Q: How have factors like inflation, natural disasters, and financial market instability impacted the insurance industry recently? What has been the result for policy holders with laundry operations?
“The dollar doesn’t go as far as it used to” means receiving the same service or product but now at a higher price because of inflation. Costs are increasing in general including adequate insurance coverage. These costs are impacted by governmental regulations, price controls and the need for insurers to recover from extraordinary events. Floods, fires, storms and rain have wrecked the expected income of many insurance carriers. Particularly hard hit are California, Texas and Florida, but all areas are going to see price increases in the purchase of business coverage because of inflation. In California, the insurance commissioner reportedly refused rate increases for companies doing business in this State and the result is a large number have abandoned or greatly reduced coverages offered. Why would any insurance company want to sell policies that didn’t give them a return on their risk?
Q: At a minimum, what coverage(s) would you suggest for the average vended, self-service laundry with a couple of employees?
In light of increasing awards in lawsuits, the liability coverage of laundromat owners should be increased from one million and two million aggregate to two million and four million aggregate. Second, you need to have your worker’s compensation insurance in place to protect you from employee labor injury and claims. Finally, if you own or are buying a fairly new store, you should consider insuring the true replacement cost of the equipment. This can be very costly to the laundromat owner, but can be reduced with careful consideration of what items actually belong to the landlord if the location is a leased property. There is no rebate or benefit if you accidently double insure property that is already being covered by the landlord’s insurance carrier, such as is often the water heaters, walls, pipes, fixtures, heaters and other items attached to the real property.
Q: How might the insurance coverage you suggest for the average business offering wash-dry-fold services (through drop-off and/or pickup and delivery) differ from your previous answer?
This raises a question about laundromat insurance. Does a laundromat (meaning by definition a self-service business) policy provide adequate coverage for a second business entity (fluff & fold or pickup and delivery) operating in the same facility? The answer is unclear in my opinion. Most insurance companies created and priced their policy rates on laundromat/dry cleaning services. The addition of expanded exposure to outside risks, such as delivery services, has not been clearly addressed by the insurance companies. Consider the consequences that have developed for companies such as Uber where a rogue employee is involved in a crime or an assault during their time on the job. Will these claims be covered by the insurance companies? Has the owner properly informed the insurance company of their exposure and risks? A second policy for laundry services (not self-service) might be the proper course for those owners engaged in the additional business of processing and delivery for others, perhaps even for those who also engage in fluff & fold services. Does the insurance policy of your delivery driver provide any protection to the laundromat owner when they are engaged in work related activity using their personal vehicles? Something to consider.
Q: What areas of the average laundry, regardless of business model, have the greatest need for insurance protection?
The most common claims against laundromat owners involve liability issues related to slip and fall injuries coming from customers. Liability coverage is the proper insurance for protection against this type of claim. Depending on the value of the equipment installed, the second most important insurance would cover loss to the equipment, primarily resulting from fire. It is important for those renting to distinguish between items that laundromat owners need to replace and repair but which they actually have no ultimate ownership interest in, such as water heaters, furnaces, air conditioning, swamp cooler, lights, walls, bathrooms and other items that ultimately belong to the building owner. These items are often covered by the building insurance of the landlord and paid frequently by CAM or Net/Net/Net fees of the landlord.
Q: Can you describe bailee coverage and why it can be important to laundry businesses that store customers’ clothing in their facilities?
Until recently, the issue of bailee coverage seldom was involved to any significant degree in laundromat insurance. Bailee coverage, in which there is potential liability for a merchant to protect the property of their customers during the processing and storage of their goods, was almost never seen in self-service activities of customers in laundromats. The need for this protection is now expanding as more laundromat owners are adding a second business of processing services on behalf of their customers.
Q: Minimizing the number of claims filed seems to be key in keeping one’s insurance premiums affordable. Do you have some advice for laundry owners about how they can do that?
I think the most overlooked aspect of laundromat owners is the failure to select knowledgeable insurance agents who specialize in the laundromat field to provide their insurance policies. The right coverage and an experienced person to contact in the event of a claim is an extremely valuable potential service that many laundromat owners are not afforded because they elect to use a generalized insurance agent.
Q: In your experience, in what area(s) of insurance coverage is the average laundry business most likely to fall short?
The most frequently seen issue in which laundromat owners fall short in my experience is a failure to read their policies prior to a loss. Perhaps the most overlooked document of laundromat owners beyond their lease agreement is their insurance policy. There are coverages that are not being offered and activities that you must avoid and they are all detailed in the policies and exclusions. Read your policy and your rights and you’ll avoid the traditional owner comment to their agent of “what did I pay all this money for, why isn’t this item covered?”
Q: Electronic data gathering is playing a bigger and bigger role in small business as time passes. How do today’s insurance products reflect that?
A caution light should be going off in the minds of laundromat owners that the privacy previously protected in laundromat ownership will likely disappear in the future as AI and other entities will be able to verify the square footage, 24-hour service, income, previous carriers, previous claims, equipment age, condition, internet reviews and general information that insurance carriers will likely learn to utilize more frequently to understand their risks when insuring laundromats. The result will likely be increased premium cost to laundromat owners. Currently the insurance companies are not using all the information they will be able to gather in the future to assess the risks of insuring your business. Electronic data may be good for laundromat owners but it will also be good for gathering a more detailed picture of your business by the insurers.
Q: What is your advice to laundry owners who are having difficulty finding insurance that would be the best fit for them?
Take the time to search out an experienced laundromat insurance broker to find an admitted insurance carrier in your State. Time will eventually give incentive to insurance companies to again offer coverage in those areas currently with limited options, particularly in the policy rich areas of Florida, Texas and California. State insurance commissioners will likely allow increased premiums, but fair rates reflecting the realities of inflation and the reduced value of the American dollar will seem to be normal and just like increased pricing by our laundromat customers are being accepted, so will the higher costs of providing insurance be accepted by laundromat owners.
Q: How do you envision the laundry insurance marketplace changing over the next few years, if at all?
Rates will be higher, but there will be more competition, especially in worker’s compensation policies, which will work to mitigate the increases in other coverages. Liability coverage will remain reasonable and widely available. Property coverage will see significant increases and will likely see the greatest growth in costs for laundromat owners.
Q: What action(s) can laundry owners take to make certain their businesses remain insurable?
Never attempt to negotiate a settlement, acknowledge a loss or even admit to a customer or claimant that there is insurance coverage in the event of a potential loss. You paid a company to provide professional assistance and settlements and owners would be advised to let them handle all claims. Read what your company expects you to do in the event of a claim and post the instructions in your back rooms for reference of yourself and your staff prior to a claim.
Q: Is there anything you’d like to add about insurance for laundry businesses that the prior questions don’t address?
American Coin-OP, call me if you want additional comments on issues, you feel need to be addressed or space to be filled.
Lawrence “Laundromat 123” LarsenLaundromat 123