The hospitality insurance market is undergoing significant changes that are making it tough for bar and restaurant owners. With fewer insurance carriers willing to take on risks, premiums are soaring, and underwriting standards are becoming stricter. David DeLorenzo, the CEO of Ambassador Group Insurance, points out that many smaller brokers who specialized in hospitality insurance are retiring, leaving business owners with less personalized service and fewer options.
This shift in the market is particularly challenging for establishments that once had a reliable set of insurance choices. Many owners are now struggling to find carriers willing to underwrite their policies. In states like Arizona, where lawsuits are common, insurance companies are becoming increasingly cautious. DeLorenzo noted that the rise in lawsuits and large settlements is making insurers nervous.
The tightening of underwriting standards means that any establishment with even a hint of risk faces significant hurdles. For instance, venues with dance floors or late-night service are seen as high-risk, leading to difficulties in securing coverage. Lease agreements are adding to the pressure, with many bars and restaurants now required to carry umbrella policies with high limits, which can significantly increase costs.
Even when policies are approved, there’s a growing trend of "back-end underwriting." This means that insurers might approve a policy only to cancel it weeks later, often leading to sudden and steep premium increases. Business owners may find themselves scrambling for new coverage, sometimes facing jumps of 30% to 40% in costs.
To cope with these challenges, DeLorenzo suggests that hospitality owners focus on risk management. This includes implementing strict safety measures and investing in staff training to minimize risks before they turn into claims. He also recommends considering higher deductibles to help offset rising premiums.
Negotiation with landlords is another key strategy. Many landlords, often large investment groups, may not fully understand the impact of high insurance requirements on their tenants. DeLorenzo encourages owners to negotiate these terms to reduce their insurance burdens.
Despite the current difficulties, DeLorenzo is hopeful that technology will help improve the situation in the long run. He believes that advancements in camera technology and other tools could allow businesses to document incidents in real-time, which could lower claims and encourage insurers to return to the market with better rates.
After 25 years in the hospitality insurance field, DeLorenzo is committed to advocating for changes that will stabilize the market. He emphasizes the need for a more nuanced approach to underwriting, one that considers individual business practices rather than just relying on broad data trends. For now, hospitality owners are facing an increasingly tough insurance landscape, but DeLorenzo believes that improvements are on the horizon.