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Report to Members: 2023 Letter from the CEO

Martin Leitch

CEO

April 15, 2024


To my fellow PURE members,

It is my honor to be addressing you as the new Chief Executive Officer of PURE. I had the good fortune to join PURE as the Chief Underwriting Officer in May of 2022 and prior to that, worked closely with PURE as a reinsurance partner with Berkshire Hathaway. In one way or another—as a reinsurer, a member and then an employee—I have been admiring and supporting your insurance company and its performance for many years before taking on my most exciting PURE role yet.

Our goal is to reward members with award-winning service, broad coverage and competitive premiums that reflect the cost of risk.

Eighteen years ago, Ross Buchmueller, Jeff Paraschac and Martin Hartley had the idea to approach the high net worth insurance market differently. And this idea has grown, under Ross’s expert guidance and leadership, into your insurance company—designed, built and managed for the benefit of its members.

I am deeply grateful to Ross for his friendship and want to thank him for his leadership, time and dedication to building PURE. By bringing together the most responsible owners of the finest-built homes to create a reciprocal exchange, my colleagues built your insurance company, where our goal is to reward members with award-winning service, broad coverage and competitive premiums that reflect the cost of risk.

As I reflect on our history and begin to chart the course for the coming years, I have spent a good amount of time considering both where we have succeeded and where we have not yet lived up to our full potential.

At a glance: PURE by the numbers

  • 113,000+

    responsible individuals and families make up the PURE membership

  • 94.1%

    of members elected to renew coverage with PURE in 2023

  • $1.3 billion

    in premiums saved by members who switched to PURE since 2007

We finished 2023 with more than 113,000 members and written premium up 14%. Our renewal retention remained strong with 94.1% of members electing to stay with PURE. The small number of members who did not remain includes those we did not offer the option to renew. The decision to non-renew a policy is an incredibly hard one to make, and one we do not take lightly. We aim to ensure it is done with all due empathy and consideration and only when it is deemed to be in the best interest of the membership and ensuring the sustainability of the reciprocal.

We continued to help members prevent losses. While fire losses within the membership have been infrequent, they are almost always severe, and sometimes deadly. To help mitigate this risk, we launched a pilot in 2023 and sent Ting devices to 5,000 members, at no cost to them. Ting monitors a home’s electrical system for arcing and power quality issues which can indicate an electrical fire hazard. At the time of publication, at least 25 issues that could have resulted in fires have been caught and mitigated thanks to Ting. I sleep better knowing my family is safer because we have a Ting installed in our home. As we move into 2024, we have significantly expanded this program. Learn more about it and whether it is available in your state.

In 2023, we handled over 37,000 claims—a record number for PURE—helping more families than ever resolve damage to their properties or defend their interests. We are thrilled to see that, in this year of record setting claims volume, our Customer Satisfaction Score was excellent at 90%. So, while we aim to prevent as many losses as possible for our members, in the event you have a claim, you can expect exceptional service.

In fact, we want to provide an exceptional experience every time you engage with us. We want it to be a no-brainer for you to join the club and a delight for you to stay. In short, we want you to Love Your Insurance.

We have, without a doubt, provided exceptional value to members in the way of cost savings. Each year many of our members kindly disclose the savings generated by moving their insurance to PURE. On average, members have reported saving 17%* on their homeowners insurance when they joined PURE, which translates to over $1.3 billion saved since our inception in 2007. Notably, these savings are inclusive of paying surplus contributions during the first five years of membership. Even with premiums increasing in recent years, new members who joined PURE in 2023 still reported meaningful savings.

We are honored to be recognized by Family Wealth Report as the Best Insurance Underwriter, an award we have held since 2016, and by Private Asset Management as Best High Net Worth Insurance Company, an award we have held since 2018. These are important marks of pride for me and my colleagues, but most important is the opinion of our members. I received this comment from a member recently and it captures what we strive to deliver for all our members:

I’m truly amazed by the level of professionalism, as well as compassion, each time I deal with a pure representative. They are responsive to my needs, as well as my calls.
– Robert S., PURE member since 2011

While it is a much easier job to write about the areas where I think we are outperforming, we, of course, have opportunity for improvement and there are clear areas where we are not performing at the level we desire.

Our underwriting results improved in 2023, but not to the level we need and want. PURE finished the year with a net combined ratio over 100%. Said another way, we paid out more in claims and expenses, including reinsurance costs, than we collected in premium dollars. For that reason, we will not be contributing to Subscriber Savings Accounts (SSAs). It’s important to keep in mind that PURE’s intention is to allocate excess underwriting profits back to our members through SSAs. SSAs are one of the many things that differentiate us from our public company peers who ultimately operate for the benefit of shareholders, not policyholders. We have allocated over $100 million to SSAs to date and hope to resume allocations in the years ahead.

Recent results have necessitated multiple actions to improve our position, including rate increases, non-renewals and expense reduction. The good news is that we are seeing signs of improvement.

What conditions are impacting underwriting results?

Inflation, extreme weather, an uptick in severe but preventable claims and other headwinds are putting pressure on insurers, PURE included. We touch on inflation and preventable claims throughout our Report to Members, so I will skip those here and focus on a few challenges impacting our business.

Extreme weather
Each year we highlight issues with extreme weather and the destruction it brings. In what seems to be a consistently worsening trend, 2023 stood out with insured catastrophe losses costing insurance companies approximately $80 billion, 40% above the 21st century average. $60 billion of those losses were caused by severe convective storms (SCS)—think straight-line winds, tornadoes, lightning and hail.

2023 also brought the deadliest wildfire to Hawaii in more than a century, with over one hundred fatalities and roughly 2,285 structures destroyed in Lahaina. We are thankful that all PURE members were safe, but several lost their homes in this fire. While we can’t undo the trauma they endured, we are proud to have done our part in providing support to those members in their time of need.

We have been telling everyone we know about pure insurance and what a blessing each of you, and your company, have been at a time when so many other things feel difficult.
– Michele L., PURE member since 2022

Automobile claim costs
It has been a challenging few years dealing with automobile industry trends, some of which will be temporary but many of which are likely permanent. Starting with rising repair costs, which have increased by 36% since 2019—and the average number of days to repair a vehicle is up by 35% over the same period. This can partially be explained by inflationary pressures, more expensive vehicle technology and supply chain disruption, but more frequent and severe accidents are also contributing factors as distracted driving becomes a greater societal issue.

Uninsured motorists and underinsured motorists
Industry-wide Automobile premium increases combined with broad economic strain have resulted in an increase in the number of drivers lapsing on their Auto insurance or renewing at state minimum limits. It is estimated that 1 in 7 drivers countrywide is uninsured. As a result, more and more carriers, even some high net worth carriers, are opting to exclude, or have filed to be able to exclude, Uninsured and Underinsured Motorists (UM/UIM) coverage from their Excess Liability policies. However, for most of our highly successful membership, this coverage is only growing in importance. Rest assured that PURE remains committed to offering this valuable coverage at fair rates. Today, 80% of our members elect to buy this coverage through their Excess Liability policy but this number should be closer to 100%. If you have not already done so, speak to your broker to ensure you’re adequately protected.

As I look ahead to 2024 and beyond, we will focus on continuing to improve the value we deliver to our members, while ensuring the sustainability of our reciprocals.

What can you expect in 2024?

To this end, we have embarked on an important effort to ensure that our executive team connects with members who have shared concerns or praise about their experiences with PURE. PURE aims for continuous improvement, and we can’t do that without a greater understanding of your feelings and experiences. With that said, here are some important initiatives for 2024:

Reducing our inflation factor
When we assessed our pricing structure in 2023 to address the impact of inflation in light of increasing claim costs, we promised we would continue to monitor inflation and the factors that have kept construction costs high. We have done that over the last year and are pleased to announce that we are reducing the inflation factor on our Homeowners coverage beginning with policies renewing in April 2024.

Greater focus on loss prevention
When I review our historical claims data, it is abundantly clear that well-maintained homes with actively managed loss prevention and mitigation devices perform significantly better—so, we will continue our loss prevention and mitigation journey. As I mentioned earlier, we are expanding the rollout of our Ting pilot program. We’d love to see the day where a Ting is installed in every PURE home. Depending on where you live, you may also be asked to participate in one of our water-loss mitigation pilots. While in-home water losses don’t create the same life safety issues as electrical fires, we know that we can help our membership avoid the premium cost and life disruptions caused by large water claims.

Beyond these programs, we will share even more information on protection standards and will endeavor to make protecting your homes an easier and more rewarding experience. As more members experience a PURE360® Risk Management Consultation this year, and in years ahead, I urge you to embrace the opportunity to learn about ways to better protect your home and prevent future losses. Partnering to reduce the frequency and severity of loss events is how everyone wins.

More solutions to solve more problems for more members
We aim to deliver a robust suite of products and solutions that meet the evolving needs of our members, so we are excited to share some of our plans for 2024:

Complex risks

PURE Specialty Exchange (PSE) is our non-admitted reciprocal insurer that is offered through our Managing General Underwriter, PURE Programs. Through PURE Programs, PSE will have more capacity for properties that do not fit PURE’s appetite, aiming to offer solutions for challenging properties, including coastal and wildfire-exposed risks. Historically, the non-admitted market has been “feast or famine,” with prices driven by supply and demand imbalances instead of the “technical” cost of risk. PSE will follow PURE’s membercentric approach with a commitment to fairness and transparency.

Teen drivers

For parents, including me, there is little more frightening than the idea of your child getting behind the wheel of a car. Unfortunately, this fear is supported by data, as the probability of a young driver (under the age of 20) being involved in an accident is significantly higher than other age groups. It is also more likely that accidents will be more severe. The good news is that safety can be improved with proactive effort and education. Later this year, we will begin rolling out a safety program for teen drivers (and their parents) that will provide ongoing opportunities to learn and improve upon existing driving skills.

Flood

While still in development, we intend to roll out new Flood products designed to provide the vast majority of our members with access to broad coverage and higher limits at competitive prices to insure against this often uncovered peril.

Expansion into Canada

Before the year ends, we will open for business in Canada, beginning with Ontario. With this expansion, we will be able to offer coverage solutions to existing Canadian PURE members who have trusted PURE to protect their U.S. interests and reach new members who have not yet experienced what it means to be a PURE member.

FEMA reports that 1 in 4 flood claims filed are by homeowners outside of what is considered a “high-risk flood zone.” Nearly every property has some risk of flooding, underscoring the importance of Flood insurance no matter where you live.

PURE was built to be a better option—with unparalleled service, innovative solutions, broad coverage and competitive prices. This continues to be our vision and our North Star.

Thank you to all of you who have taken the time to share your feedback—both positive and negative—with me, members of the PURE team or the Subscribers’ Advisory Committee (SAC). Your feedback helps us keep getting better. We are committed to increasing our communication and transparency going forward and continuing to add to those things that set PURE apart from our peers.

I want to reiterate how grateful I am to have taken on the role of PURE’s Chief Executive Officer. I am honored to hold this title and to have the opportunity to lead your insurance company with the partnership of so many fantastic colleagues.

Thank you again for your membership, partnership and support. Wishing you all the best for 2024 and beyond.

Cheers,

MARTIN LEITCH
Chief Executive Officer

Read the full 2023 Report to Members