Why Is Laundromat Insurance So Expensive, and What Can You Do About It?
By way of introduction, Brooks Waterburn is an insurance agency based in New York. For the past 20+ years, we have specialized in protecting Laundromats and laundromat owners. As a matter of fact, we protect over 1,000 laundromats nationwide!
In the beginning, it was easy for us and every other agent to write laundromats. The market was wide open, and carriers were competing for business. Over the past 10 years, however, insurance companies have been consistently raising their rates on the laundromat class of business. Not only that, but several prominent insurance companies have stopped writing the class altogether. Those that have remained in the marketplace have seen their rates nearly double in the past 10 years.
So why this dramatic change in the industry? Why are insurance companies picking on laundromat owners? After all, most of them are small businesses just trying to make a living. The answer is simple. Claims! Bottom line the insurance companies are paying far more in claims for the laundromat class than they are taking in premium. We have approached almost every company out there and not one of them has said that laundromats were a “targeted class of business”. They will write them on an exception basis.
In our agency, by far the most frequent type of claim we get is the so called “Slip & Fall” liability claim. This occurs when a person slips in or in front of the store on a wet spot or cracked sidewalk. While these are not very big claims, they are a nuisance and often take a long time to settle. In addition, legal costs are added to the claim. This can be just as expensive as the settlement. The average settlement is $5,000 to $10,000 and another $7,000 for legal fees. If a laundromat has one “Slip & Fall” claim every 2 years, the insurance company will never make money on the risk.
So, what can you do about it? How can you reduce the amount the insurance company increases your premium? Here are a few tips:
- Prevention: If you don’t have an accident in the first place, there won’t be a claim. Keep your floors clean and free of clutter and wet spots. If there is a spill, clean it up right away, and have “Wet Floor” signs clearly visible.
- Reduce Loss Amount: I have seen hundreds of potential slip & fall claims disappear because the store owner had it on video. You’d be surprised how many people “take a dive” or exaggerate a claim. Having a robust camera system is the best way to clearly show what happened. If there is an incident, transfer the recording to a thumb drive and save it forever! Lawyers know that recorded data is saved for only 30 to 60 days and is wiped clean after that. If the incident is saved to a thumb drive, you can factually demonstrate the actual loss even if the lawsuit comes in a year later.
- Fill out an Accident Report right after the incident: It’s best to do this right away while the facts are fresh in everyone’s mind. Have a supervisor or employee who witnessed the fall fill out an accident report form stating only the facts that they saw. For example, if you didn’t see the customer fall, state in the report that “the customer stated she/he fell”.
The next most frequent type of claims we get is the dreaded dryer fires. These types of claims are never small claims. The fires can start in a variety of ways. For example, I’ve had multiple claims when a customer puts oily rags or clothing in a dryer and the heat of the dryer starts a fire. The problem is often exacerbated when somebody opens the dryer that is on fire, feeding it oxygen.
And while I love and support firefighters and understand they have job to do keeping everyone safe, sometimes they cause as much damage as the dryer fire. They rip down ceiling tiles, as well as other measures to ensure the fire did not spread. I’m not saying they shouldn’t do it, but it is something to keep in mind when there is a fire, the damage goes far beyond just a single dryer fire.
Dryer fires can also be caused by poor maintenance. If there is a buildup of lint in the vent system, a flash fire can start with the tiniest of sparks.
Solutions to these hazards are simple. Have a proper maintenance program where your vents are cleaned on a regular basis. You can either do this inhouse or hire a reputable company that specializes in vent cleaning. Also, educate your customers on what to put and more importantly, not put in dryers. Do you have proper signage? Some preventative measures can go a long way.
Customers say to me, if the rates are going up anyway, and there is little I can do, why should I invest all this time and money in these preventative measures? Fair question. Hear are a few points to consider:
- Insurance is cyclical. Rates go up, rates go down. When premium increases start to level off or dare I say go down, it will be to those store owners that have well run stores and have the highest potential for profitability.
- Regardless of industry, insurance companies will always give the better deals to the most profitable businesses. While it may not be optimal, a 5% increase in rates is better than a 30% increase!
Have questions or comments? We’d love to hear from you. Drop me a line at [email protected]