The global insurance industry significantly impacts restoration companies on a local level. Natural and man-made disasters can have a cascading effect for 5-10+ years. In 2024 alone, there were at least 26 separate billion-dollar disaster losses. The roughly $102 billion paid in claims through Q3 2024 was a hefty burden for insurance companies, while 2023 saw a record-breaking $123 billion in losses. However, a glimmer of hope emerges on the horizon. After five years, the pendulum in the insurance industry may be starting to swing back.
The Changing Landscape:
Insurance companies are primarily concerned with issuing profitable policies. Underwriters are revisiting risks they previously declined, feeling more comfortable with current profit levels. Additionally, the reinsurance market is loosening its grip. However, this shift comes with a caveat – policyholders will be expected to take on more risk by having “more skin in the game” than before. Insurance coverage will still be available, but with limitations.
What Policyholders Can Expect:
- Exclusions: Reading the fine print is more crucial than ever. New exclusions are being added to insurance contracts over time. While the insurance company is obligated to update policyholders, few people thoroughly review their contracts. Lean on professional advisors to ensure your business operations are covered as comprehensively as possible.
- Higher Deductibles: The rules for replacing roofs, both residential and commercial, have changed. Insurance companies are adopting a similar approach to car dealerships – roofs depreciate in value over time. Expect wind or hail deductibles to be a higher out-of-pocket expense, sometimes a percentage of the total replacement cost of the property.
- Claim Consideration: Insurance is designed to cover major losses, not minor damages. A key mental shift is recognizing that insurance is best used for devastation, not frustration. Claims paid by insurance companies affect policyholders for several years. After a claim, coverage may remain the same or even decrease, yet prices will likely continue to increase.
Impact on Restoration Businesses:
- Job Costs: Material and labor costs continue to rise, particularly due to supply chain disruptions following catastrophic losses. This directly affects the cost of insurance claims and how quickly insurance companies can regain profitability.
- Data is King: One of the best ways to appeal to insurance companies is by providing them with valuable data. The phrase “good data in, good data out” applies here. Insurance companies possess extensive datasets used to determine insurance pricing, like workers’ compensation policies for restoration businesses. Speak the insurer’s language – provide data-driven examples that demonstrate your business prioritizes safety, profitability, and risk management. This strategy applies to working with adjusters, too.
Final thoughts
Restoration companies have a unique relationship with insurance. Restoration work is often paid for by the client via the insurance carrier. Additionally, restoration businesses are also insurance consumers, carrying personal and business policies.
Since those receiving restoration services are oftentimes in a vulnerable and emotional state, consider explaining the unique relationship between restorers and insurance companies. Effective communication is crucial when taking a step back to see the bigger picture with your client. In today’s fast-paced world, acting as a guide rather than just the “hero” can build strong client relationships.
Kate Scully Krebsbach
Kate Scully Krebsbach is a Chicago-based independent insurance agent with Scully Insurance Group, an affiliate of Robertson Ryan Insurance. She specializes in working with restoration businesses across the United States, bridging the gap between the insurance marketplace and the nuances of the restoration industry. As a fourth-generation insurance professional, Kate enjoys spending time with her toddler daughter and husband (when she’s not discussing liability and contractual requirements).
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