AI powered insurance and strata document review

0:00 – Meet OctoAI and Eli Report

0:00 Ryan Grant: So next up we have Thomas Beattie from OctoAI Technologies Inc. He's going to be covering AI powered insurance and strata document review. Their company makes the product Eli Report. Hello Tom.

0:16 Thomas Beattie: Good, how about yourself?

0:16 Ryan Grant: Great, thank you.

0:20 Thomas Beattie: It's been an exciting couple of days, some fantastic tools for strata owners and property managers and other stakeholders. So yes, this will be your first tag team presentation. I'm going to be joined by Sonja Blackburn of Axis, who is our insurance partner, but I'll start by introducing OctoAI and what we do with Eli Report.

0:43 Ryan Grant: Great, I will put your slides on the screen now.

0:45 Thomas Beattie: That's fine, perfect. Okay, thanks everyone. Glad you were able to join us today. Insurance has been mentioned several times over the course of this conference, and alongside all of the fantastic things that we've learned about document management and communication tools, we are a source of potential relief for you on this pain point. Eli Report has been around for a number of years, I'll give you some background on that, and we'll talk about how we think we have a part to play in the changing insurance landscape for strata.

1:22 As a bit of background on myself, I describe myself as a recovering investment banker.

1:24 – A Carfax for Condo Documents

1:25 Thomas Beattie: I've been working with startups for the past 10 years, I'm a big champion for financial literacy, and my previous startup helped people invest and learn together with their friends and family. And while I was running that I was approached with the concept of Eli Report, and I thought it was strange that when you spend ten thousand dollars on a used car you get this Carfax report with a complete history, but when you spend a million dollars on a condo you get an incomplete binder of documents, or an assortment of files which are hundreds of pages long.

1:59 And in essence we came out to create a Carfax for condos. So that's what we've done with Eli Report. We've run nearly 20,000 of those over the past several years, and we're trusted by thousands of owners, strata council members, property managers, buyers, investors, home inspectors, lawyers, notaries, depreciation report specialists, anyone that's involved in real estate and strata. So the essence of an Eli Report is that it will pull out relevant information for you and make it easier to understand its history.

2:35 Unlike CondoClear — and you may have seen Ryan speaking earlier — we do not provide advice or guidance. So if you're looking for that type of interaction you'll need to speak to CondoClear, or your realtor, or your property manager. But what we do is make it possible for you to pull out everything that matters, instantly gaining insights into the lifestyle restrictions and critical issues, all easily sorted.

3:03 And something that's not frequently done or accessible, which is to benchmark your community against others of a similar type, of a similar age.

3:09 – Sample Report: Insurance and Lifestyle Restrictions

3:09 Thomas Beattie: So I'm going to actually show you a sample Eli Report now on the fictional Octopus Villas. The Octopus Villas community is a hypothetical townhouse built in 2000 with 28 units over three floors. You'd see a street view, you'd see where it is on the map, and then immediately we dive into some of these insurance fundamentals. So this community is looking at a fairly typical insurance budget. They're saving about nine percent versus their peer group on their annual insurance.

3:41 Their earthquake deductible at 15 percent is a bit higher, but the water and flood deductibles, $25,000 and $50,000 respectively, are a bit lower. So overall this strata is not doing too bad when it comes to their insurance. I spoke about some fundamentals of your building and understanding what some of these lifestyle restrictions are. And for those of you already living in strata you're familiar with these, but for someone that's new to your community, knowing whether they'll be able to bring their pets in with them, knowing whether there are restrictions over rentals, smoking, barbecues, any age restrictions and other procedures, is important to them.

4:18 So Eli Report pulls those out and makes it possible for you to see what the restrictions are. And while that's a little bit small on your screen, it's small so that we can bring up our side-by-side viewer and show you that, following the legislative changes last fall, there are now no long-term rental restrictions that apply to stratas in BC. So the prior restriction to a maximum of 15 strata lots has been superseded.

4:44 However there are still short-term accommodation restrictions that remain. So if you did purchase into this community you wouldn't be able to use it for Airbnb, etc. All of these lifestyle restrictions are there and comparable and easy for you to see and to understand, and again you get to bring up the source document for context, which helps. In this building you're allowed to bring a maximum of one dog or one cat.

5:09 So if you have a dog and a cat, or two of one or the other, you'd think twice about entering this community.

5:12 – Budget Benchmarking Against Peer Stratas

5:15 Thomas Beattie: But that's how that works. I'm going to skip down to the financial information, and this is something that I believe is more relevant to those of you that are living in strata today. We look at a building's budget and break it down into several component pieces. You saw, as mentioned, insurance above, but we also look at the repair and maintenance, the utilities, the management fees, and your CRF contributions, and then the static snapshot, or point in time reference, to the building cash reserve balance.

5:46 So again we benchmark those to peers, and I'll elaborate on what those peers are. So for this townhouse built in 2000, we'd be looking for townhouses in the province of British Columbia built within three years, so between 1997 and 2003. And so long as there are at least 60 communities of that type, that'll be your cohort. And if it wasn't enough in that cohort we'll step out one year either way until we have enough.

6:13 But our density of coverage is very high in BC, so that's an outstanding peer group and you really are getting an apples to apples comparison of your building. So this particular strata is spending just a bit less than the peers on their annual budget. Annual repair maintenance is about 12 percent below, so that's something to keep in mind as you're looking at what you're doing within your community.

6:40 Being only 28 units, the dollars per door that they're paying is $32, just above $26 which is the peer group average. That makes sense, there's some economies of scale that apply within the property management industry, so as a smaller community you'd expect your dollar per door to be a bit higher. Utilities are almost right on par. And your CRF contribution and reserve fund balance are in a very nice tandem.

7:02 I love to see one of those being a bit higher when one is low. It means that since your cash reserve balance is a bit below your peers, you're contributing a bit extra each year, which will help you restore that sense of balance. So, looking to be in fine shape. We also compare to the Strata Property Act requirements. Those will be changing in November of this year.

7:25 If you have heard some of the other presenters speak about it, you'll hear that they'll be required to put aside at least 10 percent of your annual operating budget towards your reserves, and that's obviously a good thing. We also look at your reserve fund balance, because there is a requirement to contribute more if it's less than 25 percent. And the other thing that's advantageous for you, no matter where you are within the strata landscape, is understanding where your building is on critical issues.

7:55 So strata fees are a major subject of interest for all of us. We want to know how much more it's going to cost us in terms of our maintenance fees next year. You see that the discussion back in October was an eight percent increase. The prior year they were looking at seven to ten. Historically they've only been moving up at say three to five percent, but the rise in inflation and services costs means that many communities are seeing higher increases now than they were a few years ago.

8:19 – Critical Issues: Leaks and Repiping

8:21 Thomas Beattie: I'm not going to belabour each of these individual subjects, but suffice to say, as I pan down the list, that it looks like this community has had a number of historic issues with leaks. Expanding that section, pinning down to the history, I see that they've had some membrane issues, parkade leaks, some piping issues, original copper prone to pinhole leaks. It's only, well, less than 25 years old, but that's clearly been an issue.

8:52 And then we can see, as we progress through time, how those issues have evolved. They were contemplating an insurance claim, and then they've taken care of the issues. So this is the sort of thing that we've been looking for. The membrane has been repaired at numerous points around the side of the building, the board performed a walkabout and confirmed no signs of water ingress. So this is a building that has taken care of a critical issue.

9:20 And as I look back at the report I see that they have an upcoming repiping project to deal with those copper pipes, so replacing with PEX. So this looks to be a fairly proactive building when it comes to looking at those critical issues. Another area of interest for everyone is the insurance and warranty. You can see that there was a historic claim. There was that potential claim we saw, but the loss was well below the deductible, and as of February their deductible dropped from the previous year of $35,000 to the $25,000 we saw above.

9:55 So that's some of the insurance history.

10:02 – Depreciation Reports and Special Levies

10:02 Thomas Beattie: Actually, we spoke earlier at this conference about depreciation reports, that's another really important subject, and I kind of panned over it. But this building appears to have waived that requirement for a depreciation report back in 2021, but they're looking at updating it now, so that's another good sign. You may have heard Jeremy yesterday talking about how it's likely that the legislation is going to require those for stratas in the near future, and that's definitely a good thing.

10:30 We are about to bring in some new analysis within Eli Report of depreciation report contents and looking at those funding mechanisms. Special levies are obviously also critical and top of mind for all. This repiping project is going to cost about $350,000, of which $250,000 is expected to be raised by special levy. 28 units in the building, you're looking at about nine thousand dollars each for this upcoming special levy.

11:01 So that's obviously something that is fairly critical. So that's an Eli Report. It's meant to be straightforward, it's meant to be simple. It takes you a few seconds, it takes us about 15 minutes to deliver your report after you've requested it, and it covers all of those critical issues. So, why consider running an Eli Report? Well, your first report's always free, we think that they're empowering and informative, and of course it could save your strata money.

11:25 – BC's Hard Strata Insurance Market

11:32 Thomas Beattie: And that's as we're talking in the context here of insurance. So, talking about insurance, I'm going to dive into what happened over the past few years. Those of you living in strata for the long term probably know this, but for those that don't: since 2018, 2019 we've been in a hard market for insurance, and the deductibles and premiums have both gone up dramatically. Premiums, according to our data, have almost doubled over that four to five year span, and the deductibles have gone up concurrently.

12:03 And that's a real double whammy for owners within strata, because you're not only paying more each month for that strata insurance, but your strata is responsible for more in terms of dollar value of losses before it hits the deductible for the building. And worse, as an individual owner within that community, your personal liability policy has also gotten more expensive, because that personal liability policy is designed to help cover the strata deductible in the event of a loss that originates within your property.

12:32 So the costs for insurance as a condo owner have gone up massively in recent years. And we spoke with the province, we spoke with the regulators, and tried to figure out what we could do to get involved. And what we decided, and approached it from, was the perspective that by putting in the work and looking at more than building spec and claims history, which is a huge part of how insurance is historically priced, we would be able to in some cases do better for you as strata owners.

13:07 So if you've had a historic loss, that's going to be on your loss report for the next five years. Your current broker or carrier is going to hold that against you. If you fully resolved the root cause of that claim, we want to give you credit for fixing it. So the membrane leaks have been fully fixed, the copper pipes haven't yet, but we know that they're slated.

13:27 So come the next renewal for this building, if that project is done, this could be a really attractive target. We look at your reserves, your maintenance program, we want to see how proactive you are about taking care of things. And of course, if you've got anything that will help you in the future, whether that's leak detection, water shutoffs that are automatic, that sort of thing, major projects, those are big differentiators.

13:50 So because our partners at Axis and their carriers are willing to look at your community in detail, they can sometimes offer savings of 20 percent or more on your strata insurance. So that's a big deal. At this point I'd like to introduce Sonja, who will come on from Axis Insurance Managers to tell you a bit more about herself and about Axis.

14:14 – Axis Insurance Brokerage Services

14:14 Sonja Blackburn: Thanks Thomas. Yes, we have been partnered, I believe since last year, providing our alternative insurance solutions for our strata property customers. Here at Axis Insurance we are an amalgamation of six brokerages that date back to 1928. It is sometimes so confusing, we have no affiliation whatsoever with Axis Insurance, the insurance company. We are a full service brokerage offering both commercial and personal insurance solutions. I personally have been in the insurance industry for 20 years, and I've seen all types of accounts and losses and claims.

14:57 And over the past few years we really have been looking at how we can make insurance easier for our strata clients. The reports that Tom has been able to put together have been really great, in that we're able to really look closer into a strata policy and how they are maintaining the properties, as well as what mitigation efforts they're putting in place. Right now we are able to provide policy review and recommendation, assistance with risk management and planning and implementation.

15:31 There's a lot of new things that come out onto the marketplace, such as leak detection devices and things like that, that we're happy to walk you through the options. We also review each policy upon renewal and provide claim support, identify and facilitate opportunities for risk management practices. That's really key, and that has been the biggest driver I think within the past three years with respect to insurance premiums.

15:55 It's really important that the stratas do have risk management practices in place, and if they do, that they communicate that to their insurers, because those can be reflective on their insurance payments. We also take a look at the property itself and see if we can identify areas of savings. For example, recently we had a strata that had wood burning fireplaces in the units, and because of that they were paying 50 percent more in insurance premium.

16:26 However the owners were no longer allowed to use the fireplaces, so by simply decommissioning the fireplaces they saved over $25,000 in insurance premium. So we try to help identify those options, to see if that is something that they're able to consider, and whatever may need be, it by deductible, or connect them with other industry partners to see how we can get those insurance premiums down for you.

16:55 We also will coordinate directly with the property managers and or the strata council, and join you at your AGMs if you would like help with communicating this information. Really it is our intention to be the broker and the advisor, and not really rely on you to have to relay the insurance information onto your unit owners or your strata councils. Offerings that we provide are directors and officers liability.

17:20 – Directors and Officers Liability Coverage

17:24 Sonja Blackburn: That is a huge exposure right now, especially with all the changes in legislation. Stratas are now dealing with having to allow rentals, which at times can almost make strata council members… well. So making sure that you are compliant with the Residential Tenancy Act, things like that, it has never been more important that you have directors and officers liability in place. Although it is not a requirement at this time, it very likely will be in the near future.

17:57 Some other areas are environmental liability. I don't know if you guys heard about the strata that decided to put laundry detergent on the roof to get rid of some moss, and unfortunately they used a lot of laundry detergent and all of those suds went into a nearby stream. So that is something that you want to make sure that you've got coverage for, in the event you've got a contractor using different practices that you don't want to be held responsible for, and if you are, you want to make sure you have coverage in place.

18:32 Some other areas are electrical mechanical breakdown, earthquake. Earthquake is a huge driving factor right now in premium, and there's many areas that some insurers aren't being able to provide earthquake coverage for. We do have alternative standalone earthquake options as well. Terrorism, crime and employee dishonesty, privacy and cyber, especially if you're using some of these wonderful apps that we've heard talked about earlier today.

18:55 If you are going to be providing that information to third parties, you want to make sure that you are looking into the privacy, the way they are protecting that information, and make sure that you have protection in place for your strata in the event a breach was to occur. Again, there's also the legal implications on this, so you want to make sure that you've got a number to call to get legal advice at any time.

19:22 Those are also things that we offer within our policies. And other options are deductible buy down, or things like earthquake and water damage deductibles, as well as commercial general liability.

19:28 – Applying for Insurance Through the Portal

19:37 Sonja Blackburn: So as far as the application process goes, the Eli Report has made it absolutely amazing. As many stratas, what we find, will have maybe newer directors on there and you don't know all of the answers to, or maybe a new property manager or management firm that might not have historical information. These Eli Reports allow us to review and see what has been done, and then ask the questions.

20:02 As we're aware, a lot of times things will be discussed and reviewed and they won't necessarily be implemented, so we use these reports more so as a guiding tool, so for us to be able to ask the questions and hopefully help you find the answers that you need to complete the application process. This also makes the application process a lot quicker, in that we're able to provide terms or an answer, if we're able to provide a quote or anything.

20:29 Thomas Beattie: In other situations, I'll jump in, because we built this portal for Axis leveraging what Eli Report has built over the past couple of years. If you create a profile, which is just identifying yourself as either a strata council member or a property manager, you're able to apply by simply dragging the common documents over into that directory, adding the address or strata plan number, confirming that you have provided or will provide the most recent loss run and appraisal, and answering the one question: has this building had a loss of over ten thousand dollars, claimed or unclaimed, since its last renewal?

21:06 If yes, a brief explanation, and if no, that's it, you submit it and we get to work. Everyone who applies for an insurance application will automatically get a free Eli Report.

21:21 Sonja Blackburn: So overall, we strive to be best in class in every category in our industry, that's really what we strive for, and to be an advisor to our clients, our clients being both the strata council and their unit owners, as well as property management firms, and help them assist their clients as well. We're always here to answer any questions and we encourage any phone calls or feedback, where you can provide just a second set of eyes on any existing policies that you have in place.

21:51 Thomas Beattie: Fantastic. So that's what we came here to tell everyone about, Ryan.

21:55 – Q&A: Broker Comparison and Report Costs

21:55 Thomas Beattie: I think we've still got at least five minutes for some Q&A.

21:59 Ryan Grant: Perfect, let me take a look there. So yes, I pasted some in the chat there as well that people have posted. Are you able to see the chat on the right hand side? There we go.

22:17 Sonja Blackburn: A question for you: is this discount insurance, or is this offering comparable to what you'd see from BFL, CMW or HUB? No, we do not provide discount insurance, we're not allowed to discount insurance aside from what's provided by the market. We have similar coverage offerings to what's provided by BFL, CMW or HUB, anywhere else really. Biggest part of any insurance policy is going to be the application process.

22:50 The more information that we have the better, and that is really what's going to reflect your insurance premiums. If we can get all of the information together and our application shows that there is more information on risk management and all of these things, then we are going to, well, nine times out of ten, get a better insurance rate.

23:13 Thomas Beattie: Fantastic, I'll take one. What does an Eli Report cost? As I said, your first one is free. If you're looking for multiple Eli Reports, as a potential purchaser you can get one through your realtor, or you can buy a single report from us for forty dollars. Sonja, I see a question for you: I see Axis Insurance has no branch in Victoria, would any of the branches in Duncan or the mainland be willing to insure a strata in Victoria?

23:40 Sonja Blackburn: We actually do have a Duncan office. I'm not sure, it's not on our website there, but we do have a Duncan office. We are remote based though, however, so yes, we can offer coverage in Victoria, and we are actually licensed across Canada, so we can insure buildings anywhere in Canada except for Quebec.

24:00 – Q&A: Keeping Insurance Costs Down

24:00 Thomas Beattie: I see another question on what's the best way for a strata to keep their insurance costs down. I guess you'll get a lot of different perspectives on that depending on who you speak to. Obviously maintaining your building to the highest possible standard, and not allowing your roof to get too old, not allowing your hot water tanks to get too old, those things are all fairly critical. I think from my perspective those are the sorts of things we see quite a bit.

24:29 Obviously it's water losses. The BCFSA's report a couple of years ago highlighted that that was a major source of pain for insurers in this province, and the sense was that too many communities were using their insurance as a bit of a maintenance policy. Deductibles back in that era used to be maybe five, ten thousand dollars in some cases, now it's rare to see a water deductible that's anywhere near that level.

24:57 But, Sonja, what would be your answer, what's the best way for a strata to keep their insurance costs down?

25:04 Sonja Blackburn: Most important, it's going to be maintenance, making sure that you're staying up to date on your maintenance plan, getting that new roof on there when needed. Or if you haven't had that, at least having regular inspections being done, that way your insurers can see you're being proactive in the maintenance area. Another thing is keeping the claims to a minimum. Us, as your insurance brokers, really be your partner.

25:28 We work for you, we do not work for the insurance company. I had, as a good example, a client that when they provided me the loss run, they had five claims within the last five years, which affected their insurance application. Unfortunately four of those claims were window breakage claims, so each one of those claims only amounted to about seven hundred dollars. However, now their loss run was quite full of information on losses.

25:58 So really partnering with your broker to talk about what your options are there. A really easy way to avoid this for this strata would have been to have had a separate glass contract in place to cover the glass related loss, that way it wouldn't have affected their primary policy. So having those conversations with your broker on how you can, you know, maybe piece it out and get creative, to avoid having those smaller losses affect your primary policy.

26:27 Thomas Beattie: Fantastic. I'm seeing a question, Sonja. I believe Axis can offer insurance anywhere across the country, can you not?

26:34 Sonja Blackburn: Yes, we can.

26:34 Thomas Beattie: Excellent. So you would be able to cover a building in Salmon Arm? We've had a specific question about a relatively new community of six units, that sounds right up your alley.

26:46 Sonja Blackburn: Yeah, definitely, we're definitely able to take a look at that.

26:50 Thomas Beattie: Fantastic. A question for us: do we resell documents? No. Your property manager and or strata is responsible for all of the document management. An Eli Report is based upon the documents that you upload when you request it, so that's where that is at. One more for you Sonja, I think we've got another minute. It says, are your deductibles higher to enable lower premiums?

27:21 Sonja Blackburn: No, not necessarily. We do have options for increased deductibles to lower premiums, but overall our deductibles are comparable to what you'll see on any of the policies, if not, in many cases, actually lower.

27:39 Ryan Grant: Fantastic. Well, yeah, that was great, really good overview. I really love all the analytics, you know, me being an IT person as well, right, I'm into data. So this is really good, what you guys are doing.

27:58 Thomas Beattie: Thanks. Yeah, we want to empower people with better data so that they can make better decisions.

28:04 Ryan Grant: Yes, and have better insurance prices too, right?

28:08 Thomas Beattie: Yes.

28:08 Ryan Grant: All right, I will then look over to Sean Jordan that we're going to introduce here. So thank you guys very much for coming, and we'd love to have you back at another time.

28:21 Thomas Beattie: Fantastic.

28:24 Ryan Grant: Yes, take care.

28:24 Thomas Beattie: Bye.