Insurance "Pay as you go"

Originally Posted By: jcahill
This post was automatically imported from our archived forum.



I read with interest the threads on “pay as you go” insurance. I think this concept is great. I would re-title it “Buyer pays for it if they want it”.


If you want to drive a car YOU pay the insurance; buy a home YOU pay the insurance. The same goes for medical and life. This industry is stuck with consumers who want the premium averaged in amongst the masses. I suggest those consumers that want protection pay for it.

The solution is simple. They purchase liability relative to the value of the improved property factored by an age and occupancy modifier.

All claims would be submitted to arbitration.

The insurance company would have a duty to defend.

If the premium for a $150,000 home is $800 then so be it. The consumer is given a contract with a choice.
---- $1000 maximum liability for $300
---- $100,000 liability for $800 (or whatever).

The Standards for the optional inspection would require mandatory photos and description data. A discount for vacant homes would be given. Engineering reports would be required for all foundations.

I guarantee this industry would gobble up such a program. "Guarantee limited to apology on this forum however for an optional premium of $15,000 I will personally email every NACHI member an apology" ![icon_biggrin.gif](upload://iKNGSw3qcRIEmXySa8gItY6Gczg.gif)

Just food for discussion.


Originally Posted By: mboyett
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John,


Good to see you posting here again on the NACHI BB. I know your questions and ideas will generate lively discussion and, hopefully, lead to some serious thinking about our industry. Welcome back.


p.s. I showed up for the Inspector's Committee meeting today. Where were you guys? It was 30? and cloudy...that's no excuse. ![icon_smile.gif](upload://b6iczyK1ETUUqRUc4PAkX83GF2O.gif)


--
Mike Boyett
Capital City Inspections
Austin, Tx
www.capcityinspections.com

Originally Posted By: ekartal5
This post was automatically imported from our archived forum.



Hello John,


This form of insurance was a major discussion here a couple of years ago perhaps less. There was one company based in Illinois that took many home inspectors to the cleaners. The owner is a notorious crook. It’s a great concept indeed but one that should be approached like walking on egg shells.


Erol Kartal
ProInspect


Originally Posted By: escanlan
This post was automatically imported from our archived forum.



Hello John,


Nice to hear from you! You need to join in more often.

I would consider a pay as you inspect philosophy if the rates could be made reasonable. Unfortunately there are to many clients who do not understand the implications of the cheapest price they can find concept. It would be difficult to try to add a high premium to each inspection.

I have been thinking of the whole deal a lot lately and have an idea. First off Texas laws seem to be an influence on other states HI laws. Seems we are considered one of, if not the, toughest on licensing. If Texas can take the lead on this possibly other states would follow.

To begin with, every licensed RE professional would have their Texas Real Estate Recovery Fund amount increased from $100 to the area of $500 - $1000 each year. That's a lot of money that can go into a state controlled investment fund to pay out on claims. The pot just keeps growing as the investment fund grows.

Now onto the procedure for claims:

1. The first step is arbitration where each party pays equal shares of the costs up to settlement. If at any time either party withdraws they get to pick up the whole tab for the failed arbitration. If arbitration is found in favor of the complainant go to settlement method below. If not go to step 2.

2. Case goes to court. If the complainant loses Texas law already says they get to pay all costs. If the complainant wins then go to settlement method below. As an additional incentive to prevent frivolous lawsuits if the complainant loses they pay an additional 10% of the demanded loss amount to a general fund. It can be used for any number of good causes whether it be Children's Advocacy groups, training programs for disadvantaged youths, etc.

Settlement method:

This is the beauty of it. If the fund does pay it runs repayment by the RE Professional the same as now with a slight twist. The RE Professional pays back the first $30,000 before they can practice again. The remaining payment is in the form of required extensive additional training in the area(s) they were found negligent in.

As I see it this will provide three major benefits. If a person wants to file a frivolous complaint or lawsuit they certainly have a lot more to lose than just their time and some legal fees. Most people are smart enough to realize that they made the mistake and should have listened to the Inspector. Generally they will just not file the complaint and if they do then they get another lesson from "The School Of Hard Knocks"!!

The second major benefit is the Inspectors would not necessarily have a need for E&O if they knew that frivolous lawsuits were being dealt with harshly. If they are performing their job properly there is no need for expensive E&O premiums.

The third benefit is the additional cost to someone wanting to enter the field and the expectation that if they do screw up due to inability it would be their last. How many people can afford to pay back the $30,000 now?? Those entering the field would have to be serious enough to keep up on their training, knowledge and abilities to succeed.

Yes, sometimes there are extenuating circumstances and possibly the Inspector should not be dealt with as harshly. These can be taken into account and lesser repayment options can be considered appropriate.


--
Manny (Emmanuel) Scanlan

Knowledge is power, but sharing knowledge brings peace!

Originally Posted By: ekartal5
This post was automatically imported from our archived forum.



escanlan wrote:
Hello John,
Nice to hear from you! You need to join in more often.

I agree. Mr. Cahill is known for being one of the nation's top home inspectors/instructors. Sorry John couldn't help it. ![icon_lol.gif](upload://zEgbBCXRskkCTwEux7Bi20ZySza.gif)

Might as well toss in Dan Bowers too...

Erol Kartal
ProInspect


Originally Posted By: jcahill
This post was automatically imported from our archived forum.



Gosh, thanks for the compliments. Nice to be posting again. I have been catching up on the NACHI site now that the political world is winding down (30 hours a week instead of 60)


Reply to Manny's post.

In Texas the Texas Residential Construction Commission (TRCC) was created a few years ago. I believe it requires State managed dispute resolution between builders and buyers. Of course one can imagine the allegations of abuse in that the statute was funded by the builders. Nonetheless, there is merit to their actions. Read all of the posts by Dr. Swift and one would conclude that it is insane to be an inspector.

Manny, your idea is a bit like the TRCC. Here are some thoughts:

- Excess TREC recovery money flows to the State. It does not build up. The only way we modify that is to change the statute to increase the reserve.
- TREC might create a TRCC type dispute resolution process. The complainant would be required by law to go through the State first. (TRCC is not fully tested; trial lawyers are sure to be looking for holes)
- The complaint would entail an "on site" investigation of the matter by a State sub-contractor (usually someone with lots of HI experience.)
- Only the items of complaint would be investigated.
- A hearing would be held and a reasonably compensated 3 person committee would make a ruling. The committee would include a State attorney, consumer and inspector appointed by the inspector committee. The appointed inspectors could change from case to case. The inspector committee could be consulted by the appointed inspector.
- The committee would make the ruling.
- The tricky thing is deciding if compensation should be allowed. Such action would be like saying "we pay for what we miss" in Texas. IF this is the path then careful limits must apply.
- The fund would be managed like insurance. The inspector would not be required to reimburse however a sliding scale of premiums would apply and excessive claims could result in loss of license.
- Anything exceeding the fund limit would be underwritten by an outside carrier like Lloyds.
- No deductible; duty to defend.

This action sounds like socialized insurance / dispute resolution however the TRCC set the precedent for considering this and it might be a partial solution to a problem that has existed since I started doing this in the 1980?s.

The inspector lobby is insignificant. However the power of the Realtor lobby is notable. If Realtors realize that 20 to 50 page reports exceed the "Common Sense" principals mentioned by Dr. Swift then their endorsement of such a program would go a long way to getting approval.

The goal is protecting the consumer and the industry.

Enough bloviating.


Originally Posted By: escanlan
This post was automatically imported from our archived forum.



Quote:
- Excess TREC recovery money flows to the State. It does not build up. The only way we modify that is to change the statute to increase the reserve.


The reserve could be a floating maximum and reviewed every 5 years. At that time if an excess was determined to exist it could be distributed to programs to help the profession whether it be consumer education, licensee additional education programs, etc. Some may claim that they should receive a rebate but I don't really feel that would be practical.

The TRCC dispute resolution is a prime example of why the government should not get involved as deeply as they are in the case of TRCC. The arbitration process there is to heavily quagmired and only creates a hostile atmosphere and displays (although not necessarily true) bias towards the builder.

Mandatory first step should be arbitration or even mediation through a totally independent third party with some monitoring only by TREC or TREC representatives. Many disputes can be handled through discussion and education. With minor additional rules added to make it more beneficial to arbitrate/mediate many will take that route without question first.

Quote:
- The tricky thing is deciding if compensation should be allowed. Such action would be like saying "we pay for what we miss" in Texas. IF this is the path then careful limits must apply.


We are in a litigation crazy society. As a result tort reforms have been enacted and now a medical professional can basically negligently kill you and all you can get from them, dollar wise, is $250,000. Yet let an RE Professional be sued and the sky is the limit, i.e. pain and suffering, physical damages, etc. We need tort reform to limit damages to actual losses with the burden of proof being unmistakenly placed on the plaintiffs. That same tort reform should give the defendent immediate redress in the form of an immediate judgement against the plaintiff if the suit is proven frivolous. In other words don't make it hard for a person to challenge an RE professional. Just make it expensive for them if they do try a frivolous action.

Quote:
- The fund would be managed like insurance. The inspector would not be required to reimburse however a sliding scale of premiums would apply and excessive claims could result in loss of license.
- Anything exceeding the fund limit would be underwritten by an outside carrier like Lloyds.
- No deductible; duty to defend.


I can easily see this. TREC would also have the opportunity to immediate yank the license of an individual for gross actions of incompetence if they felt the individual would continue on the same course.

As for the money end of it let's say that every RE professional paid $1000 each year into the fund. The last time I checked there were approximately 4000 licensed Inspectors and somewhere in the neighborhood of 15,000+ RE agents. Even if this new fee caused a 25% drop in ranks (those that don't want to pay the $1000 a year) that still leaves 14,250 X $1000 = $14.25 Million a year in the fund. That's a huge amount of money!! Not really sure what the averages are now for annual claims so can not compare it to see if that would work.

Quote:
This action sounds like socialized insurance / dispute resolution however the TRCC set the precedent for considering this and it might be a partial solution to a problem that has existed since I started doing this in the 1980?s.


There is actually a lot of good to be said for Socialization. In these current times and conditions it very well may the better way to go.

Quote:
The inspector lobby is insignificant. However the power of the Realtor lobby is notable. If Realtors realize that 20 to 50 page reports exceed the "Common Sense" principals mentioned by Dr. Swift then their endorsement of such a program would go a long way to getting approval.

The goal is protecting the consumer and the industry.


We (RE Professionals of all fields) are bound by our COE to protect the consumers and our industry. One thing I do not truly understand is the appearance of a great deal of friction between Inspectors and Agents. We (all of us RE Professionals) really do need more dialog between us to gain a much better handle on our responsibilities to the consumer. It is true, after all, if we all work together the consumers will be much happier and file less complaints and lawsuits!


--
Manny (Emmanuel) Scanlan

Knowledge is power, but sharing knowledge brings peace!

Originally Posted By: fabousada
This post was automatically imported from our archived forum.



i,m looking for insurance for home inspecor.


Originally Posted By: ekartal5
This post was automatically imported from our archived forum.



Farid there is wealth of information here on this topic. Do yourself a favor and forget about ‘Pay As You Go’.


Erol Kartal
ProInspect