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June 29th, 2012
Fiorito On Insurance
Market Conditions Signal Increased Rates and Shrinking Availability of Coverage
Restaurants and other food service business face upcoming challenges due to gradual, but severe market changes ahead. Conditions show that insurance rates could increase and coverage may be difficult to obtain; now is the time to turn to your professional to be as prepared as possible for what’s to come.
The insurance market has been cyclical, characterized by prolonged soft market conditions followed by short term hard market spikes. The insurance industry encountered a number of challenges in the past few years. Belts are tightening and the situation is unpredictable.
The sluggish economy has made it difficult for the property and casualty industry to realize the investment returns of the past. Premium dollars have gone down while claims have generally trended up. For the first time in a half decade, premium rates for property, liability and workers' compensation insurance have begun to increase as of late last year. We're moving into a seller's market and buyers must be more aggressive to protect their own interests and their insurance advisors must be more proactive in helping them secure coverage. In a seller's market--known as a 'hard market' in insurance industry parlance--the top concerns facing clients are increased prices and decreased availability of coverage.
For example, a client was with a smaller broker who was dealing with a “front-line company” and due to market changes, the company made the decision to no-longer write restaurants. Hence, the broker requested a 30 day extension of their client’s policy only to wind up at a dead end; as they did not have the contacts of other companies that were still writing restaurants at competitive prices. The client then turned to another broker who specialized in restaurants and had relationships with companies that were only slightly affected by the market changes. Due to these relationships and ongoing restaurant programs, the broker successfully got coverage for the client at the most competitive price during this market climate.
The most important thing restaurants and other food service businesses can do today is be proactive. Don't wait for insurers to come in with price increases. Work with a broker that focuses on the restaurant industry and has the right expertise to help you navigate through potential increases ahead.
Making the most of a strong buying position depends on being prepared when you sit down to negotiate coverage. Reviewing your history also enables you to set up loss control and safety measures that will make you a better risk in the eyes of underwriters. Talk to your insurance advisor to learn how a gap analysis can provide valuable underwriting information to control risk and reduce losses.
Here are some recommendations to help you shape up your safety program:
- Understand and address key exposures - Poor ergonomic design, slip and falls, inadequate machinery safeguarding, or lack of proper personal protective equipment could be significant drivers of workers' compensation costs, if not addressed. Review these and other aspects of operations to prevent frequent and high severity losses.
- Learn what you don't know - Develop internal resources or hire a safety professional to help you identify potential risks and ensure that you are in compliance with OSHA requirements.
- Design safety into your business - Focus on redesigning processes to remove hazards where possible.
Restaurants and Food Service companies that manage their risks well will be better able to navigate a difficult pricing environment as it emerges. Take the time to gather information about the current state of your business and understand your own risk profile before you renew your insurance coverage. Make sure you have an insurance professional at your side who understands your company and your industry.
Robert Fiorito, serves as Vice President, Hub International Northeast., where he specializes in providing insurance brokerage services to the restaurant industry. As a 20-year veteran and former restaurateur himself, Bob has worked with a wide array of restaurant and food service businesses, ranging from fast-food chains to upscale, “white tablecloth" dining establishments. For more information, please visit www.hubfiorito.com
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