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More with Less
While expectations increase, payments decrease
Phillip Rosebrook JR, CRBusiness Mentors
Premise• Insurance companies require more information
and more documentation• Our files are scrutinized and additional
documentation required• Billings challenged• Price list inelasticity • Clients higher expectations • Connected world – no secrets
It Won’t Last
Change is coming...You can't escape by pretending it's not coming.Go out and meet it - and make it work for you. - Larry Janesky
Always be Prepared
What in the World is going On?
• Global economic factors• Interconnectedness• Drive for efficiency• Competitive world• Entitlement• Speed of change accelerating• Immediate information and immediate
communication• Feeling the effects of a bad economy
2011 Insurance Perspective
• 2011 Was the Highest Loss Year on Record for Economic Losses Globallyo Extraordinary accumulation of severe natural catastrophe: Earthquakes, tsunami,
floods and tornadoes are the primary causes of loss
• $380 Billion in Economic Losses Globally (New Record)o New record, exceeding the previous record of $270B in 2005
• $105 Billion in Insured Losses Globallyo 2011 losses were 2.5 times 2010 insured losses of $42Bo Second only to 2005 on an inflation adjusted basis (new record on a unadjusted
basis)o Over 5 times the 30-year average of $19B
• $72.8 Billion in Economic Losses in the USo Represents a 129% increase over the $11.8 billion amount through the first half of
2010
• $35.9 Billion in Insured Losses in the US Arising from 171 CAT Eventso Fifth highest year on recordo Represents 51% increase over the $23.8 billion total in 2010
Losses Due to Natural Disasters in the US,
1980–2011 (Overall & Insured Losses)
7Overall losses (in 2011 values) Insured losses (in 2011 values)
Source: MR NatCatSERVICE © 2011 Munich Re
(2011 Dollars, $ Billions)
2011
Overall Losses: $72.8 Bill
Insured Losses: $35.9 Bill
2011 was the 5th most expensive
year on record for insured
catastrophe losses in the US.
Approximately 50% of the overall
cost of catastrophes in
the US was covered by
insurance in 2011
trends• Severity is up – frequency
down• Increase in direct sales• Increased tort costs• Drive to achieve higher
underwriting gains due to loss in investing income.
• Maintenance and repair inflation is over 7%
Additional Concerns• Global weather changes• Increase in building near high risk areas• Complacency• High degree of investing uncertainty• Low yield on fixed investments • P&C net income in 2011 – 1.9%• 2011 ROE – 3.9%• 2011 Combined ratio 107.5
Insurance World• Hard market – Pricing is good• Soft market – Pricing is bad• Underwriting profits – profitable companies paid
to hold investable cash • Premiums today – claims tomorrow and Inflation
impact• Trend soft turning hard – kind of
Connecting the Dots• Soft market leads to higher claims ratio – lower
premiums – recent history• Tough investing market – Lower investment
returns• Inflation in repair costs – Higher payouts
tomorrow.
• RESULTS - Pricing pressures for restoration contractors
Non-Insurance Influences
• Property equity o No insuranceo I want mineo Lien holders
• Excess supply restoration services
• Increasing deductible – especially high risk perils or high impact areas
• Mild weather across North America
• Increasing cash out• Litigation
Unknown Future• Interest rates – what happens
when the world stops buying• Gas prices• Taxes• Employment and
Unemployment• Regulation • Increasing employment costs• Election year• Inflation/Deflation• Future of US Petro dollars???
Predictions – Less • Restoration’s safe haven will lead to more
competition• Insurance payments will continue to decrease – at
least in relation to inflation• Less compensation for after hours, service calls,
etc. • Lower margins on emergency service • Higher deductibles • Managed programs continue entrenchment• Earlier involvement in management of claim
Predictions - More• More monitoring and project management
required• Core restoration competency expected but not
rewarded• Open file days becomes very important - faster• Customer service measured on every job• Clients have higher expectations
Big Picture• Create a company that is
nimble• Manage overhead• Leave a margin for error• Be strategic and in control• Study the market and be
aware of trends• Don’t fight the trends
Strategies• Comprehensive financial understanding• Customer service• Economies of Scale• Capital preservation• Lean operations• Outsourcing• Staff assessment• Strategic marketing and broad work sources• Know when to say “no”• Team involvement & leadership throughout
Comprehensive Financial Knowledge
• Need to know• Strong analysis • Understand ROI• Stop feeling start
thinking • Key benchmarks
Customer Service as a SCA
• Zen • Training and orientation • Reinforcement and reward• Top down commitment • When it becomes a system it
ceases to be a problem
Economies of Scale• Protecting margin by specialization• Leveraging fixed costs through flexible shifts• Targeted marketing efforts• Specialization and partnerships
Capital PreservationMany companies are not prepared and will fail
• Living on the edge leaves little room for error• Lifeline• Access to opportunities• Staying power
Lean Operations• Take a serious look at overhead• Each line item needs to be defended• Each staff position needs to be defended• Balance between job and overhead costs• Look near highest margin areas• Management staff needs to perform• Involve your team in solutions• Run and manage budgets• Be deliberate – • Not about being busy – rather efficient
Outsourcing • Look at the complete cost of in-house staff and
services – understand how much overhead comes with each position. Midas Managero Burden o Support staffo Vehicles and assets
• What is the value• Not emotional • What do you do best• Office, field, management, marketing all up for
review
Staff Assessment • Benchmarking• Quantitative assessment• Qualitative assessment• There are great candidates in each market• Not emotional • Create group of leaders and “owners” committed
to being the best • Individual work V multiple
Marketing• Implement defined business strategy• Diversification in work sources• Results today and tomorrow• Everyone participates• Measure results • Owner needs to take the lead• Budget & focus on results today• Effective online presence
Say NO!• There are good and bad customers• Limited resources and time• Understand opportunity costs• Customers, jobs, programs, partnerships,
purchases• Cannot be all things to all people
TEAM• Your plans will be fought, theirs – implemented• Communicate reality and goals • WIIFM• Collaboration a new way to work
Summary • The Business world is changing• You need to be in control • YOU do not have to solve all the problems• Opportunities will be created• Become exceptional• Prepare for the new normal • Need to be profitable at all levels in your business
