PROTECTING SECURITY FIRMS
In spite of recession, market fares well
By Dave Willis
To say it’s been an eventful decade for the security business is certainly an understatement. From the 9/11 terrorist attacks to the recent recession, the industry has faced more than its share of challenges.
Interestingly, the recent economic fallout has actually extended a trend that started after 9/11. “As a whole, the industry has been looking for more qualified guards,” says Karen Izzo, president of Izzo Insurance Services in Elmwood, Illinois. “They don’t want Barney Fife any more, and they’re willing to pay to get better guards.”
“In a bad economy, turnover is reduced,” adds Bruce Brownyard, presi dent of Brownyard Programs, Ltd., in East Islip, New York. “And there is a larger pool of available workers.”
Increased awareness following the events of September 2001 has had an impact. “People are more interested now in having security at their events,” says John Bures, senior vice president of Southfield, Michigan-based CoverX. “This has led to increased opportunities.”
Adds Brownyard, “The industry was already growing, but after 9/11 it really took off.”
The good and the bad
The recession has delivered mixed results for security firms and their agents and insurers. “In some cases, we’ve seen a 25% to 30% revenue drop in security businesses,” explains Brian Costanza, vice president-underwriting for Costanza Insurance Agency in Dallas. “Some are finding it harder to get paid. For instance, in California, guard firms are having to accept IOUs from the state government.”
At a recent security industry conference, speakers shared revenue data. In context, it wasn’t all bad. “They said security guard revenues are down about 10%, whereas other industries are seeing considerably greater drops than that,” Brownyard recalls. “In a bad economy, I guess it’s not bad to be down only 10%.”
Some clients—especially manufacturing and industrial concerns—are shutting their doors altogether. But security needs remain. “Many properties that employed two guards are cutting back to one,” says Costanza. “From an insurance perspective—primarily from a general liability standpoint—this creates a unique situation. We’ve seen an increase in property damage claims as a result.”
Some security firms have experienced a double whammy. “Some accounts have gone bankrupt, so the guard firm not only loses a client, but the client has gone away owing them money,” says Izzo.
Some guard firms are trimming their ranks. “We’ve seen deterioration in sales and payroll for some smaller firms,” says Torrence Brownyard, CPCU, president of W.H. Brownyard Corporation in Bay Shore, New York. “Some have reduced their insurance coverage or done away with it because they can’t afford it.”
Startups are surfacing. “With unemployment rates where they are, I’m seeing quite a few new ventures in the private security arena,” says Costanza. “This creates a challenge from an insurance standpoint. Often, the applicant is less experienced. Hiring and training procedures may be lax, which could have serious liability consequences.”
Still, some firms are growing. A number of larger firms, for instance, are seeing revenue growth between 5% and 10%, Torrence Brownyard observes. “They are going strong—diversifying into different areas.”
Costanza has seen the same trend. “Guard firms are moving more into investigative services,” he says. “It’s always been there, but now they’re expanding. We’re seeing more firms working with insurance companies on fraud issues.”
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