The Challenges Facing Small Artisan Contractors
By Rene-Philippe Jobin, Manager, Property & Casualty and Life Sciences
As the economy continues to work its way back towards stability, small businesses continue to face challenges. There is no better example of this than those faced by small artisan contractors: electricians, plumbers, carpenters and others.
The primary challenge is consumers. The post-recession consumer is savvier than ever. They wield the Internet as a primary tool for finding exactly what they want. They check review sites and social media to gauge the reputation of small artisan contractors. They conduct research on needed repairs or projects, and with so much information available and a new emphasis on do-it-yourself projects, they may even opt to do a job themselves, leaving many small contractors with less business.
Furthermore, where consumers would simply hire the first contractor they found, they are now looking for estimates from numerous outfits. By using those estimates to negotiate the most competitive price smaller contractors are forced to compete against each other more than ever, thereby driving down prices.
The result of this better educated, savvier consumer is small contractors spend more time managing their business and writing estimates than they do practicing their craft. This means less room for error and tighter margins for the contractor.
This is valuable information for insurance brokers who write contractor business. By understanding the artisan contractor’s operation and their insurance needs, brokers can still take advantage of this industry niche.
When construction was booming, insurers were competing for business and quoting low rates across a wide range of operations. But as claims rolled in, those insurers who jumped into the contractor market without the necessary experience or commitment level were caught short. The frequency of small claims like tool theft to the severity of large losses has really tainted some classes of business, such as plumbers, HVAC and snow removal operations, to name a few.
Today, many insurers now apply annual, generic premium increases regardless of the contractor’s claims history. These increases negatively impact the artisan’s bottom line. With more consumers now requiring proof of insurance and the ever increasing litigious awareness of the general public, this can really put the small artisan in a bind.
An experienced broker who understands contractors can help limit the number of unknowns by properly representing their clients to underwriters with adequate detail and information. Experienced brokers establish trusted relationships that protect all parties and can weather the ups and downs of this segment.
As for the small artisan contractors, they must be patient and focus on distinguishing themselves through outstanding work and ensuring the succession of skilled workers in an aging workforce. Of course, proper