 Think Tech Hawaii. Civil engagement lives here. Aloha and welcome to Kondo Insider, Hawaii's show about living in an association. In past shows I've mentioned the fact that about 38% of our population lives in some form of an association. So we're all subject to those who live there anyway or subject to the rules and obligations of living in an association and oftentimes just misunderstood. I would like to say at the beginning of this show again that our hearts go out to those on the big island who are struggling with the effects of the volcano and I don't want to forget my good friends on Kauai who had the massive floods down in the North Shore area of Kauai too. Also we sometimes forget talking about the volcanoes so much are also struggling after the aftermath of that great flooding which brings to mind the magic word we all think about insurance. So I asked a good friend of mine Ron Tsukamaki from Atlas Insurance Agent who's a pro beyond pro and all these matters to come visit with us today and talk about insurance for association. So Ron welcome to the show. Thank you. Thank you. Tell us a little about yourself and your firm. Well myself I've been in this insurance game for a long time. I don't even want to admit how long but it's been decades and the firm I work for Atlas Insurance Agency has been around even longer they were formed in 1929 so they're one of the oldest agencies in the state and today about per PBN where agency is the largest in the state per premium volume written within all our clients. So and you do a lot of association insurance. Yes I actually lead the what we call the AOAO group within Atlas they have specialty areas and association in one. So this is digress for a second because we're talking about the volcano a minute ago. The people on the big on can you get volcano insurance is is there can these people be insured or not insured what is what is the real scoop on that. Well within a standard Hawaii market for homeowners they don't write volcano insurance. What they've done is they started a sort of a pool of last resort is called the Hawaii Property Insurance Association which is sort of a Huey of the local insurance carriers who write volcano insurance lava fire in the lava zones and what's unfortunately happening is that because they write in highly distressed zones their premiums are probably if you had a standard policy like Richard you own property here in on Oahu so you have a unit on Oahu well their premium is going to be somewhere in the area four to five percent times what the premium on a standard policy would be. So it's very expansive and it's also very restrictive because of the nature of the coverage. So they can get it there's other forms you can go into what we call an excess and surplus lines market that's going to like to Lloyd's London and that's you know you're paying the market rate for the exposure and because the excess and surplus lines market is a open market whatever there's no standard forms there's no standard terms and conditions and no standard rates and again the rates are going to be much much higher the deductible deductibles are going to be much much higher than you would find even in the Hawaii Property Insurance Association pool. And you as a wild guess do you think that most people had insurance or didn't have insurance over there? Well as a wild guess because of the cost and locations I would say a great percentage did not have insurance. When you think a standard premium is $1,000 I'd say it's $4,000 that's a pretty pricey premium to pay for sort of limited coverage also you know when people bought in Puna in that area they're looking for inexpensive housing lands inexpensive and stuff so for them to pay that kind of price many of them did not pay. It kind of reminds me going back to 1992 I actually was on my condo on Kauai when Hurricane Aniki hit Kauai and luckily for me I was on the North Shore and it was devastating but the building is kind of a four-story concrete building and and I hate to say it probably my damage was less than $100 on my own unit because it's almost like a bunker this particular building it had itself lost roofs and other things as well so they had a multimillion dollar claim but we look at the individual owners they weren't affected and out of that came to Hawaii Hurricane Relief Fund. Is that still around? Well what's the scoop on that? Technically it is around. The state assesses a certain amount for all property transactions and stuff a small small percentage but it's built up over the years so it's fairly sizable that in fact but it hasn't really it's been sitting there in the state fund as a hurricane relief fund but it hasn't issued any policies since 1992 several insurance companies have come into the state there is hurricane insurance available readily available currently today in the state so it's a fund that is sort of sitting there in reserve in case you know between us if a hurricane ever hit Oahu a big one ever hit Oahu we're going to probably need a fund like the Hurricane Relief Fund because a lot of the carriers will be pulling out those who have come in or they're going to be really restricted in coverage so for the most part it is sitting there in reserve and right now there's the interest and it's growing so the interest is being trying to be siphoned by the state to go into the general fund since it's just sort of I know the industry fought that they you know it's it's kind of the our money put in for a specific purpose they shouldn't be able to rate it for some other purpose you know just because the state needs money so but let's go back to what an insurance agent does for a second you know from my perspective a lot of boards of directors they look at it and they see their policy comes up renewal and they think that the agent just gets a renewal from the existing carrier and you just renew it every year yeah what does an agent do when it comes down to renewal well when you talk about renewals and associations in general I think there's two things you have to understand one is the agent represents the insurance carriers and licensed with different insurance carriers so they are an insurance carrier representative but you know in Hawaii we really feel that we try to represent our associations so the question is do we roll them over every year is it easy or do we really look at marketing and what it goes into it and so the answer is we have to look at every account individual depending upon their loss history depending upon the market they're in you know there are not like in California hundreds of markets who are willing to write hurricane insurance in Hawaii we have a very limited you can count on one hand basically the standard markets who are competitive in hurricane insurance and you have fingers left over if you talk about frame versus fire resistive but the fact is because we have such a limited market you have to balance knowing that you know if you market every year and you're one of the three four carriers that write and you see this account every year after not getting in a couple years where do you think that account goes bottom of the pot no consideration so what we try to do is you know strategically market accounts they should be marketed at least every three to five years out to the marketplace but market them every year sometimes it doesn't make any sense depending upon claims dependent upon the marketplace in general one of the things that you correct me if i'm wrong but my understanding an agent is i don't know if the right word is licensed but is authorized by insurance company to represent them and and present them so not all agents represent all insurance companies correct and and one of the ones that is coming to the market in the last i'm going to say 10 years but uh i've lost track of time you hit it right on the note oh i'm lucky that good guess but is this firm out of Korea called dong boo where in the beginning when they came out there was all sorts of coconut wireless chatter that oh if you buy a dong boo policy you're putting your association risk because as a claim they may not have enough assets in hawaii to pay the claim and they could walk away and of course they we stood those their criticism for 10 years and i know many associations are right with dong boo but just for the audience's understanding tell us who dong boo is and address this issue about whether they're a credible resource here in hawaii okay well dong boo is a south korean company uh they're the third largest company in south korea behind comes like seven some some huge companies uh but uh just for hawaii dong boo was in guan sipan area since the eighties and they've gone through probably seven eight typhoons earthquakes major losses in the in guan and sipan and they've paid the claims they're still there they're still right in business they in 2006 well actually down 12 years ago but they came to hawaii and so they are one of the major carriers we use you know we have access to pretty much all the carriers too but we were fortunate to be selected by dong boo to be one of their agents i think they have seven agents that they have licensed but uh the things we care about uh are obviously are they financially sound well they're rated by am best am best is the foremost rating agency for insurance companies uh banks use that rating uh government agencies use that rating and stuff and am best specializes in rating insurance companies and they have all kinds of tests that they go in so they've measured dong boo's rating and they give them an a 15 and the a rating says that they're excellent in their claims paying ability with their surplus and then the uh 15 it's roman numeral 15 is the size of the company so they're rated 15 which is the largest company size within insurance carriers which means at a minimum they have over two billion of policy holder surplus uh so they are when the largest and am best says that they have excellent claims paying ability now within the state of hawaii they're uh under the supervision they're admitted so they're under the supervision of the state commissioner and uh when they first came in there was some criticism talk you know some agents didn't get licensed whatever but there was some criticism but dong boo and actually insurance commission commissioner at the time had issued a letter saying time out they're an excellent company they meet all our criteria they are financially sound uh so and they supervise continually supervise the company now one of the things about assets in hawaii that's been brought up before uh insurance carriers are required to have so much assets deposited in hawaii based upon the policy writings the premium rate so they the insurance commission measures that well over the years dong boo's obviously kept growing growing so they had to add more assets so you know so the commissioner rate and said okay you need x amount of assets why so they've had to add assets over the years so there might be that time between them getting audited went until they deposited the new amount there might be some lag in terms of they might not meet that requirement but they have and they're in good standing with the insurance commissioner it's interesting we're going to take a short break here about after I make my little statement here is that you know my wife's the treasurer of one of our condo associations and um we uh it was a developer turned over the association to the board and so we were in the process or she was in the process of along with the rest of the board of reviewing insurance policies and we went to your agency as well as a couple other agencies and and uh and I would say nothing against this carrier but the developer had written it with um Lloyds of London as a non admitted carrier we went out to review and try to improve on our insurance we were able to get through your agency the best quote and was written through dungbu and we had the lengthy discussion to make the board did with you on uh to make sure that it met the necessary criteria so in general I think we should just remember dungbu is an admitted carrier their license to do business in Hawaii they're a 15 carrier that they're worthy of consideration you know and and you they can ask all the tough questions which you should as a board or an owner but uh let's cut the argument whether or not they are a reliable source here in Hawaii because I think they've demonstrated over the last 10 years through their excellent claim paying as well uh that they are a reliable source here in Hawaii and on that note we're going to take a short one minute break and we write back with my good friend Ron Sugamaki and talk about association insurance I'm Jay Fidel think tech think tech loves energy I'm the host of Mina Marco and me which is Mina Morita former chair of the PUC former legislator and energy dynamics a consulting organization in energy Marco Mangelsdorf is the CEO of Provision Solar in Hilo every two weeks we talk about energy everything about energy come around and watch us we're on at noon on Mondays every two weeks on think tech Aloha Hey Aloha everybody thanks for joining us on think tech Hawaii I'm your host Andrew Lanning the security guy I host a program called security matters Hawaii and I hope you'll join us on Fridays we are at 10 a.m and we're going to be talking about those security things that really should be important to you and you know maybe get behind the scenes on some some things that you may not know about the industry or about products or even about your habits I'm security is all about people processes and products we hope to bring that to you in an informative and hopefully a useful way so again 10 10 a.m on Fridays security matters Hawaii on think tech Hawaii join me thank you welcome back to condo insider I'm sitting here with Ron Sugamaki from Atlas Insurance and we've had a very interesting discussion about our friends in the Big Island and volcano insurance and we talked about hurricanes and now I want to get back to the basics and basically we look at a condo association under the statute they have certain obligations to provide certain types of insurance it's not even a choice and so I'd like to start out with what I'm going to call property insurance and what is what is property insurance and kind of what was the short summary of what's provided under that well I try to make it as simple and says property insurance we we based it on two things what is the property you want to ensure and need to ensure and what are the perils that you're going to ensure them for so if you said it's is it a covered property yeah is it a covered ban we have coverage and so in condo 514b as you indicated requires all associations to carry property insurance for their common area elements and limited common area elements too so there we that's right out of the first paragraph within the statues under insurance so property insurance is what we cover need to cover for associations the perils we call the old name used to be all risk but all risk as exclusions so the insurance industry try to eliminate the perception of we cover everything change it called special perils but it used to be what we call all risk and basically that includes all you know all perils that are not excluded and the major areas that we cover are fire water damage hurricane for most of our clients the big major exclusions tend to be flood earthquake big one wear and tear you know we get into this battle constantly and but wear and tear you know certain I would say construction defects things like that that they don't cover but where do they get flood insurance then they if you know that's an issue of that you know particularly in Hawaii there are flood areas and I know there's flood zones and and the flood maps and those types of things so if they if that's an exclusion where do they get flood insurance and and are they required to have it only if they're in the flood zone well they get flood insurance most most of the coverage is through the national flood association FEMA program that is pretty standard and it's also subsidized by the government which they're trying to take away that subsidy over the next few years but so most carries right to the national flood association the the requirement really goes into even in 514 b they talk about associations should consider flood insurance if you're in a high hazard flood zone and that is an a or a v flood zone which means you're within the 100-year flood zone the other if you're outside and flood insurance through national flood is building specific they ensure this building and then another policy for that building so it's building specific so you might have buildings that are outside the flood zone and and technically you don't have to carry it but like I tell a lot of clients if you're close to a flood zone boundary I've never known a flood to stop because the line says stop right and in fact 20% of all floods paid through the national flood association are paid in non-hazardous zones well and so that's one reason we encourage our clients to consider flood but you know you're on top of the hill maybe not you know but if you're beside a stream we've had a lot of climate change a lot of flooding that hadn't existed before so besides property what other types of policies are associations mandated to carry certainly general liability you know there associations you know you have the trip and falls and all those kinds of liabilities so general liability is a pretty standard coverage most of the terms conditions are mandated by law so and the policy forms are all pretty much the same so that's one of the major coverages that all associations carry and the term I we hear a lot the umbrella what is what is an umbrella policy yeah it's sort of descriptive of the kind of coverage umbrella goes over the top of like your general liability policy it goes over the top of your if you had an auto or auto liability policy it'll go over the top of the auto liability policy it will in we have a specialty umbrella coverages that will actually go over the top of directors and officers policies and lastly it goes over the top of what we call under workers comp there's an employee liability policy that coverage and it'll go over the top of the employee liability you know one of the things we hear around the industry a lot is that one of the challenges of insurance in Hawaii for associations is director and officer liability that there's been a lot of claims and a lot of increased costs and it's not profitable to the carriers and and there's a lot of consternation over that that accurate or how do you what do you see them from your end well it's absolutely accurate unfortunately because uh we just had a meeting with a regional manager for one of the largest dno carriers were condominiums uh and they basically indicated that Hawaii's lost history over the past two years most recent two years has been significantly higher than their national program uh so they are reviewing their rates as we speak and they will probably be filing for rate increases later on in the year so that's uh that is a problem uh in Hawaii we've had a couple things that we've seen a lot more of recently and one has been uh there was a non-judicial foreclosure act and it I think the net has been now over 50 associations are drugging into this and the outcome is still unknown but it's uh you know it's costing the dno carriers a lot for legal fees and in fact uh last year the statistic from Hawaii was the average condominium claim cost over $30,000 uh and most of that's legal fees and when you think that most associations for a million dollars of limits pay around two thousand three thousand dollars you know when you look at the average claim being uh over 30 that's why we have it well the industry as a whole has tried to mitigate that I'm not saying it's been totally successful by having legislation passed guaranteeing what we call value of mediation before judge and let's talk about it before we sue each other to try to reduce these claims and the success of that program has been very good in a sense I think most about 80 percent of the claims that go to this mediation get resolved without going through all this legal process and cost so hopefully people out there will start to realize that making continuing to make claims is not going to be healthy to the industry you know and uh and because I see a lot of these claims I would say a lot of them are on the edge of being something that you know you can really make a legitimate argument about so but uh I see it's a real issue for the industry because everybody's costs are going to go up which means maintenance fees are going to go up yeah well I think you hit part of the answer in the associations and the industry has to do more to prevent claims you know you get into this dollar trading uh you know you got coverage so okay you know but and have the insurance companies step up and pay all those well they're not a non-profit they're going to try to recover those costs so uh the rates are going to go up significantly and uh you know again specialized condo programs there's basically three of them that really write a majority of the condos in Hawaii and uh if you start turning in claims and you get kicked out of that group you're back to the wild wild west and the non-standard market it's going to be expensive very you know I probably have a hundred more questions for you but we're down to our last minute so I'm going to thank you for being here and ask you if you'd be happy to come back sometime and talk some more about this so we can educate our board members and owners would you be wanting to come back in a future day absolutely and I want to thank all of you on watching condo insider our weekly show about association living uh Jane Sugimura my co-host will be here next week with an exciting show we hope you can tune in aloha