The Real Estate Insurance Crisis: What’s Happening Behind the Scenes With Fred Glick of Arrivva and Michael Chien of Rhino

Here’s a glimpse of what you’ll learn: 

• How the insurance funnel works: admitted vs. non-admitted vs. FAIR Plan
• What the FAIR Plan covers and the critical gaps most homeowners overlook
• Why carriers are leaving California and how it affects premiums
• What to do if your policy is non-renewed or canceled
• How Rhino helps high-risk homeowners find affordable, comprehensive alternatives
• How AI-driven tools can help reduce wildfire risk and improve insurability
• Tips for finding a trustworthy independent insurance broker

In this episode with Fred Glick and Michael Chien

California’s home insurance crisis is hitting homeowners hard, but what’s really going on behind the scenes? 

In this episode of We Fixed Real Estate, Fred Glick of Arrivva sits down with Michael Chien, co-founder and CEO of Rhino, to expose the truth about rising premiums, non-renewals, and why more homeowners are being pushed onto the FAIR Plan. Learn how AI and risk data are reshaping coverage, what the FAIR Plan actually covers (and doesn’t), and the smart moves you can make to stay protected. Don’t miss this insider look at the future of California home insurance and what every buyer needs to know before it’s too late.

Resources mentioned in this episode

• Fred Glick on LinkedIn
• Arrivva
• Rhino
• Michael Chien on LinkedIn
• Rhino for Arrivva Clients

EPISODE TRANSCRIPT

[00:00:00] Drew Thomas Hendricks: Welcome to the most recent episode of We Fixed Real Estate.

We’ve got a really special guest on the show today. We got Michael Chien from Rhino talking about insurance and especially for those that are maybe having FAIR Plan is the only option. He’s got some alternatives. Welcome to the show, Michael.

[00:00:16] Michael Chien: Thanks for having me, guys.

[00:00:18] Fred Glick: Yeah, thanks. We really appreciate you coming on because we get this question a lot.

A lot of our buyers either buy this way or that way in the Silicon Valley into the trees. And that’s where the FAIR Plan kind of kicks in, depending where you are. It could be Danville, could be Oakland Hills, could be Los Altos. You know, they’re all over. But it’s a question that always comes up.

So we know you can do FAIR Plan, but tell us and tell our audience what you can do besides FAIR Plan and what the whole thing is. So fire away.

[00:00:56] Michael Chien: Yeah, it’s a great question and I find that FAIR has moved beyond the usual suspects of maybe, you know, Tahoe, Truckee or other, you know, very, very forested, more rural areas into the mainstream, right?

And so it’s gone from something like a hundred or 200,000 homeowners and policies to over half a million by the recent count. And it means that there are a lot more folks asking about it, and I think what’s, what’s interesting to me that I find homeowners not always familiar with is how the insurance market is like a little bit of a funnel, right?

There are admitted carriers who are regulated by the state. Their rate filings take a long time, but it’s for consumer protection reasons and it means that, you know, State Farm, Farmers, Travelers, the name brand insurance companies are all in that emitted bucket. There is another layer of companies called non-admitted or surplus lines that historically have been used for more niche or specialty risks but are more flexible with the risk that they can write and the rates that they can charge.

And so in a property insurance market like the one we have today, that non-admitted or surplus layer is going from niche and specialty to more and more common as people try and stay off the FAIR Plan. And the last layer of that funnel is FAIR, which, you know, even the FAIR Plan Association themselves say it should be your last resort.

And so in theory, homeowners are supposed to work their way down that funnel. Right? From admitted to non-admitted to FAIR. And we find that for lots of reasons, but speed or education, a lot of people will go straight to FAIR because they hear about it and because it’s a sure thing, FAIR will write no matter what your level of fire risk is.

And so we are trying to emerge as a brokerage alternative that helps you conduct the most complete search of the market to make sure that if you do have to go on FAIR, it really is your last resort. And so we’ll write that too, but only after doing a good search.

[00:03:13] Drew Thomas Hendricks: It’s interesting.

On the supplemental is that or, yeah, surplus lines. Is that similar to like if I have a million dollar wine cellar and I need to get a surplus insurance on that?

[00:03:25] Michael Chien: Yeah, so surplus lines is just the term for carriers that need to write risks that the admitted markets won’t take on. And so that might be a house that is outside the coverage limits of the FAIR Plan.

Or it might be a commercial policy where the risk is really complex or niche. And so property has not historically been that niche because most property is four walls and a roof. But the challenge of having to understand that property’s risk against, against wildfire has forced a lot more properties to find placement in the surplus lines market as opposed to the admitted market.

[00:04:09] Fred Glick: Okay. I wanna ask you another question just for simplicity’s sake. Can you compare going FAIR Plan to a vanilla, you know, five years ago, State Farm policy and what doesn’t FAIR Plan cover, and if those items are coverable, who are they coverable with? See where I’m going with this? Yeah, I mean, I’m trying to explain it in the simplest terms for people.

[00:04:38] Michael Chien: Yeah.

[00:04:38] Fred Glick: Because some, because I don’t get it, you know.

[00:04:42] Michael Chien: It’s a great question. And it, you’re right, that FAIR is not in and of itself a perfect replacement for a homeowner’s policy. It covers certain perils, most notably fire, but also others like internal explosion or you can get earthquake.

But it’s not every peril that you would want in your homeowner’s policy. And so everybody that is on a FAIR Plan policy also has to get what’s called difference in conditions or a wraparound policy. And so that is designed to sort of round out or fill out the coverage to make sure that the more standard set of perils that a homeowner’s policy form covers are all there.

So that to make sure that, you know, with your two policies, the FAIR Plan and the wraparound, that those are equivalent to a normal homeowner’s policy.

[00:05:36] Fred Glick: So liability insurance, for example, you definitely have to get a separate policy for that. FAIR Plan doesn’t cover liability. Right?

[00:05:44] Michael Chien: No FAIR Plan will cover your property and liability for certain perils. Though…

[00:05:54] Fred Glick: But not like a trip and fall kind of situation?

[00:05:57] Michael Chien: No. Yeah. That is part of your difference in conditions.

[00:06:00] Fred Glick: Got it, got it. Okay. That helps a lot. FAIR Plan, from what I hear lately is not very stable. I haven’t seen financials or anything, but we keep giving them business and there hasn’t been any fires yet. So.

[00:06:17] Michael Chien: It continues to grow. And with every you know, large wildfire, their financial position continues to slip. And so, you know, one of the larger headlines that came out of the LA fires in January was that they had to levy a very large fee from all the admitted carriers in the state.

Part of how they financially structure the FAIR Plan is such that it’s allowed to levy fees to stay solvent or in a good financial position. And so as the, you know, losses from wildfire that they’re obligated to cover add up it means that they have to levy more and more of those fees on admitted carriers.

And that’s one reason the admitted carriers are, you know, not very happy to stay in the state. Is because it gets pricier and pricier to do business in the state.

[00:07:11] Fred Glick: Yeah. I mean we all know about that. I mean, you know, it’s like for people who, you know, quote unquote normal people, it’s like you saved enough of that down payment.

And now the rates went up and maybe they’re down a little, but it’s really close. And then you find out, “Oh, and I gotta buy insurance.” And it’s in the wrong place and you gotta pay 18,000 a year. Or, “I don’t have that money. I saved up, I saved up, I saved up and now nothing.” So it’s, it’s crazy. I don’t have the solution.

You don’t have the solution, but hopefully the market will make a solution. Things will get better.

[00:07:47] Drew Thomas Hendricks: You say that, so there’s a scale, there’s a funnel that you gotta go down. You got, for lack of a better word, you got the admitted insurance, normal insurance, and then most people just race right down to the bottom of the funnel and FAIR Plan.

What’s given like a hypothetical cost structure, you now are not able to get admitted insurance, there’s the intermediary, then there’s FAIR Plan. For the average consumer, how does that look?

[00:08:11] Michael Chien: Yeah, so it depends on the home and where it is, but in terms of order of magnitude, let’s say a admitted policy is say $3,000 or $4,000.

You might expect a non-admitted policy to be, you know, slightly more expensive, which is why it’s less preferable, but maybe in the, let’s say $5,000 to $8,000 range. And then a FAIR Plan policy might be  $5,000 to $8,000, often just for the fire. And then the wraparound is another $2,000 or $3,000 on top.

And so the non-admitted option is both, you know, maybe a better financial decision and also has the benefit of not having to juggle two policies worth of paperwork. And so there are both, you know, great quantitative benefits, right? That you can, you can do in the math. But there’s also some of the qualitative things, right?

Like FAIR has a long history of not having great customer service. It did not allow automatic or electronic renewals until very, very recently. That’s one of the bills that’s kind of going through the governor’s desk right now. Yeah. So those are also things that don’t show up in the premium calculation that are also reasons to avoid it.

[00:09:31] Drew Thomas Hendricks: So you get your home insurance through FAIR Plan and there’s not an automatic renewal the next year? You go through the whole thing over again?

[00:09:39] Michael Chien: No. And so there are a lot of poor stories that we’ve seen of people who missed the letter in the mail or missed the payment by day and are really worried about holding onto their insurance or having their you know, lender put force place insurance on them for, you know, basically being in violation of the agreement of the loan, right? That’s the worst case. But hopefully if the bill goes through the governor’s desk, that will be a feature they add, so.

[00:10:12] Drew Thomas Hendricks: Wow. And what, I have a question though, just ’cause now I’m a homeowner here in California.

As of now, I still have regular USAA insurance. No problem.

[00:10:20] Michael Chien: Awesome.

[00:10:20] Drew Thomas Hendricks: For someone like me, is it, do you get like one chance to fail and then you’re on FAIR Plan? Like, if there happens to be a fire down the block from me, suddenly I’m blackballed. How do they, how have they grown this from a hundred thousand people to 500,000?

[00:10:34] Michael Chien: Well, so FAIR will say yes no matter what the level of fire risk is. And so when people get non-renewed by their original carrier it’s where people tend to go. Part of like,

[00:10:47] Drew Thomas Hendricks: How do these carriers decide when to just say, “We’re not doing business in this area anymore.” Is the fire trigger or a likely fire a trigger?

[00:10:57] Michael Chien: So carriers are always reevaluating the data they use to make underwriting decisions. And the frustrating part is that every carrier uses a slightly different set of ingredients and mixes them up in a slightly different way. And so, you know, this goes for any independent brokerage, whether it’s us or someone else.

But like, that’s why it’s always good to find someone who’s independent because they’re not beholden to a certain carrier the way they do things. I will say that most often it’s that they’ve reevaluated either the fire risk of the location you’re in or the condition of something in the home that they don’t like to see.

So the one that everyone’s been talking about is, “They ran a drone over my house and found moss on the roof.” Right? Or found that, exactly. And so the reason can be property specific or it can be location specific. But all that is say is happening more and more, which is why FAIR is, you know, up 500% in the last few years.

[00:12:04] Fred Glick: Okay. Now we’re gonna bring in some lawyers to do air rights for every homeowner. It’s gonna have a covenant that’s gonna get recorded and it’s gonna disallow anybody flying over their house.

[00:12:18] Michael Chien: I will say there’s some interesting consumer advocacy work that nonprofits like United Policyholders are doing.

I can’t say I’m intimately familiar with all of the proposals, but there is some good work to make sure that folks are informed about, you know, the data that’s either being collected of them or used to justify a non-renewal of them. Which does give us some, I guess, reason for hope.

[00:12:46] Fred Glick: Yeah, it’s like I always thought about if I got a drone and I knew what I was doing, which I don’t, I never trained myself on it, but I can get it and then go around a neighborhood and just hand out, you know, pieces of paper that say, “Hey, we’re in the neighborhood with our drone. Would you like your roof inspected for free?” And kind of partner with a roofer. And you know, it’d be interesting to see if people would agree to it or not, because then once they know something, they have to disclose it.

Some people just don’t wanna know nothing until there’s a problem. You know, they’re just, there’s people who just aren’t into preventive care and don’t wanna spend the money and wanna spend the money on something else.

So it makes for a whole crazy situation. And how do you put that into the algorithm? You know? So how do you know when you’re picking a client? How they’re going to be at the house? So. I’m getting really deep in the woods, so I’ll let that go. Well, anyway.

That

[00:13:44] Drew Thomas Hendricks: happened to my mother-in-law. She ended up having to get a new roof because there was, the insurance company sent a picture of these cinder blocks that the previous roof were left on the roof.

No, she had no idea.

[00:13:57] Michael Chien: It is worth asking. Because a lot of times people will get the non-renewal. It’s always worth asking if that decision is final or if it’s conditional. Right? And so if you know, the first pass is always just to say, “Well, if I took care of it, is that decision really final?”

And oftentimes like that does work for people depending on, you know, the carrier you run into. But sometimes it’s not good enough.

[00:14:24] Drew Thomas Hendricks: Yeah. So Michael, so someone just got the letter. They’re insurance getting canceled, they’re reaching out, someone like you’s right there to help them. What does the process look like?

[00:14:34] Michael Chien: Yeah, it’s a great question. And so the thing that is interesting about non-admitted carriers is because they’re more flexible in what they can write on, they ask for a lot more questions. And so that’s information that ideally a homeowner or their real estate agent has but often has to be cobbled together through the enrichment of a bunch of different data sources.

Whether it’s county permit or assessor records or MLS listing data or actually just, you know, geospatial or satellite data. We have to come up with the answers that allow underwriters to feel confident in that risk and say yes to it. And so, you know, we have distilled that set of information into about as quick and easy of a form as you can get.

And so we work with the real estate agent and or the buyer to fill that out. And the goal is then we can give a comprehensive report that says, here are all your options. We’ve done the search.

[00:15:40] Fred Glick: Is that a standard? Yeah. I’m sorry. Is that a standard form that you could send us?

[00:15:46] Michael Chien: Yeah, so there’s a form on our website.

It is you know, it’s an adaptation of an industry standard that is much longer and virtually impossible to fill out as a nons subject matter expert. So we have done our best to make it user friendly, if you will, and then do all of the processing behind the scenes.

[00:16:10] Fred Glick: Yeah, that’s fabulous. Because I always get, like my buyer, after they go under contract, they’ll talk to their insurance guy and they say, oh, they need to know the age of the roof, or when the last renovation of the kitchen was done, or how old’s the electrical. I always thought about, there’s these home warranty companies and we found one that’s good called Armadillo and just actually takes and does things.

The idea would be if a homeowner’s insurance company took on the same insurance for all these, whatever they cover, making one big comprehensive policy. But in the beginning, the insurance company would get a copy of all the inspection reports on the property and be able to make decisions that way and be able to offer this giant package of everything in your house in one, as opposed to some warranty companies being separate.

It’s kind of, it’s kind of silly.

[00:17:05] Michael Chien: We think it’s pretty unintuitive that if you are a new buyer of a home, you don’t get to assume the policy about the home that the last, the last owner had. Which is, you know, in some ways there are, I’m sure lots of new things to qualify, right? But a lot about the intrinsic value and condition of the home is still the same.

And so there ought to be, I think, a really legitimate system of record for following those underwriting inputs that allow the insurance shopping process upon buying to be way more streamlined than it’s right now.

[00:17:44] Fred Glick: Way easier. Yeah. Oh, it’s crazy. It’s crazy.

[00:17:47] Drew Thomas Hendricks: We should have done this at the beginning, but give us a little plug on your business where people can find you.

[00:17:51] Michael Chien: Rhino is a specialist, independent insurance brokerage. And what we specialize in is helping hard to insure homes, exposed to wildfire risk, find coverage through carriers that are not the FAIR Plan, which, you know, is basically the last resort carrier.

So if people have been non-renewed or declined or maybe even priced out, those are the folks that we’re really looking to connect with. And our website is withrhino.com and that’s where you can get in touch with us. That’s where you can share your information. That’s where you can, you know, get our view on your situation. And so…

[00:18:31] Fred Glick: Actually, and if you’re one of our clients, you can go to withrhino.com/arrivva. So…

[00:18:38] Drew Thomas Hendricks: Oh, there you go.

[00:18:38] Fred Glick: Thank you for setting that up. So, and then michael knows where it came from, so.

[00:18:43] Michael Chien: Yes, exactly.

[00:18:44] Drew Thomas Hendricks: I was looking at your some of the testimonies and they all, someone in Orinda got the AI powered risk assessment and then it goes right down to ember resistant vents and non-combustible siding. Do you help them with these repairs or is this something…

[00:18:57] Michael Chien: Yeah.

[00:18:58] Drew Thomas Hendricks: AI risk assessment showed that they needed to do?

[00:19:00] Michael Chien: This is our take on the role of an insurance brokerage, actually. And our view is that the line between insurance broker and risk manager is actually gonna start to blur. And we think it’s kind of silly that brokers don’t work with their insureds between the time of the buying and the time of the renewal, because that’s 12 months where you can really work to mitigate risk at the home level and work on the insurability of the property. I think one thing that we hear in the East Bay where I am is people are anxious about their insurance situation.

And I think that’s always funny because insurance is supposed to reduce your anxiety. It’s not supposed to make you more anxious. And so that’s one sort of feature or service that we work with clients on, which is, you know, we can help you see how a carrier sees your home and find some, you know, usually pretty within budget, pretty cost effective easier things to do that mitigate wildfire risk.

Also, just for your ease of mind, even if, you know, a carrier doesn’t, you know, wanna give you a big discount for it, it’s a good thing to be proactive about.

[00:20:16] Drew Thomas Hendricks: Hmm. That’s very good.

[00:20:17] Fred Glick: It’s been fabulous. Yeah. I’ve learned a lot and I like learning about this. I can pass it on to buyers ’cause it is crazy out there. It’s just gonna get worse. That’s just the way it is.

[00:20:31] Drew Thomas Hendricks: And I still, one more question here. What is this AI risk assessment and what sort of data do you use? Are you just looking at a, the geolocation on a map and then using other kind of survey data and aggregating it?

[00:20:43] Michael Chien: No. So the data that we actually care most about in sort of coming up with recommendations is data that you as the homeowner provide about the condition of your home.

I, we think it’s really important that that people know we’re using that data to help recommend them things, not necessarily to get them in trouble with a carrier. That’s often a question we get. But what it allows us to do when we run those images through a vision model is figure out what of the mitigation checklists that, you know, really smart building science professionals have come up with. What’s been done and what’s not been done. And so based on our understanding of how much those things cost and how much those things improve the risk profile of your home, we can then sort of stack rank the order of operations of things to invest in or spend your weekend project doing.

But all of it is designed to benefit the homeowner. It is not designed to you know, be, we’re not trying to knock on folks. Yeah. We’re not trying to be a tattletale. We’re trying to help folks feel like they’re in control of, you know, of their home’s risk level and ultimately their home’s insurability. ‘Cause those two things are related.

[00:22:08] Drew Thomas Hendricks: But you’re also enabling them to be able to take, “We’ve done all these things to help mitigate the fire risk. What we’ve done that should be reflected in this insurance premium.”

[00:22:19] Michael Chien: Yes. And so that’s actually the last thing. Like if there was one thing we hadn’t gotten to that I would wanna spend time on, actually those mitigation actions do factor into the premium.

So if you’re on the FAIR Plan, there’s a new bill that actually gives a discount for each of those items you get done. Which is a huge, you know, it’s one of those, like every little thing matters and they’ve updated the pricing to reflect that which is a step in the right direction.

And eventually the end state of going in that direction might be that some of this work is required. Obviously not right now, but you know, if you start with discounts, who knows in, in a few years what might condition for insurability be.

[00:23:08] Fred Glick: That brings up another question. So if there’s this checklist to get your premium lowered from FAIR Plan, I assume then you’re able to shop the other guys that are in between, like you talked about, because it’s less, it’s less risk, more insurable, or it’s kind of stuck with it.

[00:23:29] Michael Chien: In theory, yes. And that is the direction we wanna see the market head in. I will say that most incentives for property level risk mitigation show up at the premium level as a discount. And less so in the core yes or no decision to underwrite that risk. Part of it is because those actions are always optional and so it’s hard to make a yes or no decision based on inputs that are optional to the homeowner.

But if we get to a point where, you know, maybe there are great government programs to help people do this work, or it’s become a lot more common to have some of these upgrades applied, say like in building codes, we might get to a point where those things are required to say yes or no at all and move past the point of just giving discounts.

[00:24:25] Fred Glick: What have we been on here about half an hour? And it’s like, we could continue for hours, but we will, we will let you rest. Maybe you’ll come back in after a few episodes of whatever and give us some more wisdom. No, it’s super appreciate this and I’m sure my clients will and those listening, watching throughout the world.

But you’re just licensed in California, correct?

[00:24:49] Michael Chien: Yes, just California.

[00:24:51] Fred Glick: Okay. Okay.

[00:24:52] Drew Thomas Hendricks: You’re listening outside of here. Tune out. No tune back in.

[00:24:57] Michael Chien: We’d like to be licensed in more states soon. And we find that in a lot of industries, I think other states like to look at California and insurance is regulated state by state.

So our license and learning will soon fly elsewhere. Yes.

[00:25:14] Drew Thomas Hendricks: So that being said though, that brings up good point. So someone is listening, they’re in Washington, they’re in a fire area in Oregon, how do they go about finding these middle of the funnel type options?

[00:25:26] Michael Chien: Yeah, I think it’s find a really well-respected, high quality independent brokerage.

Right? Those are folks who are independent because they are able to write with a bunch of different carriers and look for the one that fits your needs. And so I think, like I said earlier on, like even if it’s not us, right? Just because you are dropped by a single carrier does not mean you are, you know, you are ruled out from all the rest of them. You just need a broker who can help you find them.

[00:26:00] Fred Glick: What would be search words you’d put in for that?

[00:26:03] Michael Chien: I would just, “Independent insurance broker near me.” And, you know.

[00:26:09] Fred Glick: Okay. You’re not, you know, fire in high risk area or something like that, or?

[00:26:20] Michael Chien: That may work, though our sense is that we are, we are among a small handful of brokerages that actually specialize by peril. Most other brokers are still generalist, and so the idea is just to find someone who knows your location really well and who will be really good to work with.

[00:26:43] Fred Glick: Got it. There you go. Great advice. We appreciate it.

[00:26:48] Drew Thomas Hendricks: Oh, thank you so much, Michael. This was fantastic.

[00:26:51] Michael Chien: Thank you

[00:26:51] Fred Glick: both.

[00:26:52] Drew Thomas Hendricks: We’ll have to get that landing page up on Arrivva now that I know it exists.

[00:26:56] Michael Chien: Sounds good.

[00:26:56] Fred Glick: Totally.

[00:26:58] Drew Thomas Hendricks: Talk to you later.

[00:27:00] Michael Chien: Cool.

[00:27:01] Fred Glick: Okay.

[00:27:01] Michael Chien: Thanks, guys.

[00:27:01] Fred Glick: That’s cool.