Securing Insurance in High Fire Zones with Dave Drumright

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On this edition of FarmTalk Paul interviews Dave Drumright, an insurance Broker with Brown and Brown Insurance. They discuss the importance of acquiring insurance in high fire zones, what goes into insurance quotes and the different types of insurance policies for rural California.

Transcript

Interview: Securing Insurance in High Fire Zones with Dave Drumright

Paul Ward: Hey everyone. It’s Paul Ward here and welcome to another edition of Farm Talk. Today’s discussion is “Acquiring insurance in high fire zones.” We have a very special guest today, Dave Drumright with Brown and Brown Insurance. Hey Dave, thanks and welcome to the show.

Dave Drumright: Thanks. How are you?

Paul Ward: I’m great. Thank you. So you’ve been an insurance broker for quite a while. Tell us a little bit about yourself.

Dave Drumright: Cal Poly graduate in AG Business Management. So I have some background in agriculture as well and rural communities. I grew up in a little town Porterville, California; lots of grapes and oranges and some cattle. My brother even had a catfish farm. He ran a catfish farming operation in Porterville when we were in high school. So we got to go catfishing all the time. It was pretty cool.  I got my first insurance license when I was a senior at Cal Poly actually. I was going to do that until I got a real job and here I am, 35 years later. 

Paul Ward: So you’ve been with Brown and Brown for obviously a while and you have put together quite a few policies for folks that live in high fire zones. We just happened to be here in Southern California in fire country. So in December of 2017, as you know, we had the Thomas fire, which up until that time was the biggest fire in California history. Then a year later in November of 2018, we had the Woolsey fire just to the South, centered in the Malibu area. It was covered in smoke for a few weeks. Each of those events were really just kind of hard in so many ways and on so many people. What kind of stats do you know for those two destructive events?

Dave Drumright: Well in 2020 last year, that just ended, thank God, there were 57,000 fires in California. A lot of it is from lightning. Which is crazy! Remember that August 2020 was called the “August complex fire.” There were hundreds of thousands of lightning strikes and the result of that 57,000, that fires 10 million acres burned and 10,000 structures. That was just last year. Then of course the Thomas fire was so devastating. Then there were the high winds. The Santa Ana winds just kept blowing and blowing and blowing, and it blew up North, into Santa Barbara, through the backcountry and San Paul. There were 23 people that died in that fire, which was really from the mudslides that occurred after. So from an insurance event, because the proximate cause was the fire, the mudslides were covered under those fire policies.

Paul Ward:  Interesting.

Dave Drumright: So there were 1600 structures and a hundred thousand acres. Now that was the Thomas fire. I mean the Woolsey fires, I’m sorry, there were 282,000 acres in that fire, the Thomas fire, 1,063 structures, That was over $2 billion in losses. Then the Woolsey fire, that was $6 billion in losses. That was crazy that that’s the one that went for, started in Simi Valley by JPL and then across through the Hills and up to the Reagan Library. Then it burned across and jumped the 101, went through Agora on the back of Westlake and then over to Malibu and stopped at PCH. But again, Santa Ana Winds, you know, cause a lot of that stuff. Right? Of course the most devastating was the campfire in 2018 and that was also 2018 and that was the one in Paradise. It literally burned 95% of the town. And I was on a webinar the other day, talking to the people that are rebuilding the city, basically widening the roads and they’re having a better egress plan with more of the green structures and better forest management to trim out a lot of that underbrush that was burning forever and ever, and it just didn’t stop. It just spread, you know, literally like wildfire.

Paul Ward: So killed nearly a hundred people, didn’t it?

Dave Drumright: That it did. I think it was 85 people. It was just so sad. 

Paul Ward: A terrible, terrible event. I’ve certainly had clients that have had challenges getting insurance. They want to live in nature, up against a Hill or in the Oak tree or the canyons and they’ve been quoted some pretty astronomical rates by various companies. So it gets to the point where some folks have just said, “you know, I’m going to live in town.” What would the solution be? I mean, with such huge financial losses, how do people acquire insurance that’s semi-affordable?

Dave Drumright: Well, I think you have to look at the last five years and this excludes 2020, there were $38 billion, $38 billion in total losses, just in California. So the insurance companies, I mean, they’re in business to make a profit. They’re not hearing, just pay out claims and walk away. So they have to charge an appropriate premium for the exposure. And you know kind of what we do is, we look at each account- because every account is different. It could be a farm, it could be a rural home on a couple of acres or just a lot. Every place has gotta be different. The zip code, the insurance companies, you use territorial rating and they do modeling where they put in all of the data that we submitted them and their actual people too. So once they’ve looked at a submission, they’ll look at the pictures that we sent in the diagram, showing the bridges, because firetrucks are concerned about getting across a bridge to go fight a fire, especially if the bridge is old, it might not be structurally sound.

So they want to know about the bridges. They want to know if the trees are hanging over the back 40 of the house and they want to know what kind of clearance they have. That’s a big thing; is there defensible space? Because the firemen need to get in to be able to protect the welding and the structures and the defensible space. If it’s clear, or if it’s using green materials or the green trees versus stuff that dies every year and you’ve got to replant it then that’s less rushed to burn and you never know when the fire’s going to happen. So you’ve got to plan ahead. So that’s a big part of it- finding the right insurance company too. It’s not just, you know, looking at the preferred insurance companies that do farms because they’re not going to classify it as a farm if it’s not a farm. I’ve tried, trust me. So they won’t do that. They want a true farm or hobby farm in order to classify it as a farm. If it is, then we can put it with one of our preferred foreign companies. They’ll go on a list here, Allied Insurance Company, Nationwide AG Traveler’s, Philadelphia Insurance Company, Zenith Insurance Company, Chubb Insurance Company and Capital Insurance Growth. So we have a bunch of farm insurers that are willing to do it, if it’s a right situation. 

If it’s not a farm, then what do you do? Right. So there’s, there are two different types of insurance people in California. There’s your Captive Insurance agents who work for Farmers, State Farm, Allstate, or AAA. Those guys write home and auto policies. They’ve also dabbled a little bit in commercial stuff, but for the most part, they are auto insurance carriers and insurance people. They typically can only write with their own insurance company. That’s why they call it “captive.” So I found a long time ago, when I first started this business, it was better for me and my customers to be an Independent Insurance guy, because then you can represent a whole bunch of different insurance companies. Well, it evolved through the years,  trust me, I can tell you because I’ve seen it that the insurance companies require so much volume or they won’t even give you a contract. So now you’ve got to write $5 million in premium every year, just to keep your contract with Liberty Mutual or Philadelphia Insurance Company or any of those carriers. So that’s a struggle for your local insurance guys. Thankfully, that’s one of the reasons that I had really liked Brown and Brown Insurance; I’m not plugging Brown and Brown because I know it’s more about the customer and that’s true to the bottom line, but this relates to that because we have 10,000 employees in the country and 200 offices.

So we’ve got some clout with insurance companies. We don’t have to worry about the production requirements that insurance companies are giving us because we’ve got well surpassed that, right? What we do is, we’ll put together the package and get it to all these insurance companies and find the best one. That’s got the best price, the best coverage for the customer, because that’s really what the bottom line is- the best thing for them. 

If it’s a home in the rural area, we’ve got many companies that will look at it. Most companies because of that $38 billion in claims over the last five years. I told you they are really hungry for those types of properties. I have to be honest. BUT, there is something called “The Surplus Lines Marketplace.” There’s the “Fair Plan,” which maybe you or your customers have heard about the “California Fair Plan” and that’s relevant too.

Paul Ward: Yes, we’re hearing about that.

Dave Drumright: Yeah. It’s in the news a lot. Well, the most they’ll insure per property is 3 million bucks. So if you’ve got a really nice home up in the mountains or something, that’s, more than that, plus it includes the contents too: your TVs, furniture and all that stuff inside the house, the most they’ll do is $3 million. They have some exclusions on their policies too. Like they’re not going to include that on your policy. So that’s kind of a downfall. They also don’t insure tractors or equipment or vehicles. So you’ve still got to find another insurance company to do that stuff. 

Paul Ward: You can have multiple insurance companies to cover different assets.

Dave Drumright: Yeah. So the Fair Plan might be good for your house, but what are you going to do about your house structures, your outbuildings, or your tractor or your cars, you know, then you’ve got to find another insurance company. So the Surplus Lines Marketplace that I was telling you about has little known insurance companies that are located anywhere in the US, or they might be owned by a London company. They are not what is called “admitted in California,” which doesn’t mean they’re bad. They just don’t have to follow the rules and regulations of the California Department of Insurance as strictly as strict adherence as the other carriers do. So they’re able to add some forms and do some different little twists, like maybe high deductibles and schedule some limits on a policy. That’s going to keep the costs down for the customer. They’re even priced out of the marketplace. Their pricing is pretty high too. So I guess what I’m saying is, each individual location has different twists and different turns, different water sources, different roofing materials, different brush, clearance areas, different trees; all that stuff is a factor. So it’s not the easiest thing in the world to get insurance for rural properties, but we have availability.

Paul Ward: Gotcha. So, if I kind of want a “good driver discount,” there’s probably a few things I could do to make the situation easier. I know June 1st is a fire abatement deadline day. The fire department will come out and make sure your tall grass is mowed by June 1st and all that dead brush is pruned by then. But are there certain things that  a carrier would look for just to say, “yeah, we will insure this property or maybe give a discount.”

Dave Drumright: Distance to the fire station. That’s the first thing they’re going to look at. They’ll actually use Google maps and they’ll check it out and see what the distance is and the time it takes. I’ve actually called fire stations and had them map it. They’ll tell me over the phone that I could communicate to the insurance company how many minutes it’s going to take for them to respond. They want to make sure that they have access to the gate. So if you’ve got a gate on your property, you need to give them a key or at least have them come out so they know where the key is hidden. Defensible space, of course, has major and lots of water. So buying a water tank and having a big water supply on your premises is important. There’s also now private fire companies that are out there and you can pay a fee and they’re on standby for your property. So if something happens, they know that it’s time for them to roll out. They’ve got water tanks on their truck and their rigs, and they’ll roll to your property to help defend it before the fire gets there.

Paul Ward: Interesting. I know one client was surrounded by the Maria fire, which hit this last Halloween. They had an underground cistern of about 15,000 acres. It just so happened, it was the middle of the night, but one of the property ranch hands was there on site and told the fire department about it. So they had multiple fire trucks that were lined up to fill their tanks with the underground water; they were actually able to save several surrounding homes because of the added underground cistern. So when you talk about having water storage, that is key. Cause the fire department doesn’t have it all.

Dave Drumright: That’s a great story. 

Paul Ward: I know in the Thomas fire, there was about 170 million in agricultural losses. How would an insurance company get involved in that situation?

Dave Drumright: The federal government has a program called “The Federal Crop Insurance Plan.” They can actually have programs through the federal government for crop insurance. That picks up coverage for fire, as well as anything that can happen to your crop;  an early frost, late frost, something that happens to your buds on your trees, orange trees, or what have you. Even with this, you know, it’s funny to even talk about this now, because I remember when there was not even a chance that we’d be discussing this, but there are cannabis and hemp crops out there now too. You can actually get crop insurance on those! They’re available, trust me. And they’re buying it too, cause those are cash crops! You know, they gotta protect their crop, but yes, there is crop insurance available. Some farm policies will cover fire for the trees. If they are avocado trees or orange or lemon trees but most will not. The crop insurance will pick up a certain little bit of that.

Paul Ward: Interesting. Well, thank you, Dave, I appreciate this. How can somebody get a hold of you if they have more questions about a homeowner policy in the rural areas or certainly crop insurance?

Dave Drumright: Well, you can call me anytime or send me emails or texts. I’m available all the time. My wife doesn’t like that, but you know, Hey, it is what it is! We take care of our customers. My office number is:  (805) 690-2609. My email address is ddrumright@bbfcal.com. Or you can check out our website: BBofcal.com. There’s a link there to press for quotes if you’re interested in quotes. We also have a personal lines team, a benefits team and of course our commercial team. We all work together towards taking care of our customers and what’s in their best interest. So reach out to me and I can coordinate the and I’ll quarterback for you.

Paul Ward: Sounds good. Well, thank you Dave Drumright! We greatly appreciate it. And everyone please check out our next issue of Farm Talk. Thanks so much, Dave.

Dave Drumright: You’re welcome. Thanks.