REAL ISSUES. REAL ANSWERS: Controlling Insurance Costs
It is no secret that insurance represents an important (read: expensive) issue for companies in the LBM business. Indeed, more than four out of five respondents to a 2016 LBM Journal survey characterize rising insurance costs as “a serious issue.” The challenge is clear: balance bottom-line economic realities with the risks and costs of insurance choices. As the dealer comments that follow make clear, there is no universal answer. But there are thoughtful approaches that can help dealers navigate this very real business challenge.
This month’s issue was suggested by Scott Johnson of Lakes Area Building Center, Longville, Minn., who wrote: “Insurance costs are killing us. From liability insurance to workers comp. Every insurance seems to go up 3-6% every year. Shopping for other insurances don’t seem to give any relief in the annual price hikes. You need more margin and sales to offset these costs. Do other dealers see similar price increases, or do I need to find a new agent? Over the last 10-12 years, these added costs certainly impact annual profits.”
To learn how other dealers manage this issue, we sent an email survey to subscribers who have opted to receive our email communications. A big thank you to the 155 readers who took time to share their insights. If you’d like to participate in future surveys, please drop me an email at Rick@LBMJournal.com.
Approximately how much do your combined insurance rates increase on average each year?
First, we wanted to gauge approximately how much combined insurance rates are increasing for LBM Journal readers. As chart 1 shows, more than 92% of respondents report annual insurance cost increases of more than 3%, with more than 44% reporting annual increases averaging more than 9%. In fact, exactly one reader reported no increase in their company’s health insurance premiums in 2016. Here’s the breakdown.
The answers in chart 1 make clear that insurance rate increases among respondents far exceeds inflation (0.7% in 2015, according to the Bureau of Labor Statistics). The question is, what percentage of respondents consider that “a serious problem?” As you’ll see in question 2 and chart 2, the answer is the vast majority.