Dry Cleaners — Cover Your Assets! (Conclusion)

CHICAGO — In today’s increasingly challenging insurance market, dry cleaners and other business owners must think ahead to make sure that their business is not only protected for today, but will have coverage for protection in the future.

In Part 1 of this series, we looked at problems some dry cleaners are experiencing when it comes to rising insurance premiums and dwindling choices available.

In Part 2, we examined the market forces that are affecting the insurance industry, as well as potential new solutions from within the drycleaning industry.

Today, we’ll conclude by exploring ways dry cleaners can better position themselves to get the best policies and rates, as well as strategies to consider when in the market.

Risk Management Practices

In such a challenging market, dry cleaners must take every effort to control the things they can, says Select Risk Insurance President Harry Carranza in a recent online presentation hosted by the Drycleaning & Laundry Institute (DLI). Proper risk management practices are essential not just for getting the best premiums possible, but for obtaining policies in general.

“Commercial insurance has never been as volatile and dynamic as it is right now,” he says. “You must be in tune with the factors that affect your insurance program.”

Documentation plays a crucial role. Trying to determine damages after an event takes place is far more difficult without a clear picture of what was lost.

“Take videos or photographs of your operations annually,” Carranza recommends. “Make sure you have documentation, and keep it somewhere so that you can verify everything in the event of a total loss.”

Keeping an asset log is also helpful when it comes to obtaining or renewing insurance policies, according to Carranza: “Keep a spreadsheet of insurance information and update it when a change is made. It’s so much easier upon renewal when you have all the information, and it’s great for taxes, too.”

Also, he cautions cleaners to not value their equipment based on “bargain prices” or “perceived market value,” but to take the actual cost into consideration.

“I’ve had people who say, ‘Well, I can get this new press for 20% less because there’s a glut of equipment in the marketplace.’ That’s not how insurance works. You’ve got to look at new, retail replacement costs.”

Becoming More Insurable

Carranza believes there are several steps cleaners can take to minimize risk and therefore become more insurable.

“Consider sprinklers,” he says, as an example. “Everybody is looking for sprinklers. If you don’t have them, you’re going to be in a world of hurt with any carrier. The first thing they’ll ask for is the age of the building, which most people don’t even know, and then the sprinkler status and condition of the roof.”

Additional risk factors include the cleaner’s choice of solvent: “If you absolutely have to go with perc, then be sure you have the pan and solvent-resistive floor coverings. Make sure you have excellent maintenance and recordkeeping for your waste control.”

The businesses surrounding your drycleaning company can also impact insurance decisions.

“You wouldn’t think that mattered all that much,” Carranza says, “but we’ve seen excellent facilities be declined because they were in a strip center or an industrial park where there was a printing company three doors down. The insurance company said since the printer dealt with hazardous ink and other materials, they were afraid of fire. We think that’s ridiculous, but that is happening all over the place. So, consider your surroundings.”

A Bulletproof Insurance Strategy?

While there are factors out of a dry cleaner’s control, any effort to minimize risk will help both in finding coverage and keeping it affordable. Having a health and safety plan in place is one such step, according to Carranza.

“If you don’t have one, get one together,” he says, and suggests using the Injury and Illness Prevention Program, outlined in Section 3203 of the California Department of Industrial Regulations, as a good starting place.

“California and some states require it,” he says. “Just use a bullet-point template and do basic things, like having safety management meetings.”

For dry cleaners that run route vans or other vehicles, adopting fleet safety guidelines can also help.

“Have a written safety program,” Carranza says, “but most importantly, have telematics in your vehicles, or at least have randomized telematics. They are wonderful measures to control distracted driving. You don’t want loose cannons on the road.”

Having regular training is also a benefit, and can be used as an advantage when it comes to both hiring and retaining, as well as insurance.

“Keep records,” Carranza says. “A training spreadsheet will help you document it and keep you within regulatory guidelines.”

Perhaps most importantly, owners of drycleaning companies must be their own advocates when it comes to insurance, and start the renewal process early, rather than waiting for an unwelcome surprise.

Carranza offers these tips:

Set the expectation with your carrier, agent or broker that you would like to start no later than 90 days prior to your renewal date.
Ask your agent or broker to share their specific renewal strategy.
Discuss and research losses, especially larger losses or repeated or frequent losses.

Don’t Wait, and Don’t Underestimate

Anne Cobb is customer service representative for NIE (National Fire & Indemnity Exchange), an insurance company specializing in drycleaner and laundromat coverage. She emphasizes the importance of proper coverage levels, particularly regarding equipment replacement costs.

“The best thing to do is take an inventory,” she says, noting that many operators are significantly underinsured. She recommends working with equipment companies to determine accurate replacement costs, including installation, delivery and taxes.

“Go for asset protection, not lowest price,” says Carranza. “Yes, the two can be together, but sometimes you’re really looking out for what you’ve worked for over all those years to protect. Make sure you’re protecting what you’ve worked so hard to earn.”

For Part 1 of this series, click HERE. For Part 2, click HERE.