Assessing the impact of COVID on the water damage restoration industry

There’s no overlooking the unprecedented impact that COVID-19 has left on the water damage restoration industry. In my article from a few months back, I noted the significant changes that had been made to how contractors and insurers handle claims and adapt to this environment.

Several months later and we are building an even stronger grasp of COVID’s impact as the water damage industry gradually moves towards a “new normal”. Indeed, the inspiration for this article was from recently attending an eye-opening webinar from I Love Claims (ILC) entitled “The Changing Business”. I would highly recommend that professionals working within the WDR sector participate in these webinars as they provide a huge amount of insight during these uncertain times.

Bringing together top names from leading organisations Polygon, Crawford & Company and Rainbow International, this webinar expanded my perspective on the scale of COVID’s impact on this industry. While nobody was under any illusions that new challenges were emerging, the impact has been even more profound.

I’ve picked out some of my top takeaways from the webinar and how I feel they’ll shape the future of the industry.

Takeaway #1 – There are cuts to cash flow

It’s no shock that the biggest takeaway from the webinar was relating to COVID’s impact on cash flow. While this was likely to happen, it was still alarming to hear that there had been a 70% drop in the volume of claims – an unprecedented decline for the industry.

The reason for the decline is a combination of multiple factors, such as increased numbers of cash settlements and the simple fact that people are now working from home and also not spending time away on holidays – the times when escapes of water typically go unnoticed for prolonged periods of time.

There is simultaneously an ever-growing backlog of claims that have yet to be fulfilled due to shielding and social distancing measures. Every day a claim is left open, it can cost insurers somewhere in the region of ￡25 a day to maintain this. In parallel, the overall severity and associated costs of repair on the claim are potentially worsening with each day that the claim remains open without drying systems in place. 

And as more people are working from home, water damage concerns are more deeply felt. When these problems affect not only people’s homes but their workspaces too, it places further pressures on insurers and, consequently, contractors.

There’s no denying the financial strain COVID is placing on the water damage industry. Cash settlements by insurance companies have relieved this burden to an extent, but it does carry an ethical dilemma of whether it is appropriate to put the ownership of completing claims on the shoulders of homeowners.

In some ways it was actually reassuring to hear these concerns were felt by teams the size and scale of Polygon and Rainbow International. It illustrates that nobody has been immune to this environment, whether you are an independent contractor or a global powerhouse. These are remarkable times, and the emphasis on survival will hopefully encourage teams to focus on disaster planning beyond these events.

Takeaway #2 – The UK is under-charging for service

The impact of COVID has been particularly emphatic on water damage companies in the UK when compared to other parts of Europe.

The webinar put things into perspective as to reasons why this could be the case. A lot of it ties into the comparative costs in home insurance. In numerous mainland European countries, home insurance will typically cost in excess of ￡1,000 per year; in the UK, you’re looking at closer to ￡300-￡400.

The negatives of the commodity-driven nature of the insurance market are coming to the forefront in this landscape. The desire to secure this at the lowest price possible means potentially compromising on service quality – some firms are paid less than ￡200 to dry a room, which isn’t sustainable when work begins to dry up.

When I’ve spoken to clients and co-workers in Germany in the months following the outbreak, in many instances they are closing in on a return to business as usual. This in many ways is thanks to the greater cash reserves these organisations can rely on.

Perhaps now represents an opportunity for insurers and contractors to reflect on existing insurance prices, and whether the practice of procuring everything at the lowest value is truly feasible long-term.

Takeway #3 – Contractors and insurers are working together

On a more positive note, the events surrounding COVID have inspired stronger collaboration between contractors and insurers in their handling of claims. Historic  issues of distrust that I’ve previously discussed, while not entirely eliminated, have been lessened in the face of this unprecedented challenge.

Insurance companies are working hard to ease the pain being felt by the contractors they work with by releasing cash early and providing any other support they can. This has helped numerous companies ride out this time of reduced activity and feel reassured about their prospects when the busier autumn and winter months arrive.

While it can be tricky to draw any kind of positivity out of this whole situation, more trusting relationships between contractors and insurers would represent a major benefit to the industry beyond COVID.

This could enhance the way both sides of this industry communicate on matters going forward, be it how they can establish more suitable pricing structures or how they introduce innovations when the landscape is more accommodating.

Takeaway #4 – There are worries over retaining staff

Another issue that has been raised in the water damage restoration industry is in relation to retaining staff. Due to the lack of demand for claims at present, this has either forced or compelled companies to release technicians. 

I firmly believe that this reactive move will lead to problems down the road. Eventually this bottleneck will be released, and firms will be inundated with work once again. At that time, a dearth in available talent can restrict their ability to capitalise on this resurgence in activity.

This makes keeping technicians busy and reassured all the more important. As the speakers in the ILC webinar noted, the government’s push to grow the building sector could inspire water damage professionals to make the leap, due to the synergies between both industries.

With skill shortages already impacting the sector, it’s critical that firms are doing what they can to keep employees happy, motivated and active. Now this is easier said than done, but those that invest into their technicians will be in a stronger position to take advantage of opportunities when they emerge later in the year.

To do this, companies should look into the possibilities of:

• Exploring other revenue streams to ensure technicians remain busy and reassured about their job status
• Upping their commitment to the emotional intelligence and wellbeing of staff during this tumultuous time
• Investing in further training and development of their team to enhance their capabilities for the “new normal”

Takeaway #5 – It’s time to invest in innovations

Speaking of investment, the impact of COVID has accelerated the development of technologies designed to support teams in this environment and to increase productivity, especially in reducing the frequency of in-person inspections.

Due to the restrictions and hazards associated with on-site visits, the importance of innovations such as remote monitoring and infrastructures for remote working has grown significantly. I’ve even noted clients who supply homeowners with apps that they can upload photos of their water damage to remove the need for an initial inspection.

It might be hard to justify such investment at a time of dramatically reduced workloads. But, for those with the capacity to do so, this venture can pay dividends both now and for the foreseeable future. Investing in the right equipment can greatly enhance teams’ ability to conduct jobs efficiently and productively, which in turn can free up time for further jobs.

As more work opportunities emerge as a response to the decline in the number of operational organisations, those that invest in technologies can secure a clear competitive advantage when normality resumes. Our experts at Dantherm Group are available to provide guidance and support on where and how to invest in your team’s future.

Takeaway #6 – Companies are exploring new revenue streams

My final talking point from the webinar was in relation to how businesses are diversifying in order to maintain and expand their revenue streams. COVID cleans have exploded, as have more general cleaning and disinfection works up and down the country.

This has been a much-needed revenue substitute for firms in this difficult time. But, while for many firms it was a step taken out of necessity, it is a step that could bolster their growth in the long-term.

While most of us would like to turn back the clock to a time before COVID was part of our day-to-day vocabulary, the likelihood is that things will never go exactly back to the way they once were. Although daily deep cleans of shops and other working environments might dissipate, they will probably become more frequent post-COVID than prior to it.

This adds another viable revenue stream for water damage contractors to turn to at times when their primary income is reduced, such as during the spring and summer. Investing into the equipment and training for these tasks adds another feather in the cap of companies, and may lead to notable revenue rises year-round when we’re back to more conventional times.

Progressing in the “new normal”

There is no escaping the overwhelming impact COVID-19 has left on the water damage industry, and it will take time for the sector to reset. But I believe there is considerable potential for firms in survival mode today to thrive tomorrow.

Whether it’s the cementing of stronger relationships between contractors and insurers in the face of this adversity, or giving the impetus for firms to branch out into new processes like COVID cleans and disinfections, these global circumstances have inspired people to pursue opportunities and build bridges to meet this unprecedented situation.

In spite of the current uncertainty, firms who invest in their future, be it in their staff, their technology or their services, are capable of making noticeable strides when the world feels a bit more normal.

I’d like to thank ILC and the speakers at “The Changing Business” seminar for providing the inspiration for this piece – I look forward to any future updates on how the water damage industry is evolving.

In the meantime, if you would like to discuss opportunities to invest in your company from an equipment standpoint, drop a comment below or leave me a message.