Writer: Max Crampton-Thomas
2 min read May 2021 — Plastridge Insurance Agency is a family-owned business that serves the South Florida community with insurance services, providing customized solutions to specialized needs. CEO Connor Lynch spoke with Invest:, discussing the landscape for the industry and the ongoing trends in providing coverage.
How is the booming housing market impacting home insurance decisions?
The housing market has been interesting for all Floridians. We’re seeing a large influx of new clients from out of the area who are purchasing homes and moving businesses here. There is a lot of education involved in trying to ensure that people buying insurance understand the difference between construction replacement cost and market value. Market Value doesn’t have a heavy impact on insurance because we don’t insure based on what the sales price of a home or property is. We insure based on what it would cost to reconstruct the home, so the cost of the structure without the land or market pricing. Still, construction costs have increased in the last few years and this has increased the replacement value of homes and properties across the US.
There are other factors that are hitting other areas. Many insurance companies have lost a lot of money in the last few years, and some of them have pulled back or stopped writing as much coverage. That means people usually end up trying to go to other companies, but due to this limited supply of capacity in the market it has contributed to pricing increases. In the last few years, the insurance industry has taken losses of billions of dollars due to the many catastrophes including storms and wildfires. Out of 30 storms last year, 12 storms made landfall in the United States. It can take between two to three years for all of those claims to be realized or settled and then to ultimately impact pricing.
Have you seen demand shifts for expertise or projects on the commercial end?
There are a lot of trending coverages. There are new products in the market and there’s even a defense-only product offered for organizations or associations against things that are typically not covered by insurance. In this case, you could be providing an attorney for things like COVID or mold liability. Other products were also trending before COVID, but the need for them has only increased, like cyber liability. At this point, we’re all in technology businesses. To me, there isn’t a company out there that shouldn’t have some level of cyber insurance. That might depend on what they are involved in, but there’s so much personal data flying around that you don’t want to be the company that is having a claim made against them.
Are usage-based pricing models impacting the insurance business?
The main area currently using usage based models is auto insurance. Many people did see pricing reductions or return premiums due to COVID and the subsequent low usage. We expect usage based pricing to continue and likely grow. Workers compensation also uses a model similar to a usage based model. In this area, you can either pay a premium estimated based on what you think your revenue or employee count is going to be and have an audit at the end of the year using traditional terms or you can pay as you go. That’s been great for a lot of people because if you do have a fluctuating employee count or payroll each month, you are really only paying for exactly what is needed without having to wait until that audit at the end of the year. Sometimes people like the stability of the traditional model while others like it to fluctuate based on what’s happening with the company.
How do you see the company progressing, especially coming out of COVID-19?
I don’t know if our offices will need the square footage they have now because I think a lot of people will work in a hybrid manner at a minimum. As a result of that, I think remote work actually offers the opportunity for businesses to hire from almost anywhere now that people are realizing they can work from anywhere. This really opens up the world. For us, we still want to have a presence here since this is the core of where we do business and we love it here. We are fortunate that our growth has been great, and we expect that to continue.
What are you keeping an eye on in terms of the challenges that will emerge from this landscape?
The thing that we’re pulsing the most is the overall insurance industry. A lot of the big money – venture capital and private equity – pulled out of the reinsurance market and it’s causing things to tighten up, so we’re having to spend a little more time and energy reviewing the financials of insurance companies to make sure that they’re strong and stable. Most insurance companies in the United States lost money in the last two-three years, so they’re either going to increase their rates or go out of business. It’s unfortunate for all of us. As consumers, it’s better to have more companies competing as it ultimately drives pricing down.
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