Belfor Property Restoration did not grow into the world's largest insurance restoration company charging only 10% and 10% for overheads and profits. 1 I've discussed this Xactimate myth of 10% overhead and 10% profit with Belfors executives and in their deposits. It surprises me that the estimate of property insurance is based on a myth of 10 and 10, when most restoration contractors do not take a job without a margin of at least 40%.
Annissa Coy is an expert on content and fire renovation. She is a writer, trainer, speaker and trainer for the restaurant restoration and real estate insurance industry. She has many articles in the online edition of Restoration and Remediation Magazine . When I communicated with Annissa Coy about expected profit margins in the insurance recovery society, this was what she had to say, in part:
I do not teach much about a minimum profit margin because each company's situation varies but there are certain standards or baselines … in the industry . The gross margin varies from 40% to 90% depending on what you do, ie mold, fire, water restriction and forensic cleaning involving unattended deaths, trauma scene and hamata type cleaning.
Here is a video that Annissa Coy made, What is a good profit margin for restoration?
This is something that Revenue and profit of the restoration contract is important if policyholders will get quality work where I noted that the insurance building author Shawn Van Dyke stated that restoration contractors who charge 10% and 10% overheads and profits should expect have a net loss of 3%!
In the field, and where the rubber meets the way to make money, some restoration contractors are forced to cheat only if they agree to play the 10 and 10 game. Replacing inferior quality materials, not doing quality work, paying "off the books" workers in cash to avoid workers' compensation, health insurance and tax liability are just some of the confessions I have heard about when I attended restoration events.
With massive ongoing fires in California and two hurricanes expected to hit the Gulf Coast this week, the insurance security industry and the adaptive community are on high alert for a huge number of property insurance claims. Perhaps the insurance company's adaptation society will stop playing games about this 10 and 10 myth. The insurance company's adjusters must immediately pay what is reasonably necessary for their customers and the often non-heraldic restoration contractors to restore these ruined communities.
When news people and government officials ask me why there are so many problems getting claims completely closed, this is an item I often talk about. These insurance companies simply put their profits over their customers' concerns and do not give a clue about the quality of the repair as long as it is on a number that the insurance company dictates.
Hope you can join me tomorrow for Tuesdays at 2 with Chip Merlin, where I will discuss this issue and a recently released Pennsylvania case that allows farmers not to pay contract costs and profits until the policyholder pays for it. 2
Thought for the day
At the age of nine I got a paper route. 64 papers must be delivered to sixty-six families every day. I also had to collect thirty cents a week from each customer. I owed the paper twenty cents per customer per week and had to keep the rest. When I did not collect, the balance came out of my profit. My average income was six dollars a week.
1 How Belfor grew to be No. 1 in disaster recovery https://www.cbsnews.com/news / how-belfor-grew-to- become-1-in-disaster-recovery /
2 Kurach v. Truck Ins. Exchange No. 12 EAP 2019, 2020 WL 4760092 (Penn. August 18, 2020).