Belfor Property Restoration did not grow into the world’s largest insurance restoration company charging only 10% and 10% for overhead and profit.1 I have discussed this Xactimate myth of 10% Overhead and 10% Profit with Belfor executives and in their depositions. It astounds me that property insurance estimating is based on a myth of 10 and 10, when most restoration contractors are not taking a job without a margin of at least 40%.

Annissa Coy is a contents and fire restoration expert. She is an author, coach, speaker and educator for the fire restoration and property insurance recovery industry. She has numerous articles in the online edition of Restoration and Remediation Magazine. When I communicated with Annissa Coy about expected profit margins in the insurance restoration community, this is what she had to say, in part:

I don’t really teach so much a minimum profit margin as each companies situation varies but there is some standards or baselines…in the industry. Gross profit margins range from 40%-90% depending on what you are doing ie mold, fire, water mitigation and forensic cleaning which involves unattended deaths, trauma scene and hazmat type cleaning.

Here is a video Annissa Coy made, What Is A Good Profit Margin For Restoration?

This is somewhat similar to, Restoration Contractor Revenue and Profit Is Important If Policyholders Are Going To Get Quality Work, where I noted that insurance construction author Shawn Van Dyke stated that restoration contractors charging a 10% & 10% Overhead and Profit should expect to have a net 3% loss!

In the field, and where the rubber meets the road of making a buck, some restoration contractors are forced to simply cheat if they agree to play the 10 and 10 game. Replacing materials of inferior quality, not doing quality workmanship, paying “off the books” laborers in cash to avoid workers compensation, health insurance, and tax obligations are just some of the confessions I have been told about while attending restoration events.

With massive ongoing wildfires in California and two hurricanes expected to hit in the Gulf Coast this week, the insurance restoration industry and adjustment claims community is on high alert for an immense number of property insurance claims. Perhaps the insurance company adjustment community will stop playing games about this 10 and 10 myth. Insurance company adjusters must promptly pay what is reasonably necessary for its customers and the often-unheralded restoration contractors to restore these devastated communities.

When news people and public officials ask me why there are so many problems getting claims completely closed, this is an item I often talk about. Those insurers simply are putting their profits above concerns of their customers and do not give a hoot about the quality of the repair so long as it is at a number the insurance company dictates.

Hope you can join me tomorrow for Tuesdays at 2 with Chip Merlin, where I will be discussing this issue and a just released Pennsylvania case which allows Farmers not to pay contractor overhead and profit until the policyholder pays for it.2

Thought For The Day

At age nine, I got a paper route. Sixty-six papers had to 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 got to keep the rest. When I didn’t collect, the balance came out of my profit. My average income was six dollars a week.
—Lou Holtz
1 How Belfor Grew To Be #1 in Disaster Recovery
2 Kurach v. Truck Ins. Exchange, No. 12 EAP 2019, 2020 WL 4760092 (Penn. Aug. 18, 2020).