Insurance will only pay out actual value (i.e. what it cost to produce those items). They’ll still miss out on all the potential profit from selling those goods.
They’ll miss it on some things for sure, but if there were sunk costs or put performing products, that money can be reinvested in better performing items. I’m sure I’m an active, perfectly running warehouse, having to replace every item just with an at cost payout would be annoying, but there’s also the possibility that the payout gets them out from under old stock they would otherwise have lost even their costs on.
Well insurance only pays out on the value the retailer bought their inventory for, not the sticker price. Yeah they’re getting a lot of money but rebuilding inventory and a new warehouse is probably more money. And Insurance companies might start considering underpaid employees as an insurance liability.
They turned the fire suppression system off once the firefighters arrived, reportedly. I hope the insurance company denies their claim. Seems like an act of God to me.
And require more workers who, after a certain amount of time underpaid, might very well be too indifferent to notice certain systems were down when another one of these suckholes goes up in flames. Dunno. Could be.
Assuming it wasn’t a company owned warehouse, the landlord will probably be making an argument that their disgruntled employee makes the fire their fault.
They probably didn’t make money. Insurance won’t cover the retail value of unsold product, just the cost to make it. The building owner can get replacement cost for the building, but still loses out on rent.
The insurance company will raise rates to compensate for the payment, but it’s probably enough to hurt them for a quarter too.
Maybe, or maybe sales have been shitty and instead of product sitting on the shelves this let’s them write stuff off and pocket cost of materials.
Just saying there’s more to it than what it would mean to you or i if we had all our eggs in one basket and had to count on an insurance payout to keep above water. It’s likely not a windfall for them, but i wouldn’t be surprised if one warehouse fire is much more than a line item in a meeting or two, or even good news for some department or other if they were overextended in stock or something. A second or third big loss like that, though, would probably be required before anyone important is motivated towards any kind of inspection based on the bottom line though.
Likely, but self insurance is a thing for a reason, if it was cheaper to insure than self insured they’d probably do that, but they have that risk wether it was arson or an accident and if one warehouse would actually hurt them, they wouldn’t be self insuring.
Any way you look at it, unless it hits them enough that they have to be concerned about the price of champagne they’re filling their swimming pools with, ‘one’ incident isn’t going to make them rethink their whole salary structure. At this rate it’s shifting from one budget line item to another, and they’ll probably just take it as an opportunity to invest in two warehouse to replace the one that went up.
That’s thinking of it way too much like an ideal one for one transaction. Insurance companies don’t based their profits on how much the stuff costs to replace directly, they make money based on the cost of payouts compared to premiums. If they can get enough clients to pay the premiums, they could pay 10x costs and it would make exactly 0 difference to their bottom lines.
It’s actually the reverse in many situations, insurance exists to help recoup costs in an emergency and if you have a policy that doesn’t pay enough to recover from a loss then you are underinsured, and the only way to ensure that is to buy a policy where you’re at least slightly over insured. That’s why homeowners insurance is based on replacement cost, not on the cost when you bought it.
Business insurance admittedly is different, but to be fully covered, you are also getting replacement costs for things like stale product, depreciated equipment (which depreciates differently for insurance purposes than for taxes and accounting) and things like building and infrastructure which are at replacement costs vs purchased prices.
Basically insurance companies are less concerned with having to make absolutely sure everyone gets as screwed as possible on every individual payout, than they are making sure they’re collecting premiums much faster than they are having to payout at all. Writing every policy so that no one ‘ends up with a plus’ is far less profitable than making sure they are selling policies that are useful. Of course they also want to pay out as little as possible, but that is not nearly as attainable as calculating the likelihood of risks and raising rates whenever possible.
I dunno. I think that insurance will usually only cover Replacement Value, so if it cost them $20 per item and they sold it for $25, they could only claim $20. Then compounded with failure to meet contracts and updated cost of production (may cost $21 to make now) I doubt that they made money.
You’re right that the cost of insurance is where the real hurt will be - see ship insurance in the Strait
We’ll there are lots of kinds of insurance, a manufacturing and distribution company isn’t going to have the same insurance you buy as a homeowner. I would expect they are covered for whatever they calculated into their cost/risk contract?
That said, i maybe know enough to know most of what i don’t know, but far from inside into on the topic.
Certainly could be, and doubtful that they are fully insured against all contingencies… Possible they are underinsured against for intentionally, since they could conceivable think it’s low enough risk that it’s cheaper to allow a loss even as big as this to fall under operating losses for rare or occasional incidents like this.
Once a company is big enough even subjectively huge losses are simply a calculated risk. Do you pay a million dollars a year for 10 years to subsidize something that might cost 10 million dollars that only happens every 20 years, or do you bank on it not happening and write it off as a bad quarter if it happens?
Way more goes into those calculations than one might think, and if they’re self insured there’s just a budget item that takes a hit for this and someone gets chewed out it fired for being the one that gambled this way… While someone else loses a promotion if they signed off the other direction and paid for a million dollar policy they didn’t need.
Insurance is all mostly the same regardless of type. You aren’t going to find a company willing to take the counter party risk of you losing a claimed retail value of a product, especially a commodity. If it was collectables or bespoke crafts then it would likely be different.
Sounds like you’re more familiar with the industry than i am, but my understanding is that insurance policies are written based on what you want to cover and the value is reflected in the premiums. Companies often have an assumed product, returns and stale inventory loss calculated in. Possibly just recuping costs for ‘all’ inventory could be a plus for the bottom line, especially if there were anything like a rider for opportunity costs. The building itself could have been out of step on depreciation and now moved up with a more modern facility in planning.
May not be the same situation but plenty of business owners have considered it a windfall having insurance pay out on replacement costs for things they you weren’t utilizing and an opportunity to put up a bigger shop and roll the payouts into more modern supplies and equipment rather than gathering dust on sunk cost stuff they never would have gotten their money out of otherwise.
If you consider insurance payouts a windfall there’s probably fraud involved. Insurance generally doesn’t pay more than a thing is worth because of fraud. It’s a little more loose with things that can’t easily be valued, like art or a life.
Yes, but relatively often you can get underwater on the cost of stuff that is sitting there no longer making you money. If half your warehouse is full of stuff that isn’t moving or is outdated product, then recovering even the cost of making it can be a windfall. The amount of stuff a company has to write off, dispose of or clearance for pennies can make an insurance payout a win.
Things don’t always depreciate at their started number on paper, especially when using certain completely valid forms of accounting. Not saying this is certainly what is happening at an active warehouse, but there’s a whole lot more to it than thinking everything sitting there was absolutely going to sell at a good profit. Equipment and structures, for instance, often pay out at replacement value which can easily be more than you’d get for them at disposal rates.
Oh, for sure that’s part of the problem, they definitely have their own issues, but they are more like a layer. Insurance itself isn’t a bad thing, but like basically ever industry they suffer from greed and loopholes too.
Except with insurance they probably made money. The trick is for it to happen often enough that insurance gets too expensive.
Insurance will only pay out actual value (i.e. what it cost to produce those items). They’ll still miss out on all the potential profit from selling those goods.
They’ll miss it on some things for sure, but if there were sunk costs or put performing products, that money can be reinvested in better performing items. I’m sure I’m an active, perfectly running warehouse, having to replace every item just with an at cost payout would be annoying, but there’s also the possibility that the payout gets them out from under old stock they would otherwise have lost even their costs on.
Well insurance only pays out on the value the retailer bought their inventory for, not the sticker price. Yeah they’re getting a lot of money but rebuilding inventory and a new warehouse is probably more money. And Insurance companies might start considering underpaid employees as an insurance liability.
That’d truly be righteous but I suspect they’ll start expecting more surveillance, security, and fire systems instead.
They turned the fire suppression system off once the firefighters arrived, reportedly. I hope the insurance company denies their claim. Seems like an act of God to me.
Which, although they don’t improve conditions for the workers, are also expensive
And require more workers who, after a certain amount of time underpaid, might very well be too indifferent to notice certain systems were down when another one of these suckholes goes up in flames. Dunno. Could be.
automate
Assuming it wasn’t a company owned warehouse, the landlord will probably be making an argument that their disgruntled employee makes the fire their fault.
They announced they’re moving their entire operation out of CA, lmao.
Wow, its like… direct action works, when complaining loudly and formally doesn’t!
Whaaaat, that’s crazy lmao
Funny, if they weren’t already planning that, seems like an awfully knee jerk reaction based on a single incident.
They probably didn’t make money. Insurance won’t cover the retail value of unsold product, just the cost to make it. The building owner can get replacement cost for the building, but still loses out on rent.
The insurance company will raise rates to compensate for the payment, but it’s probably enough to hurt them for a quarter too.
If it were profitable to burn down a warehouse, there’d be a whole industry around it
If you’re in the warehouse building industry, them burning down can be very profitable…
Maybe, or maybe sales have been shitty and instead of product sitting on the shelves this let’s them write stuff off and pocket cost of materials.
Just saying there’s more to it than what it would mean to you or i if we had all our eggs in one basket and had to count on an insurance payout to keep above water. It’s likely not a windfall for them, but i wouldn’t be surprised if one warehouse fire is much more than a line item in a meeting or two, or even good news for some department or other if they were overextended in stock or something. A second or third big loss like that, though, would probably be required before anyone important is motivated towards any kind of inspection based on the bottom line though.
I’ll bet you that Walmart is selfinsured, and this absolutely hits them directly.
Likely, but self insurance is a thing for a reason, if it was cheaper to insure than self insured they’d probably do that, but they have that risk wether it was arson or an accident and if one warehouse would actually hurt them, they wouldn’t be self insuring.
Any way you look at it, unless it hits them enough that they have to be concerned about the price of champagne they’re filling their swimming pools with, ‘one’ incident isn’t going to make them rethink their whole salary structure. At this rate it’s shifting from one budget line item to another, and they’ll probably just take it as an opportunity to invest in two warehouse to replace the one that went up.
Insurance companies too exist to make money. If their customers generally went plus, the insurance company would go out of business.
That’s thinking of it way too much like an ideal one for one transaction. Insurance companies don’t based their profits on how much the stuff costs to replace directly, they make money based on the cost of payouts compared to premiums. If they can get enough clients to pay the premiums, they could pay 10x costs and it would make exactly 0 difference to their bottom lines.
It’s actually the reverse in many situations, insurance exists to help recoup costs in an emergency and if you have a policy that doesn’t pay enough to recover from a loss then you are underinsured, and the only way to ensure that is to buy a policy where you’re at least slightly over insured. That’s why homeowners insurance is based on replacement cost, not on the cost when you bought it.
Business insurance admittedly is different, but to be fully covered, you are also getting replacement costs for things like stale product, depreciated equipment (which depreciates differently for insurance purposes than for taxes and accounting) and things like building and infrastructure which are at replacement costs vs purchased prices.
Basically insurance companies are less concerned with having to make absolutely sure everyone gets as screwed as possible on every individual payout, than they are making sure they’re collecting premiums much faster than they are having to payout at all. Writing every policy so that no one ‘ends up with a plus’ is far less profitable than making sure they are selling policies that are useful. Of course they also want to pay out as little as possible, but that is not nearly as attainable as calculating the likelihood of risks and raising rates whenever possible.
I dunno. I think that insurance will usually only cover Replacement Value, so if it cost them $20 per item and they sold it for $25, they could only claim $20. Then compounded with failure to meet contracts and updated cost of production (may cost $21 to make now) I doubt that they made money. You’re right that the cost of insurance is where the real hurt will be - see ship insurance in the Strait
We’ll there are lots of kinds of insurance, a manufacturing and distribution company isn’t going to have the same insurance you buy as a homeowner. I would expect they are covered for whatever they calculated into their cost/risk contract?
That said, i maybe know enough to know most of what i don’t know, but far from inside into on the topic.
They are probably “self insured”
Certainly could be, and doubtful that they are fully insured against all contingencies… Possible they are underinsured against for intentionally, since they could conceivable think it’s low enough risk that it’s cheaper to allow a loss even as big as this to fall under operating losses for rare or occasional incidents like this.
Once a company is big enough even subjectively huge losses are simply a calculated risk. Do you pay a million dollars a year for 10 years to subsidize something that might cost 10 million dollars that only happens every 20 years, or do you bank on it not happening and write it off as a bad quarter if it happens?
Way more goes into those calculations than one might think, and if they’re self insured there’s just a budget item that takes a hit for this and someone gets chewed out it fired for being the one that gambled this way… While someone else loses a promotion if they signed off the other direction and paid for a million dollar policy they didn’t need.
Insurance is all mostly the same regardless of type. You aren’t going to find a company willing to take the counter party risk of you losing a claimed retail value of a product, especially a commodity. If it was collectables or bespoke crafts then it would likely be different.
Sounds like you’re more familiar with the industry than i am, but my understanding is that insurance policies are written based on what you want to cover and the value is reflected in the premiums. Companies often have an assumed product, returns and stale inventory loss calculated in. Possibly just recuping costs for ‘all’ inventory could be a plus for the bottom line, especially if there were anything like a rider for opportunity costs. The building itself could have been out of step on depreciation and now moved up with a more modern facility in planning.
May not be the same situation but plenty of business owners have considered it a windfall having insurance pay out on replacement costs for things they you weren’t utilizing and an opportunity to put up a bigger shop and roll the payouts into more modern supplies and equipment rather than gathering dust on sunk cost stuff they never would have gotten their money out of otherwise.
If you consider insurance payouts a windfall there’s probably fraud involved. Insurance generally doesn’t pay more than a thing is worth because of fraud. It’s a little more loose with things that can’t easily be valued, like art or a life.
Yes, but relatively often you can get underwater on the cost of stuff that is sitting there no longer making you money. If half your warehouse is full of stuff that isn’t moving or is outdated product, then recovering even the cost of making it can be a windfall. The amount of stuff a company has to write off, dispose of or clearance for pennies can make an insurance payout a win.
Things don’t always depreciate at their started number on paper, especially when using certain completely valid forms of accounting. Not saying this is certainly what is happening at an active warehouse, but there’s a whole lot more to it than thinking everything sitting there was absolutely going to sell at a good profit. Equipment and structures, for instance, often pay out at replacement value which can easily be more than you’d get for them at disposal rates.
Is that a lack of fire suppression equipment? Insurance won’t like that at all. 😃
If I understand you correctly, you’re saying that the insurance industry is the underlying problem?
Oh, for sure that’s part of the problem, they definitely have their own issues, but they are more like a layer. Insurance itself isn’t a bad thing, but like basically ever industry they suffer from greed and loopholes too.