that it shifts back and forth and back and forth, so whose policy is going to apply is really, it’s electronically tracked but it’s really difficult if we don’t have the right preparation and we haven’t had the right conversation. So what happens is, for most ridesharing situations, and I want to make this delineation as well. I’m only talking about personal auto insurance. I’ve never had a situation where somebody is using their commercial auto to do contractor work during the day and do ridesharing in the evening. I’ve not ever had that, so I don’t have any research or expertise on this. I’m talking about if Zach drives his car to work to be a lawyer, and then at the end of the day, Zach - this is fictitious - at the end of the day, Zach decides he needs some extra income, so he’s going to do some ridesharing, so his normal personal auto has now become a ridesharing car, and it’s happening all instantaneously. So the carriers are able to, I think with the industry, define the three phases of how the ridesharing process works, and it starts with I’m driving to a point where I’m going to turn on the app. At the point where I’m driving my normal car, I’ve got my normal personal auto coverage. I turn on the app and I’m looking to identify a fare for a ride. Most carriers that provide coverage in this phase are going to provide coverage for Phase 1 - I’m looking for a fare to pick up. Ridesharers also provide, some of them provide some coverage. It’s not the same coverage, it’s the other phases. It’s not really robust coverage, and I don’t recommend it, but they do offer some coverage for Phase 1. Phase 2 is I’ve now identified a ride or a fare, and I’m driving to them. At that point, the personal auto insurance stops and the ridesharing coverage is going to pick up. Phase 3 then, and we’ll talk about that in a second. Phase 3 is I’ve picked up my fare and I’m taking them back or I’m taking them to their desired location. So you’ve got I’m driving along, I’ve turned on my app; the personal auto applies. I’ve identified my ride and delivered my ride. Now if I don’t immediately pick up another fare and I’m maybe driving to reposition myself, again the personal auto kicks back on, and so that’s where this, at any given moment, I’m going on/off, on/off, on/off, and once you go through it, it’s a little bit easier to understand, but it’s so unique in how the coverage gets turned on and turned off several times through the day. So what we see then is that there are some differences in the coverages in terms of, for instance, with - do you want me to get into this part of that now?
ZBP
Sure.
JK
Okay. What ends up happening is, for instance, one particular provider has a deductible that’s pretty high in the insurance base for comp and collision. It’s much higher than most folks would have. It’s a $2,500 deductible. If you get into an accident while you’re on Phase 2 or Phase 3, their coverage kicks in. The most challenging piece is that Phase 1, though, and the Phase 1 is if you haven’t communicated with your carrier, your personal auto carrier, you may not have coverage for Phase 1 and you’re going to have very limited, I think the number as I understand is between $50,000 and $100,000 in that Phase 1 phase, which again is coverage but it’s not very much for potentially what can happen. There’s a lot of differences in the broad aspect of we can say you have coverage and we can identify, like you said, it’s in the broad aspect, when you’re in Phase 2 and Phase 3, we can identify if Uber is covering you for liability or ridesharing concern. In your personal auto experience in Phase 1, personal auto is definitely your own proprietary carrier. Phase 1 is maybe, if that makes sense.
ZBP
Sure, yes. Now let me ask you. I think it goes along. How do you communicate these issues with your clients?
JK
That’s a great, great, great question. There’s a handful of carriers now that will accept the risk and they’ll allow you to do ridesharing, so that has come - again, if we were three or four years from now, it’s an automatic no, goodbye and have fun. We’re able to have conversations with the carriers, so I put some good marketing material together that illustrates it. To some extent, the ridesharing information gives a lot of that information out as well if you look at it. You may not understand it, but there is information there. But when we are onboarding somebody as a new policyholder, that’s the question is whether or not they’re going to use their vehicle to rideshare. At the end of the day, like we talked about, the deductible can be different depending on where they’re at. They may have endorsements on their personal auto that don’t exist. On the ridesharing situation, things like rental roadside assistance, loan/lease gap, all of those items you may have in your personal auto and it’s not going to be in that coverage, and understanding, and I guess this is the bigger issue. When you say, well you say you have no coverage, not only do you not have liability, all those little things that are helpful and really meaningful also don’t exist, and I’m not sure folks always get that.
ZBP
And when you’re talking about those little things, you mean rental coverage if there is an accident, roadside assistance?
JK
Correct.
ZBP
Okay.
JK
There is loan/lease gap if your gets totaled, and the carriers are only going to allow for what’s called actual cash value, so the book value of your car at the time of the loss. Unfortunately, a lot of folks have amortized loans that don’t depreciate, that don’t amortize down as fast as the car depreciates, so they may be upside down and may owe $10,000 for a car that’s worth $8,000. They’ve just totaled their car, so sometimes they buy gap coverage through their financing company, and sometimes they buy it from home insurance, but that will provide additional coverage to maybe make up that difference. When you have no coverage from that policy, that coverage doesn’t also exist.
ZBP
Got it. Now, have you seen any ridesharing claims in your agency?
JK
We have. We had one particular at first, and the others haven’t been necessarily as bad, and it happened just as this fellow was just getting to leave his initial maiden voyage with ridesharing, and we have talked about it several times, and we have communicated back and forth exactly what we talked about earlier, Zach, about the three phases and where the coverage starts and where it ends. Sure enough, he’s getting ready to deliver his fare and gets in a pretty bad accident, and he decides to call his carrier, my insurance rep, and report the claim, and very quickly the carrier contacted me to ---few seconds unclear--- Yeah, we talked about it. He should know that with any coverage, long story short, he understood there wasn’t any coverage but he still wanted his insurance carrier to act as the claim conduit, so he kept trying to make the carrier do all of the things that they’re not necessarily responsible for - setting up repair, doing estimates, getting in touch with this, getting in touch with the impound lot, all this stuff, and really they have no obligation to do that. And then, probably the worse part about this is, he needed a rental, and he had rental coverage on his policy, but again, no coverage, and apparently this particular ridesharing company has a rental policy. He would have had to leave this state, go to another state and they make a pool of cars available just for this situation, but there’s no guarantee. It’s first come, first served, and of course when you don’t need it, you’re required to take the thing all the way back to wherever it is you picked it up, so that made it very difficult to plan. It wasn’t a for-certain thing, and it made life very difficult for that person because I think he tried once and couldn’t get a vehicle and didn’t come back while his car was being repaired, and it’s not a knock on ridesharing insurance, but they don’t have the same sense of urgency in getting you back in a car as your proprietary carrier does to the extent that they’ve got a lot of other things going on. Getting you back in your car isn’t necessarily their top priority. We think it should be, but it isn’t always, so it’s just a very slow process. It didn’t have the coverage they thought they had, and they legitimately suffered through the process. They elected to no longer be ridesharing drivers, so it was a really difficult situation, and I kept getting phone calls to the extent that can’t you be my agent to facilitate this claim? And I get it, but I mean, I’ll try to make a few phone calls, but it’s really out of my control. Again, this isn’t a claim that’s happening to our carrier, we’re not subrogating this, none of that exists, so it was really a difficult situation. I really empathized with this situation, but in the same vein, I’m fairly comfortable, and I went back after all of this happened and re-looked at all of our communication. I was really comfortable that we said the things we needed to say and pictures were drawn and brochures were given, and I mean, there was a lot of information given, and it was unfortunate. I wish it didn’t happen.