There is some good news for these hard times: insurance rates continue to be competitive and often are getting cheaper.

"There is competition among carriers, and in some cases they are pricing lower than they should," says Kerry McGrath, marketing director for Acadia Insurance, a Bedford, N.H.-based property casualty insurer serving New England.

Property and casualty insurance companies make their money from the premiums they charge and the investment income they receive from those premiums until a claim is made. Between 2001 and 2007, for every $100 paid in premiums, the amount paid out by insurers dropped to about $94 from $115.80, according to Robert Wessel Jr., vice president and insurance officer for Central Insurance Services of Louisville, Ky.

Fewer catastrophic losses since Sept. 11, 2001, and Hurricane Katrina in 2005 have also contributed to lower rates. While catastrophic losses totaled $61.9 billion in 2005, they fell to roughly $7 billion in 2007.

Aside from insurers offering competitive pricing, some of the price decline can be attributed to the insurance industry being cyclical combined with some insurers willing to work with dealers. Insurance companies see dealer customers not having the easiest time in a struggling housing market, and they are responding by working with dealer customers.

"They want the customer to remain profitable so they don't disappear," McGrath explains.

Although construction claims continue to be an industry concern, Federated Insurance Companies has seen a rise in identity theft, according to first vice president Mike Kerr. The problem should not come as a surprise, given the increasing number of dealers now accepting credit and debit card payments.

An area where dealers don't appear to be cutting costs is benefits and health insurance. David Hogan, a managing partner with New York-based Travers O'Keefe, has seen dealers unwilling to part ways with good employee coverage despite turbulent times and rising health insurance rates. "It's not what you would expect to see, especially when compared to other industries," Hogan says.

Rather, dealer customers of Travers O'Keefe, which the Northeastern Retail Lumber Association endorses, are looking to keep a quality workforce by maintaining quality health insurance programs. "The easiest way to effect pricing relief is to switch carriers," Hogan says, noting a trend common among many employers. "But we see dealers looking out for their employees. What makes this industry interesting is there are few new entrants; they tend to be mature companies," Hogan adds. "Given the pressures of running these businesses, including rising fuel costs, they still have to pay their employees, and in virtually every case I've dealt with, they are offering solid employee benefit programs."

Prices are not always the be-all, end-all answer to a dealer's insurance needs. Advises Kerr: "Rather than focusing on short-term savings, dealers should focus on partnering with a carrier that is committed to the marketplace and offers help in reducing losses through effective safety and risk management programs."

Additionally, dealers should be diligent in conducting annual reviews of their coverages, limits, and exposures. For instance, most property forms either have separate insuring limits for building and personal property per location or a blanket limit per operating location. By blanketing both building and property for all operating locations, the dealer can eliminate coverage shortages.

"Dealers will want to make sure they have adequate limits for both their buildings and their contents, and make sure they are not subject to a possible co-insurance penalty," Kerr says.

–Andy Carlo