There are significant barriers to making a successful snow and ice business. Labor challenges, increasing costs of supplies, and a softening economy are just a few of them. Many of you have been in this situation—agreements with customers are updated, you have the right people and equipment in place, then your insurance premiums double or triple for no real reason. It’s not sustainable, unaffordable and is driving people out of the business. It’s a crisis in the current business environment of this industry.
According to recently published research by the SIMA Foundation on company financial structure, 11% of total costs are allocated to insurance compared to national averages of 1%-5% for other businesses. And insurance premiums are rising. According to the same research, the average one-year insurance increase is 6.1%, with 7 out of 10 respondents indicating they have absorbed a meaningful increase in their premium costs. A crisis? Yes indeed.
Is this going to get worse? Thanks to a recent partnership with SIMA members Ansay Insurance and The Swinter Group, we have met with underwriting professionals—the decision-makers for coverage and premiums—from more than half a dozen large insurance carriers.
An interesting discovery was the reluctance of most insurance carriers to insure companies generating over 20-25% of their total annual revenue from snow and ice management. This is despite a lack of data supporting decisions to deny coverage to companies with higher percentages of revenue derived from snow. We countered that companies frequently performing snow services are often safer and more efficient due to their greater experience.
A top priority for the SIMA board of directors is the development of a company accreditation program centered on safety and insurability for its members. The next phase will involve creating a company accreditation for businesses that uphold best management practices, industry standards, and safety protocols. Insurance carriers expressed interest in this process, as it would provide valuable data to identify truly safe companies.
We know this will not be easy and has been tried before. Unpredictable winter weather will always make for conditions with some likelihood of a slip, trip or fall accident. We still intend to move forward and demonstrate that professional companies perform effectively, ensuring safe conditions. The overall end goal is straightforward: lower or stabilize insurance rates, which creates a more competitive insurance market and lowers the cost of doing business.
We will be testing a pilot program later this year. We’re optimistic about the outcomes and creating true partnerships with insurance carriers. Look for more details and information on how to participate soon.
Did you know?
SIMA members spend 29% less on insurance that non-SIMA members (9.3% vs. 13.1%)
SIMA members' insurance rates are growing 7% slower that non-SIMA members (5.8% vs. 6.3%)
The profitability study results will be available this fall. Learn more at sima-foundation.org. Thanks to Caterpillar for their financial support of the study.
Martin Tirado, CAE, is CEO and Executive Director of SIMA. Email him at martin@sima.org.