Hi and welcome to the Impact on FinTech TV.
I'm your host, Jeff Guterman.
We're down on the floor of the New York Stock Exchange and I'm joined this morning by Susan Hunt Stevens.
Susan is the CEO of TESE.
Susan, welcome to the show.
It's great to be here, Jeff.
Thanks for having us.
So we have a tradition on the show where we like to ask people why they're using their powers as a force for good.
Um, so give us a little bit of insight into why you're doing the work that you.
You're doing, and then we'll dive into what that work actually is.
Sure.
Well, I've been an entrepreneur for almost 25 years, but the last 15 have been spent on climate because I actually think it's one of the most important issues of our time, but also one of the best business opportunities.
It is innovation at its finest, and I think when you can transform a system and make people's lives better, safer, Why not?
What a way to spend a career.
Absolutely, absolutely.
So tell me a little bit about what Tessie is and what you do.
Sure, so we are an AI native platform that helps people repair homes after natural disasters.
Unfortunately, about 10 million homes in the US are affected every year by a natural disaster, and there's a lot of why-nows for what we're able to do.
So first and foremost, there's a billion dollars storm every 10 days in the United States right now.
Unbelievable.
It's unbelievable.
But also there's been a change in who's bearing the financial risk related to these storms.
It used to be that insurance covered a lot more, and now the estimate is somewhere between 35% and 40% of the total cost is shifting.
To the homeowners, so people are struggling to figure out how to recover and to get the funds to recover if they're insured at all.
Increasingly storms like flooding, there's very low insurance rates.
But the last part is exciting in terms of the technology, and it's really two things.
One is there is a plunging price and increasing availability of satellite data, fixed wing data, drone data.
That can tell us very quickly what has happened after a disaster and give us the ability to put, you know, power basically into homeowners' hands for what they need to do and how much it's going to cost to get better.
So that's what we do is we basically give every single homeowner within 24 hours of a storm a restoration plan.
We tell them what their insurance is going to cover or not.
We help them find money for the part that they don't have coverage for, whether that's charity or government or third party financing.
And then with that in hand, we're able to bring in reputable resilience oriented contractors to help them rebuild.
So I'm gonna ask the natural question because we talk about this a lot on this show.
We just had Sarah Katnick on from JPMorgan talking about resilience and that spend for resilience.
So the first natural question is, why aren't people doing this pre-disaster?
You're a post-disaster recovery option.
What is the Miscommunication and getting people to make this investment prior.
Yeah, I think a lot of people think it's a knowledge gap first and foremost, and I would agree with that at the top level.
So people just don't know what their risks are, and there's certain industries who are going out of their way to make sure people don't know what their risks are because they're worried it's going to affect home values, resale, and things like that.
So you see.
You know, um, certain associations asking climate risk data to be pulled off of home platforms and things like that.
But I don't think that's the only thing.
If you think about when people do things, they need to be very motivated to do them, and then they need to have the ability to do them.
And the ability to do them is the ability to get the funding and the ability to get the labor.
And what do we, so you're not super motivated because it's not a daily crisis today before a storm, but there's also not funding before a storm.
At least after a storm, you might have insurance funding.
There may be government funding.
Most of the funding is for post, not pre.
And then the other part is just labor construction.
It's hard.
Have you done a house remodel project lately?
It's a lot of time.
It's a high, high, exactly.
So costs are high.
So that equation of Am I motivated?
Do I have the ability?
You've got to work kind of on both axes, and that's hard.
And that's one of the reasons we came into this in the post-disaster is.
We said, well, at least post disaster your motivation is very high, and then if we can work on getting you the money and labor and making that easier, that's our best chance of encouraging you to build back better.
And so even if your insurance is only doing like for like, that asphalt roof, and they'll pay for the asphalt roof, it's not that much more expensive.
Expensive to do a fortified roof at that time.
And so the insurance proceeds might cover 90 95% of the cost.
You just have to get the right labor who knows how to do a fortified roof, right?
And it's interesting because just to make sure I'm tracking this, that homeowner pre that disaster doesn't have that 95% to redo their roof.
So the difference is that they've got 95% post disaster.
It seems like a problem with insurance companies not wanting to pre-spend to save the money, but, but we don't want to.
Because we don't want to put it on the homeowner.
I mean, they're stretched tight already.
Renters and homeowners' insurance is through the roof these days.
I'm sure that's having a big impact on people having any available extra dollars to pre pre-prep prior to it.
So even with the knowledge, you have to have the capital and you have to have the people who know how to do the things to be more resilient.
There are also some really innovative programs around fortified roofs and wildfire fortified happening in various states with incentives and things like that to do that.
But it's still, you know, small relative to the huge opportunity.
But that gets me excited about when you think about the adaptation and resilience opportunity, which I know you talk about, I mean, it's trillions of dollars of business to be had if we can get people to do this work in the right way and the right time, the right place.
So let's dive in.
How is AI helping this process?
What is innovation doing to make this more cost effective, better for the consumer?
So FEMA estimated that there's an average of 14 knocks on the door by different people coming to do estimates, damage assessments before you can get the money and labor to build back a home.
We are trying to reduce that dramatically and to put the information into homeowners' hands.
So what we're doing is within 24 hours we've got that damage assessment and we've got a restoration plan for every homeowner at no cost.
It is amazing.
So it's a combination of Geospatial data, drone data, fixed wing data, but then we actually activate the homeowner.
So think of it as a puzzle, and we're able to use a third-party data to fill in 80% of the puzzle.
But then we can direct the homeowner to go get the pictures with their phones or videos with their phones for the remaining 20%.
And we put it through a proprietary model.
It gives us the jobs to be done.
Like you need debris removal, you need mucking and gutting, you need window, you know, and then we can price that against industry standards.
Software like Exactimate to determine the cost.
That then gives us the ability to bump it against your insurance policy, which is now available through an API.
You give us permission, but we read, we can't, it's not a substitute for an adjustment.
The insurer is still going to send somebody, but we can at least tell you whether you're covered or not.
Because sometimes, particularly in flooding and hurricanes, um, the estimates are somewhere between 90 to 95% of homeowners are not covered, and they don't know it.
And so, unfortunately, we may often be the first person to tell them that.
You know, this is going to cost you $75,000.
No, by the way, it's not covered.
Oh my God, I know.
And you said before, like charities helping.
What are some of the charities I'm just curious that actually support in this?
Yeah, so there's a lot of different charities and NGOs.
One of the biggest and one of our partners is Team Rubicon.
It's 180,000 veterans who have signed up to volunteer after disasters for socially vulnerable homeowners.
It's an amazing organization.
And so that's one group, the Salvation Army, the Red Cross, you know, SBP, Cajun Navy, you know, it sort of depends on where you are in the disaster, but Team Rubicon is one of the biggest for immediate post-disaster home repair, and then there's other organizations and long-term recovery groups that build on the longer term rebuilding.
I'm curious as to the mindset of a homeowner, because they didn't spend the money before, now the damage has occurred.
There is this, at least in the United States, this sense of lightning doesn't strike twice kind of mentality.
Do you ever hear that from a homeowner? are saying, well, the roof's already been blown off after 30 years of living here.
I probably have another 30 before it happens again, so I'm not going to spend the money.
Or is the post-disaster homeowner feeling more vulnerable and unsafe and wants to spend the money?
Yeah, so I think I think it depends where somebody lives.
There are people now who are just very used to regular storms, folks or fires or things like that.
Like if you live in California, you are way more sensitized to wildfire now.
If you live in Florida, you are way more sensitized to wind, hurricanes and flooding.
I think what's happening though, and this is where people are getting surprised, is places that maybe heretofore were called climate havens.
There really isn't such a thing.
I saw this catastrophe map of the United States, and there's only this little tiny part of northern Michigan that doesn't have exposure to one of the major storms, and many states have hiked.
Owner values in Northern Michigan by 25%.
We're on the 4th year.
I wonder if we could see the bar going up home prices going up.
Exactly.
So people in Western North Carolina, Vermont, you know, who are suddenly experiencing these big, huge floods and rainstorms who were not expecting it, that's the group of people who are a little bit more like, is this going to happen again?
But I think the more and more this is happening, the more frequently it's happening.
I think people are realizing we are just in for a climate where the past is not predictive of the future, so people don't know what to expect.
Um, so it really comes down to, can I get the money to build back, you know, my home, first and foremost, and if I can, Now I'm open to the conversation that says, OK, what should I do, so if this happens again, I'm better off, and that can be as simple as raising the mechanicals in the basement or as complex as changing how your roof is put on.
So, let's talk a little bit about homeowner values post this investment, because that's one thing that we haven't touched on yet.
Is there also this sell to the homeowner that, look, you know, there's also a 10 to 15%, there might be a 5% of the cost that you have to cover to fix that roof.
That 5% will more than likely be recovered if you ever sell the home because of this work.
So I think we're starting to see beginnings of signs where homes that have hardening features, fortified roofs and things like that do hold up better in, in.
The markets, but these things are still relatively new.
And so personally I think that's what we're going to start to see.
Just like maybe 10 years ago, people started to think a lot more about energy efficiency and being an energy efficient home or a solar powered home or a resilient home by having battery backup or things like that.
I think a home being either built to withstand certain winds, certain, you know, rain levels and design or fires, is going to become More known, I think one of the interesting parts is that when you look at the data though of the most common thing to hit your house, it's hail, and it's like these big golf ball ril right through the roof and right through the window, right through your car.
So there's specific materials you can put through, but that's got, you know, people have to start really realizing, oh wait, there is a way to save my roof.
It just needs to be done with a certain type of tile.
There's some, some great groups like IBHS that are working on things like that.
In 2015, 20016 when I started really diving into climate risk, I met with a bunch of reinsurers, and when I was asking them what the most damaging climate-related disasters are, I expected fire, hurricane.
Literally the first thing that a bunch of different companies said to me, or others said hail damage, especially.
In areas where there are car dealerships, because one hailstorm can take out 15 car dealers and all the cars in a 2 minute time span, which is, I saw some wild statistic that said, um, that there were 142 days in the United States last year where there was 2 inch or greater hail somewhere.
Yeah, cause in 2015, they said to me that they don't see a pathway forward of profitability on covering climate related disasters.
This is in 2015.
Here we are 11 years later.
We've seen to your stats, billion dollar disasters happening weekly.
Yeah, it's, you know, and I think there's a lot of complexities.
I got asked the other day at a conference, you know, how would I know whether we've, you know, created a more regenerative, sustainable economy, and I said Everyone has access to affordable insurance.
And I think it's because if we think about the role that insurance plays, if you can't get insurance, you can't get a mortgage.
If you can't get a mortgage and people can't get mortgages, then home values are going to drop.
Home values drop.
Now you're struggling to pay teachers and fire and police and things like that.
And You and I went through 2008.
Mortgages were at the base of that.
And so a lot of very, very smart people, members of the board at Allianz, etc. have said that insurance crisis is the next financial crisis.
And so we will know that we have fixed this if everyone has access to affordable insurance 10 years from now.
So we started to see some.
Companies starting to offer for hardening, um, pre-hardening prior to the storm, that they're offering some discounts.
Are you starting to see more of that across the country to help the homeowner?
So it's funny, um, when Benjamin Franklin started home insurance back several 100 years ago, yes, everything.
I know, wasn't it amazing, um.
There was a deal.
I will cover your home and insure your home if you will do these 10 things to make it more fireproof.
And it was an exchange, I'll insure you if you do this behavior.
As insurance evolved, it turned a lot more into risk pooling and risk sharing, and it's like, OK, we'll take some homes in Florida, but we'll offset it with homes in Iowa.
When there's no place to share the risk, I do think we have to get back much more to this, I will insure your home.
If you do these things that make it more insurable, or I will make it more affordable if you do these things to make it insurable.
So there's some really interesting MGAs and other companies who are starting to play around with that.
Some of the last resort insurers, the, the fair plans and things like that, are starting to do that, but it's not systemic.
And if you talk to an insurer, what they will say is we do annual contracts.
The financial return of these things are long term, and we can't guarantee that this person is going to be with us long term.
So there's not a lot of financial return for us for doing these things.
And so, You know, there's a duration mismatch.
Like I find a lot of things in climate.
The contracts are this long, the risks are this long, and so that they don't match, so they don't get priced appropriately, right?
It's wild.
Like in Colorado, if you want to get homeowners insurance, you have to prove that your brush is cleared by like 30 ft around the home just once when you buy the homeowners insurance, then.
20 years later, the brush could have all come within 6 inches of your house, and the homeowner's company never comes back out and says, oh, you're not clearing anymore, we're not covering it anymore.
Yeah, I think there's going to be a huge mismatch.
I think for insurance to work, there's gonna have to be a lot more of conditions for insurance.
Um, and I think, you know, one of the things that, um, is, is hard for the average wallet, but Insurers have to be able to price risk and that risk pricing is probably the biggest signal that we have in the climate movement for what's actually happening.
And so anything that messes up the ability for insurance to price risk.
The right way, I think is dampening the alarm bells around this.
Yeah, what most people don't track is that the reinsurers can price the risk, but the state insurers are governed by the state and can't implement that price of increase, so they leave like they are in California or in Florida.
They just leave rather than being allowed to price the risk and be.
Able to dispense to your point, that risk across a much broader swath.
Yeah, I also think there needs to be a retightening of the contract between insurers and homeowners that says you do all the right things and you pay your insurance, we will be there for you fully in a disaster.
I think there's been You know, we've heard in California that some people are being offered 60 cents on the dollar in order to get it quickly, you know, and I think that that contract needs to get reestablished that says, you know, if this happens, we're there for you, and certain insurers are, but not everybody is.
I mean, we've seen in Colorado where we'll cover you for 9 months, but we won't cover you during fire season, which Great, thanks.
Yeah, exactly.
It's, well, and can you get a mortgage that condition, you know, no.
And so, you know, given how critical mortgages are to our entire financial markets, I think a sit down that kind of says, here's how this is going to have to work in an era where the past can't predict the future, you know, because we're living in that era.
So we covered insurance companies.
What about policymakers?
What can they be doing differently?
Yeah, I mean, I, you know, I think we've been very lucky to have some folks from FEMA advising us from both administrations, and the, the reforms that FEMA is going through, I think are really important, and I hope the fact that it's going to exist is now, you know, something that we can all count on and celebrate and recognize the role that they can play, while also recognizing, you know, Being the backstop, federal government being the backstop for all municipal damages over a certain amount probably isn't the right idea either.
And so how we refix that system, I think it's something everyone's going to have to talk about, and that's a huge policy thing.
I think the other is, um, is maybe on the regulatory side playing a stronger role with requiring risk disclosures when people are making financial purchases.
This is the most valuable asset and the number one investment that most Americans. are going to make and making sure they are very, very aware of the risks and aware of what the insurance is going to be for that property.
And when you're the owner, be aware when insurance is starting to get out of whack.
So we have areas of Massachusetts now where there's limitations for FHA loans on how much the insurance can be as part of a loan, and so all of a sudden people can't use FHAs to buy these properties.
The property owners didn't, don't know this, and that affects their ability of who can buy their home.
And so some policy things related to insurance and affordability and mortgages.
Just given the role that homes play in people's financial wealth is, is, I think, more important than ever.
So we covered insurance and policymakers.
We're on the floor of the New York Stock Exchange.
We would be remiss to not say what could the capital markets be doing to help with this problem.
So in closing, What is your ask or recommendations for capital markets that could help with this huge problem?
Yeah, so I think two things.
First and foremost is that the process of getting funds to homeowners after disasters is really, really slow.
I can get $7000 in an instant when I'm buying a large screen television online, right, but it takes weeks to get $7000 to fix your home.
So finding financial instruments that can move at the speed of disasters and be offering those and getting those into people's hands, because the more you can stem the damage quickly.
The better the economic impacts, the better the educational impacts, and frankly, the less damage you're going to have.
So, speed of capital movement post-disaster would be one.
And then the other one, I think would be really sitting down as a financial market and making sure that there is a very, very clear sense of the physical risk that is coming.
Because of climate and as a result of that pricing that physical risk, understanding that physical risk, because I think when you start to really understand the magnitude, that return on investment for adaptation and resilience becomes a no-brainer.
All right, Susan, thank you so much for being on the earth today.
It was awesome.
I hope you enjoyed being on the corner of the.
I loved it.
Awesome, awesome.
That's it for the impact on FinTech TV.
I'm your host Jeff Guderman.
Until next time.
