The Reminger Report: Emerging Technologies

Uber, Airbnb, Cyber Theft... How is the Insurance Industry Keeping Up? with John Kinkopf (Part 2)

September 09, 2021 Reminger Co., LPA
The Reminger Report: Emerging Technologies
Uber, Airbnb, Cyber Theft... How is the Insurance Industry Keeping Up? with John Kinkopf (Part 2)
Show Notes Transcript

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 2 highlights include:

  • Types of Airbnb coverage and potential risks to hosts and guests.
  • Telematic data trackers recording driver safety to inform insurance rates.
  • New ways to communicate with clients, prompted by COVID-19.

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

            Shifting gears a little bit, I know that one of the other areas in emerging technologies, or we’ll call it the gig economy, that I think that a lot of average customers or consumers may participate is Airbnb, and I’m curious to know, from an insurance agent’s perspective, what are you seeing or how are you addressing maybe some of the gaps in coverage that people may have if they decide, hey, I’m going to go away for the weekend.  I’m going to list my house, my condo, my farm, my cabin on Airbnb.

 

JK

            You’re an attorney, Zach, right?

 

ZBP

            I am.

 

JK

            Do you ever go through some life experiences and think kind of in third person, this doesn’t look like this is a good idea?  Or this might not end well, right?

 

ZBP

            Yes, occasionally.

 

JK

            We had an Airbnb, we rented an Airbnb up in Michigan, and my insurance brain was on the entire time, just thinking about.  It was a great experience.  I had a ball.  I would do it again.  The property was fantastic, but just like pictures on a wall, stuff in a refrigerator, water leaks, all these types of things that happen in normal day to day life that remain.  When you have a vacation rental, which is a little bit different, most of your stuff is sealed in a locked storage area.  Most of these Airbnbs, it’s pretty much, we’re going for three days, kids, let’s go, and everything remains as it is.  You see a lot of things.  The biggest is, if any property is damaged, there’s two kinds of damage.  Let me say this.  There’s two kinds of coverage with Airbnb.  There’s the Host Protection Program and the Host Guarantee Program.  The Host Protection Program basically says, and I may have this, one of them says you’ve got liability coverage in case somebody gets hurt from the time they check in and check out and they sue you as a third party renter.  The other one says, and I think it’s the Host Protection, it says that we’ll fix your property or your contents if they get damaged during the rental process.  Well, on the property side, the biggest problem that I saw is, almost all homeowners are insured on a replacement cost basis, an overwhelming number, so that means cost to repair minus your deductible, it’s getting fixed.  From everything that I’ve read and seen in Airbnb, I believe all of their settlements are actually cash value, so that means cost to replace minus some depreciation minus the deductible, and you’re getting arguably 40% to 60% of proceeds to solve your claim problem, and my guess is, if it’s gone to the place where it’s going to be this claim, it’s probably pretty big damage, and that’s not a fun space to be in.  Some things like roofs, things like windows, things like carpet, all these types of things, if they get damaged, in my opinion, you’re not going to be made whole with the actual cash value process.  That’s a big error or a big gap I see.  In our part of the world, we see a fair amount of, between septic and sewer and some of these microbursts of rain, we’re seeing some water backup from the cities not being able to take the rain flow quite as much or septics getting a little bit too much and you get some water backup, which isn’t automatically covered on a policy.  It has to be endorsed on.  It gets on, I would guess, 75% of policies that exist today.  That coverage doesn’t exist on the Airbnb platform, and some of the other stuff that we talked about - cyber coverage, equipment breakdown - those coverages don’t exist on the Airbnb platform, and your deductible might be dramatically different on the Airbnb platform than it could be on  your own policy.  One thing I’m not sure of because I see this a fair amount and I’ve asked all of our hosts that we insure to make sure they’re verifying with Airbnb is that if you have an LLC or you have a Trust that is in ownership of that particular property, is the liability being extended to you as the host individually and to the owner, the Trust or the LLC, or is it just being, because you as the person are the host of that property, and I haven’t seen conclusive information to indicate that you can get that.  I haven’t seen that it doesn’t happen, but I haven’t seen what our, and I’m not aware of how that process works to make sure the Trust or the LLC is added directly.

 

ZBP

            Let me ask you, when you are going to secure insurance or helping a client secure insurance, is this something that you see where you're having this discussion with the client up front - are you renting this home through Airbnb or Vrbo or one of the other services, and if so, as you’re having these conversations, how have you seen the different carriers approach the coverage?

 

JK

            It’s a much different feel to the extent that you have two kinds of risks in the Airbnb platform.  You have, I have a rental dwelling that would traditionally be rented on a yearly basis or at least on an annual basis collecting monthly rent, and you have my own home, which would normally be owner-occupied.  In both spaces, we have been able to find coverage, but it’s a very discriminating underwriting process that folks have got to go through, so if you’ve got a pool or pond on your property, whether it’s home or rental, generally I can’t find coverage for that on the Airbnb platform.  If you’re an unusually unique building, you’re probably not going to get, in other words, if you’ve got a ton of bedrooms and a ton of floors, most of my carriers would walk away from that because they want to see maybe that one-family, two-family platform, and that would be ---few seconds unclear---.  It doesn’t always make sense to me because in my mind, one of the best parts about their being my insurance ---few seconds unclear--- is, that host is in there before the renter comes, and they’re in there immediately after the renter comes and they’re cleaning up, so you get a pretty good sense of what’s going on, and by the way, they’re also rated online, so if you’ve got a bad renter, you may know that, be able to pick that up ahead of time, or if you’re the host and you’re a bad host, that gets picked up in time, and you would think that would be a lot of helpful information for an underwriter to discern risk levels, but I think the intangible is, you never know who’s going to show up in that building.  That’s harder to predict.  It scares underwriters, and when you have an uncertain underwriter, that means they’re not going to write ---few seconds unclear--- uncertainty.

 

ZBP

            At least with your agency, are you seeing more Airbnbs vs. ridesharing?  Are you seeing more of your clients looking for ridesharing coverage vs. Airbnb coverage?  What proportions are you seeing?  Kenton and I actually just did, we recorded this morning, a webinar for the Defense Research Institute where we talked about people’s participation in the gig economy, and honestly, what we see, historically speaking, is just that there’s been a huge boom in the participation in the gig economy, and so we’re curious.  Just from your anecdotal experience in your agency, which do you see more participation of in those regards?

 

JK

            I’ll give you two anecdotal experiences.  One is, we talked about the wonderful Mohican State Park, which is pretty near one of our offices.

 

ZBP

            Yes.

 

JK

            You can imagine that there’s some beautiful vistas and there’s some wonderfully secluded areas which would make wonderful marketing and wonderful opportunities for an Airbnb, but nobody in their right mind is going to be doing ridesharing where there’s two people per five square miles, right?  That doesn’t make any sense.  So we see a tremendous amount of Airbnb.  In fact, I’m really anxious to see with some of these small towns that do have beautiful country and do have, so in the Loudonville area, they’ve got a lot of ---few seconds unclear--- and they’ve got some restaurants, and so it’s really been a way to enjoy that area.  It’s a little bit more unique to the tourist and it allows folks to have a little bit different experience, and you don’t have to have this huge investment of a 40-unit hotel or this kind of thing, so more folks are getting some nicer, some of these places are just outfitted tremendously.  They’re doing some unique things that I’m not sure I would do, like treehouses.  I don’t know if you’ve seen, have heard about that or . . .

 

ZBP

            I have.

 

JK

            That ain’t my gig, but they’re doing some of that real neat stuff that way.  I will tell you, in your hometown, I’m aware of, I’m going to say one person that does ridesharing, and it’s that, because it’s only Lyft, and it may or may not exist.  I mean, it just, you turn on the app and you may have a ride that night or you may not, but it’s my understanding, it’s literally one person that does it.

 

ZBP

            I have been in some, I have been in other rural areas of the State of Ohio and West Virginia for that matter, where I’ve been in situations where I’ve turned on one of the apps for a rideshare and somebody at a hotel will say, oh yeah, Bob drives for (fill in the name).  He might be driving tonight; he might not.  So I totally understand.

 

JK

            Absolutely, so the short answer is, we see a ton of Airbnbs, and they’ve been very successful.  We have seen that.

 

ZBP

            This is a little bit off topic, but I think you raise a great point, is that, I think that for places like Loudonville, which you mentioned, and we see this.  I read a piece recently about the New River Gorge down in West Virginia which was recently designated as a national park, that they’re seeing a boom in the Airbnb industry down there, and similar other platforms as well.  But instead of building, like you said, a 40-unit hotel or motel, and sometimes that’s not the experience people are looking for, either.  They’d rather stay in a more remote cabin or a house, but you’re starting to see a boom in the tourism industry, and also as we are coming out of the pandemic, I think people are anxious to travel as well, so I think that the Airbnbs and similar platforms help to fill that niche but also help to increase economic development in some of these areas, which I think is a wonderful thing.

 

JK

            I 100%, I mean I’ve seen that $125.00 might be your average hotel cost in these parts, and I’m seeing Airbnbs going for $200.00, $250.00, $300.00 a night.  It’s a one unit or one family type of situation, so they’re definitely, people are definitely willing to pay a premium for this opportunity.  I think that’s very clear.

 

 

ZBP

            I’d love to talk a little bit about how some of the other areas of technology and how they may be changing your business.  One of the things that I know we’ve seen and I think probably anybody who’s watched any television has seen commercials that relate to apps that are tracking  your driving and trying to figure out your usage and if you brake too hard or you speed too much or you’re traveling too quickly.  Have you seen, what have you seen from your clients?  Is this a technology that they’re excited to adopt or no?

 

JK

            Again, kind of in preparation for this, I’ll tell you from my agency experience, very little, I’m going to say no.  We might have one or two of these data trackers.  Telematics is what they’re called in our industry.  In coverage, the insurance companies try to induce folks into giving them their data for a reduction in the premium, so we see very little, and it’s hard for me to recommend it.  We talk about it, but it’s hard for me to recommend because I wouldn’t buy it.  I’m not a fan of that, so some of that might be driven by my own personal thoughts, so I kind of went up a level and I talked to an underwriter in one of our bigger carriers and asked them about the uptake that they say, and she told me that she sees very little to nil, and she’s got, let’s say 14 different territories that she underwrites for.  She said something to the extent of she sees 1,000 apps, she might see three with that kind of telematic discount on it, so it’s, I don’t think in our part of the world and other parts ---few seconds unclear--- country but rural parts of Ohio, I don’t think this is catching and I don’t think the carriers have given enough of a financial incentive for folks to jump on it.

 

ZBP

            That’s interesting.  I wonder, I just wonder whether even if there is a financial incentive, how much of a financial incentive would it have to be in order to entice somebody to participate?

 

JK

            Well, I think folks recognize, and it’s a great ad campaign, don’t get me wrong.  Just pay per use, right?  What it is, is just about I don’t drive many miles.  It’s also, like you said, it’s hard braking, it’s hard acceleration, time of day, length of trip, all of those types of things come into account, and I mean the whole reality of why there’s a lot of accidents is we’re not necessarily very good drivers.  I mean, there’s a lot of claims.  There’s a lot of fear that that’s still going to happen.  I don’t know how they telematic a deer, right?

 

ZBP

            Right.

 

JK

            I don’t think that the small window that truly benefits, and it’s a real small underwriting kind of sweet spot, they do generally get a decent amount of incentive, but it’s a very select small group.

 

ZBP

            One of the things along those same lines relates to data, and we know that insurance companies are collecting a large amount of data, whether it’s those 40 to 60 points that they’re collecting in the underwriting process about you or the risk that they’re undertaking when they write the policy for you, whether they’re getting it through these apps that’s tracking your usage, the telematics, or other regards, have you seen or heard of unique situations where insurance carriers are acquiring this data in other means?

 

JK

            One of our carriers, one of their renewal factors is miles driven, and you go, okay well that’s interesting, but I never see that they’ve asked the insured how many miles you drive a year.  There isn’t a survey that goes out.  What, upon more questions, I came to learn was they were using a vendor that was dealing with QuickLubes, if you will, or oil change franchises.  I don’t know the name of the one.  I call them QuickLubes generically.  Every time you go in and get your oil changed, the first thing they do, ask how many miles on the car, and it’s information they use to make sure they can let you know when you’ve done your 5 or 8 or 3,000 miles, hey it’s time to come see us again.  Well, they’re selling that mileage data, and somehow carriers can buy that mileage data, so if you’re a regular person that gets your oil changed and you’re a good citizen and you do it on a regular basis at the same place, that information is getting found out, and to this particular carrier, they’re picking it up and it goes ---few seconds unclear---.

 

ZBP

            So in the situation you’re describing, you’ve actually got carriers who are acquiring the information from outside third-party vendors?

 

JK

            Yeah, it is a third-party vendor, absolutely.  The carrier’s not doing it, and I’m not sure how that agreement works.  I would guess, you might know more about, I guess somewhere in the fine print, it might tell you when you agree to pay your $30.00 to your Lube Stop, that I’m okay if they share my mileage with folks, right?

 

ZBP

            Sure.  I mean, I know that there are several companies that even when I service my car, I’ll get notifications via email from somebody that says hey, your last oil change was on X date, we expect or anticipate that you’re up for another oil change on Y date, so I know that that type of data is out there and is being utilized.

 

JK

            Have you seen or heard about the applications for phones?  I know this to be in true with a particular brand of automaker, your left front tire is 5 pounds low on air.  I mean, it’s telling you in your app.  It’s not only a light anymore on your dashboard.  It’s telling you on your app.  It’s telling you where it is, and it’s telling you how light it is.  So clearly they’ve got all the data about the vehicle, and to some extent, I appreciate that because they, in terms of that telematic, if you will, I feel safer knowing that they can tell me when my car is going to break down so I can fix it before it does.

 

ZBP

            Absolutely.

 

JK

            But it’s the same thing.  It’s for the same thing.

 

ZBP

            Right.  I know that you and I had talked previously about GPS as a technology and GPS being used.  Do you have any examples that you might be able to share of GPS that you’ve seen used in the industry?

 

JK

            I do.  This one was two weeks ago, Zach.  It was a great outcome and it’s kind of an awkward situation.  I was going to a golfing fundraiser, and one of my insureds who is a contractor, we see each other for the driving range or whatever, he lets me know he’s just found out he got his skid-steer stolen, and I’m like, okay, so while he’s there, I get my phone going, we get his information, we report the claim immediately to the carrier.  And the good news is, this is winter equipment so it isn’t something essential he needed that day.  At the turn, we golfed the tournament between Hole 9 and 10, I ran into him again, and he let me know that the manufacturer was made aware of the theft, and although he knew with the GPS software that he bought with the skid-steer, he knew where it was.  He knew what state it was in and perhaps what city, and that was about as close as he could get.  When he made the manufacturer aware, and I’m not sure I know all of the technology behind this, they did some next-level thing.  They precisely provided the address to where this thing was, and by the time we finished our 18 holes, the skid-steer was recovered intact, and the person responsible for the theft was in jail, and all of that was because they knew exactly where that, because of the GPS, they knew exactly, I mean precisely where that piece of equipment was.

 

ZBP

            Not only is that amazing technology, but that’s an amazing result and a way that we see this technology, I mean, GPS has been around for a while now, needless to say, and we’ve seen it utilized more and more in how we drive our vehicles and how we get from point A to point B, but what a wonderful outcome to be able to have that property returned and a crime stopped in that short of time, because oftentimes you hear stories about equipment like this being stolen and they say sorry, report it to your carrier, good luck.

 

JK

            Right.  I think this is a win.  I imagine that GPS software costs a little bit more, tacked on the cost of the equipment, but if it had been lost, that insured would have had a deductible and the insurance company would have paid, let’s make up a number, $20,000, $30,000 for that piece of equipment, and unfortunately, the way insurance works is the cost of that claim is going to get spread over all the folks that are insured in that industry by that carrier, so the fact that it was recovered means the insurance company doesn’t have to spend all that money, our insured didn’t have to spend his deductible and the bad guys are apprehended, so to some extent, it worked out like it should, and it saves, there was a legitimate savings there as well.

 

ZBP

            Yeah, absolutely.  Let me ask you, as we close out, as an insurance agent, is there anything that’s keeping you up at night?  As we talk about the technologies and how there’s been an accelerated societal change over the last year coming out of the pandemic, and what are you guys doing to adjust to some of these things and just to address them and deal with them?

 

JK

            Well, let me say this first because it has nothing to do with what you asked me, but what keeps me up at night is four-wheelers because they’re an insurance nightmare and they’re all over the place and they’ve got great equipment and they go real fast.  It’s just a nightmare in our industry.  Having said that, what you’re asking about is so, I don’t know what your life is like in terms of the service side, Zach, but it’s really hard to know.  We’ve got a variety of folks that are on different spectrums of how they want to communicate.  They’re good with mail, they’re good with email, they’re good with texting, they’re good with voice mail.  That seems to be kind of the normal minimum gambit, but the other day somebody DM’d me on Facebook.  I’m barely on it.  I’ on it, but I’m not on it very, and I see this thing, this indication.  I’m like, well what is this, and somebody’s asking me policy questions and payment questions for their insurance ---few seconds unclear--- I don’t know.  We got him taken care of, but how do I monitor that space as well on a real basis to make sure I’m giving the good customer experience?  I’m not saying it’s wrong or bad.  I just, I wasn’t prepared and I don’t track that, but that’s what that particular customer wanted.  And when COVID started, this was really unique for us, again small town, so we at least usually talk to our folks before we do business with them, but there had been a handful of folks, because COVID had arrived and was prevalent, didn’t visit, didn’t talk, just had to conduct business.  So I sold a handful of policies last March and April, I never actually heard a voice.  I actually never saw a face.  Everything was done through email and texts.  With technology, it’s all, I mean, you can ---few seconds unclear--- the e-signature situations, you can get, with the amount of data that you can protect and send in terms of policy information, you get that encrypted and protected.  I felt very comfortable and very safe, and I feel like we were doing it the right way, but it was just so impersonal, and that was the part, so I’m just trying to understand how folks want that service level and how we can respond best to track that.  And I’ll still tell you, so I got somebody who DMs me on Facebook, and we still have folks who try to come in once a month and pay their premiums in cash, and we finally used COVID as an excuse why we can no longer do that, so there’s just a whole spectrum of folks and it’s good and we appreciate the communication, but it makes it much harder.  It keeps me up at night.  Are we tracking all that?  Are we seeing all that?  Are we logging all of that so if something goes sideways, what’s our best method to recall how that conversation went?  So that’s the biggest challenge we have on customer service.

 

ZBP

            Sure, I appreciate that.  John, that’s all the questions we have got for you today.  I just wanted to thank you again for taking the time to sit down with us and to discuss these issues and how technology is changing how you see the insurance industry and how it changes how your agency is doing business, so once again, thank you, and we appreciate it.

 

JK

            Thank you, Zach.  I appreciate the opportunity.