CEO's message: Challenging times provide opportunity for the retail hardware store industry |
By any measure, 2020 has been a year to remember (or maybe forget). COVID-19, hurricanes, wildfires, riots, and politics have all made 2020 something today’s youth will be recalling in stories they tell their children and grandchildren. COVID-19 has presented the world something not experienced since 1918. The retail hardware store industry has been affected by the challenges of 2020 in significant ways, some positive, and some negative.
If you have been to your local hardware store recently (and you probably have), you most likely noticed fewer available parking spaces and more customers than normal. But you also may have noticed fewer staff, and maybe some low inventories.
In the hardware store industries (including BMD and lumber) through August 2020, the US Census Bureau reports year-to-date sales up 11.4% versus 2019. For comparison, the 2019 sales in the hardware store industries were up just 0.8% over 2018. In my discussion with several retailers, the sales increases are in some cases substantially higher than the average. This is good news for retailers. It’s really no surprise to see the increased sales considering the fact that hardware stores are essential businesses and with travel brought to a near standstill, many consumers are going to the local hardware store more often than pre-COVID-19.
While sales are robust, there are most definitely significant challenges. Staffing challenges are perhaps the greatest. Even for essential businesses, some workers are avoiding the workplace for fear of exposure to the virus. And of course, some contract the virus and are forced to stay home. To keep up with demand, owners can hire help, but training is required and to do so with high sales and increased safety measures adds to the stress and the challenge.
Supply chains have been heavily tested and in some areas for certain items, inventories are running low. The store owner is trying to meet increasing consumer demands at the same time they are seeing manufacturing and distribution challenges.
The store owner is also having to make their stores “COVID-19-ready” for their staff and for the public with masks, distancing, hand sanitizers (for use and for sale), sneeze guards, one-way aisles, regular disinfecting, etc. All these things are creating additional stress on all parties.
I am in the insurance industry. I am grateful to be working with retailers throughout the US – retailers are essential business and I thank them for staying on the front lines. Insurance for retailers is definitely affected by the COVID-19 environment. Many states now have “presumptive” orders from authorities requiring that a worker who contracts COVID-19 is “presumed” to have got it at the workplace. These presumptive orders will definitely have an effect on workers' compensation claims and premiums.
Business Interruption claims (due to the pandemic) have become a major subject of focus in many states. Though most insurance policies have exclusions for pandemics, there have been thousands of claims made and numerous courtroom decisions on the matter. Hardware store owners have not been impacted by business closures as much as many other classes of business. There is talk in Washington about developing a federal backstop for business interruption from a pandemic, similar to other federal backstops like for terrorism. This is a topic that will be in courtrooms for months and perhaps years to come.
Eventually, the pandemic will pass. When it passes, will hardware store sales settle back to pre-pandemic levels? Let’s hope not, but it makes sense to assume that things will cool down somewhat. We all look forward to the day we can talk about COVID-19 (and 2020) as something in the past.
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Maintaining customer focus during COVID-19 |
Covid-19 has had an immense impact on our daily lives and our livelihood. We have seen many of our customers flourishing during this time as homeowners and consumers look to do home and business improvements as well as take up new hobbies that require tools and supplies. On the other hand, operations such as party rentals have been very hard hit with events being cancelled or postponed.
We all recognize the physical, emotional and economic strain Covid-19 has touched us all. From a business perspective being aware, proactive and showing how your business cares about employees/their families and the public will go a long way to maintain your good reputation in the community.
Below are some ideas to help attract and maintain a customer base during the COVID-19 pandemic.
- Internet + phone orders
- Curbside pick-up
- Self-checkout lanes
- Local delivery options with proper safeguarding
- Leverage on-line resources to help customers with projects
- Video calls with customers that are at job sites doing home projects looking for advice
- Adequate barriers at check out, posting notices, floor marking on social distancing, face masks, gloves where needed, providing hand sanitizer, etc.
- Be proactive with appropriate frequent sanitizing including any rental equipment
- Providing additional short breaks so employees can wash hands
- Promptly address any potential employee infections and seek guidance from local health officials on appropriate next steps
- Be sure to communicate with employees and vendors if a case is detected
- Conduct appropriate deep sanitizing
Additional resources to help your business.
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Did your umbrella insurance premium go up this year? |
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Let’s take a moment and talk about commercial umbrella insurance; what it is, why there is a lack of availability right now, and what to expect as we move into 2021.
Umbrella Insurance is the excess coverage protection that insures your company’s liability in the case of a major accident, incident, or mishap, where your company could be responsible for that claim or loss. Umbrella coverage, as the name implies, sits on top of your company’s general liability primary policy and your company’s primary commercial auto policy, and is a set amount of limit that ‘follows the form of the general liability and auto policies and their coverages. A typical excess policy, for example, is $3mm of coverage, and sits on top of a primary $1mm limit general liability policy and a $1mm limit auto policy. Your total coverage for a general liability loss or a commercial auto loss would be $4mm in total ($1mm general liability + $3mm excess and/or $1mm auto + $3mm excess). Most any loss that affects your general liability or auto coverage (and your employer's liability portion of your workers' compensation policy), and grows large enough to affect your excess coverage, is covered (but there are a few exceptions).
As you may have noticed this year, your umbrella premiums have probably increased a bit. This is due to two factors: less carriers are writing umbrella coverage, and therefore capacity is down, and losses continue to increase, which raises the loss costs (and therefore, the premium).
Carriers in the admitted market have been suffering losses like never before in the umbrella line of insurance. This is due to more auto claims and general liability claims, and higher severity of those losses. We are seeing more and more distracted driving claims (cellphones are the main culprit here), and larger and larger liability claims (as lawyers drive the losses and settlements up for everything from complex liability claims to simple slip-and-fall losses). Medical costs continue to increase as well, which only make the losses go higher. Combining all of these factors together makes for higher premiums and less availability. Many carriers have exited the umbrella market completely, with no intention of re-entering in the future. The losses have simply been too great to manage with a simple premium change. Many carriers that we have spoken to have advised that until distracted driving issues (i.e. cell phone use while driving) have been minimized or stopped, or have been automated out of the equation by technology, and tort reform implemented to stop milking insurance companies for unnecessary high dollar amounts of losses, this capacity problem will continue. As the laws of supply and demand say, with less capacity (supply), and a steady or higher need for coverage (demand), the price will move higher.
So, what do we see for 2021 in the umbrella market? We believe pricing and capacity will remain on level with this past year, with minimal increases. The carriers who don’t want to be in the umbrella market have already exited. The ones who have chosen to stay have made their rate changes and will probably be level to up 5% for 2021. Capacity should be the same as 2020, now that the market has settled down a bit. While COVID-19 has changed a lot of things in our daily lives, umbrella insurance is not one of the things that was affected. And the surplus lines market has stepped up well to cover the admitted market’s shortfall for umbrella capacity. The pricing might be a little higher, but capacity is available.
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Does my business need EPLI insurance? |
EPLI covers businesses against claims by workers that their legal rights, as employees of the company, have been violated. Both current and former employees can file lawsuits, against a business, if they believe their rights have been violated at any point during their employment. The most frequent types of claims covered under this type of policy include: wrongful termination, discrimination, sexual harassment, and retaliation. In addition, these policies cover claims for other types of inappropriate workplace conduct such as (but not limited to): defamation, invasion of privacy, failure to promote/deprivation of career. Businesses that do not carry EPL insurance can be making an expensive mistake. The cost of settling out of court averages $75,000 and defense costs can soar up to $300,000 for cases that reach a jury. In addition to the financial burden, is the length of time it takes to resolve EPL claims which could be between 18 and 24 months. Companies need protection against these types of wrongful acts in the workplace as defense and settlement costs can be financially devastating.
HOW MUCH DOES EPLI COST?
Costs will vary from business to business. The factors that affect the cost of EPL insurance:
- Number of employees
- Rate of employee turnover
- Employment procedures
- Past claims
- Amount of coverage
- Amount of deductible
Finding the right balance between effective risk management and affordable employment practices liability insurance is crucial and has a direct impact on a company’s bottom line. Having an EPLI policy will easily pay for itself if you are sued even just once.
SHOULD YOU HAVE AN EPLI POLICY?
YES! In today’s litigious environment it is important to have a mechanism to protect yourself. EPLI coverage will not only help protect your business but also offers professional guidance that can help prevent wrongful employment practices altogether. If you have employees, you need EPL insurance.
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Expanded product offering for rental operations |
'A' rated carriers
Direct bill with 10 equal payments
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