Insurance Expenses Were One of the Largest Costs of Doing Business for this Contractor

RCS Influencer Wendy Marvin says that it’s hard to pick just one large cost of doing business, but liability insurance has been her pain point this year.

Being given the RCS Influencer questions to answer each month – and laughing when they ask us for just “one” of anything – is a gift for we Influencers.  Our question for June asks for the largest cost of doing business.  There are so many ways to look at this question. 

Since it’s been a pain point this past year, I’m going to talk about liability insurance.  I’ll start with telling you, we’ve had 1 (very small and stupid) claim against our insurance over the last 12 years.  We manage our risk daily to prevent issues.  On this one, our insurance didn’t even give us a chance to fight, they just rolled over and paid the claim.  The damages were arguably not even our fault, but it didn’t matter.  Frustrating at best.   

In our industry, we estimate liability insurance using our “projected” gross sales and wages.  With a business history this is an easier, albeit not perfect task.  For new companies, it’s a total crap shoot.  If we underestimate, they charge us after the year-end audit.  For overestimating, of course, there are no credits issued.  So, we all walk the tightrope of guessing.  This isn’t the insurance I’m going to reference.  I want to tell you about a shift in multi-family building.

We’re a good company, no claims, no issues, and yet our new construction builders have begun asking us for wrap policies.  To clarify, they want US to provide a wrap policy on their build.  People we’ve worked with for 10 years or more are asking for this lately.   At first, I was furious, and then after doing some research, we found this request is coming directly from their insurance.  Seems like there’s a change in the wind here and it’s costly – our current project cost $15,000/project specific.  The most recent one was paid for by our builder, but I’m sure the future will bring more liability shift in our direction.  I’m on the West Coast, but be assured, all the insurance companies follow each other.  That’s a ton of dollars to build into your estimates.  Does just buying your own wrap for the year make more sense?  Maybe, but we need to find a way to cover the cost in our estimates. 

Over the years, our policies have been carefully crafted.  Multi-family, condos, etc., are all riders we pay extra for and I’d suggest you do the same.  A normal building of apartments can be converted to condos (within your liability period) and you’ll be in trouble.  Sounds like BS, but it’s true.  We’re an odd industry, with a ton of pit falls.  Having the right people looking out for you makes a HUGE difference.  I’ve learned so many lessons from my friends Seth & Ashley Pietsch at Integrity Insurance. It sounds like a shameless plug, but it isn’t.  To protect your company, you need to work with people who specialize in roofing.  Feel free to email Seth – he’ll give you the low down.  He geeks out, and while it makes me smile, I feel SO fortunate to have found such a knowledgeable professional.  He’s willing to go to bat for my company and takes the time to explain all the risks associated with my policies and the industry.  I appreciate that. 

By staying ahead of changes, my estimators have a chance to build in these costs.  By noticing what’s changing, we have a chance to make informed decisions.  Will we continue to do condos?  Maybe.  Will we find that the cost of doing business is too high and walk away?  Maybe.  At least I have a choice, and for me, that makes all the difference. 

This cost, while variable, isn’t one that you can just eliminate.  The only ways to manage insurance and other fixed costs, are to hire the right people and to find ways to pass on the expenses.  Unfortunately, our customers will bear the burden of the expense, which is sad.  At the point where we’ve had enough and choose to walk, maybe then the builders will pressure their insurance into being reasonable. 

Maybe. 

One can hope. 

Wendy Marvin is CEO of Matrix Roofing. See her full bio here.