CHICAGO — Having solid insurance protection in place to manage risk is vital for any business owner, including dry cleaners. While this is not a purchase that cleaners get excited about — it’s the one item they buy but never want to use — it’s crucial for keeping the company alive when disaster strikes and for protecting the bottom line when it comes to customer complaints or employee injuries.
However, in today’s business climate, many dry cleaners are facing rising premiums, reduced coverage and fewer choices as some insurance carriers are leaving the market and economic forces drive up costs.
Less for More
“The biggest challenge for us last year was building and bailee insurance,” says Wayne Wudyka, CEO of The Huntington Company, which includes businesses such as Huntington Cleaners, Wesch Cleaners, Camelot Cleaners and the Certified Restoration Drycleaning Network (CRDN) franchise.
“Building insurance has more than doubled for us from the year before,” he says, noting that his operations include four retail stores, along with routes that serve about 4,000 homes weekly, 180 buildings with lockers, and restoration business through the CRDN franchise. “We went from $250,000 to half a million dollars in coverage premiums, and it’s not even the same coverage — it’s not as good.”
Part of the issue, Wudyka says, is the revenue model of insurance companies, where premiums are only part of their income strategy.
“Insurance companies make their money reinvesting premiums in the stock market, and they have had a couple of rough years for investments,” he says. “If they lose 10% or less on their core business, they’re considered a safe investment, because they typically have a greater return than 10% on their cash in the markets.”
Another factor contributing to rising insurance costs for dry cleaners and other small-business owners actually has nothing to do with their industries.
“The insurance industry exists due to pooled risk,” says Anne Cobb, customer service representative for NIE (National Fire & Indemnity Exchange), an insurance company specializing in drycleaner and laundromat coverage. “This means that events outside of the drycleaning industry will affect drycleaning insurance rates.”
The recent California wildfires alone, for example, are estimated to cost insurers more than $40 billion.
“As insurance is the spread of risks, these insured losses will eventually be paid by the reinsurance industry, which in essence is the supplier of insurance for primary carriers.”
During a recent online presentation hosted by the Drycleaning & Laundry Institute (DLI), Select Risk Insurance President Harry Carranza pointed out there were no fewer than 24 billion-dollar weather and climate disasters — including hurricanes, hailstorms, tornadoes, wildfires, winter storms and other severe-weather events — in 2024 alone.
“And these are $1 billion at minimum,” he says. “Several of these were over $20, $30, $40 or even $50 billion.”
Come back Tuesday for Part 2 of this series, where we’ll examine some of the market forces that impact insurance prices, along with new industry solutions.
Have a question or comment? E-mail our editor Dave Davis at [email protected].
