Main Street’s Hardest Hit Businesses

Agents across the country — except in Texas and neighboring states — agree that construction and related trades have been hardest hit by the recession. Restaurants appear to be the second hardest hit.

In terms of lines of insurance, the recession is most evident in workers’ compensation, where carriers are returning premiums, according to agents.

“Everyone knows that the contractors have been whacked. It starts with large contractors and filters down when larger contractors start to go after smaller jobs, the smaller contractors are left really scrambling,” said Ray Gallant, principal of Gallant Insurance Agency in Acton, Mass.

“They [contractors] are trying to buy just enough insurance to meet requirements to work on a job or bid for work and some can’t do it. It’s a tough conversation for agents to have. Some companies are lowering their commercial coverage, say where they once carried $2 million to $3 million, now they only carry $1 million,” said Chip Greene, Greene-Hazel and Associates, Jacksonville, Florida.

Kevin M. Baker, Suhr Risk Services of California Insurance Brokers, San Jose, hasn’t had any construction clients go out of business but he has seen them shrink. “[C]onstruction revenues, for some of our clients went dramatically down. Their sales might have been cut to 25 percent of what they were a few years ago,” said Baker.

Next to construction trades, restaurants have probably been hit hardest, according to agents.

“We write a lot of restaurants and I am generally hearing at least a 10 percent decline in sales up to over a 20 percent decline in sales. It’s not because people aren’t still eating, it’s because they realize or have decided that they’ve got to buy it at the grocery store instead of buying it at the restaurant,” according to Brad Berrong, Ed Berrong Insurance Agency in Weatherford, Oklahoma.

The experience is similar for Mari Eisenrich, vice president of operations for Weatherby-Eisenrich Insurance Agency Inc. in Cranberry, Texas. “Restaurants are our hardest hit small business,” she reported. “People are just eating out less.”

At RJF Agencies in Minneapolis, the construction book has been hit hard but overall hospitality accounts have fared better, according to Bill Jeatran, CEO. “Going back to the beginning of the recession, a lot of hospitality were impacted but not as much as other segments like construction or manufacturing,” he recalled. “Some of hospitality has actually picked up business depending on the tier of hospitality.”

Jeatran said that while $20-a-plate restaurants have been left hungry for business, the $8-a-plate eateries have been doing better. The fine dining restaurants he insures have all survived, too.

In addition to construction and restaurants, Charlotte Hicks, Aquesta Insurance Services, of Cornelia, Concord and Wilmington, N.C., would add retailers to the list. “Many of the mom and pops didn’t have the cash reserves to weather the downturn and they ended up having to close their doors,” Hicks said.

The recession has also hurt printers and manufacturers serving the construction industry, according to Jeatran.

Even in Indiana, where the recession has been milder than elsewhere, there have been closings, especially in smaller cities that are dependent on other industries like auto, according to Roger Ronk, executive vice president, Independent Insurance Agents of Indiana.

No matter the type of business, the effects of the recession are regularly reflected in workers’ compensation.

“Workers’ comp has been hard hit since it’s on payroll and the amount business receipts. That has a dramatic effect not only those businesses, but agents as well since its commission. With low rates, it’s a double whammy,” said Gallant of Massachusetts.

Also, while in good times insurers charge more because employers are increasing their payrolls, today insurance carriers are not only charging less but also returning premiums to reflect years of payrolls going down.

RJF Agencies’ tracks its premium audits. Jeatran said they have gone from “significant positive audits to significant return audits” the last few years because exposures and payroll have been decreasing across all lines of all customers.

That’s also the experience in Indiana. “Almost every company or agency I talk to, the premium audits they are doing on workers’ comp they are returning premium. That’s normally a place where the payrolls are higher than anticipated and it’s totally reversed itself,” said Roger Ronk, of the agents’ association.