New Challenges in 2024 Restaurant Insurance Market
Restaurant operators nationwide face a new challenge to their bottom line in the form of increasing rates for property and casualty insurance. However, unlike increases in labor and food costs, insurance is an area operators have a fighting chance to control by following a few simple strategies.
First, it’s important to understand the current drivers of insurance inflation. Property claims, primarily for weather-related events like wind and hail, are increasing at an unsustainable pace. At the same time, a rising concern of “nuclear verdicts” – legal judgments where injured parties are awarded astronomical awards at trial – places carriers in the position of being forced into settling questionable claims they might have defended in years past.
These factors have driven a number of insurance carriers out of the restaurant market altogether and forced the rest to take substantial rate increases. Underwriters are now in a position of being able to pick and choose the best risks to quote, and the ones with the best rates will unsurprisingly, usually be the most selective.
Utilizing an independent insurance agent that knows the restaurant industry and works with a wide variety of restaurant markets is always the first and most critical step. But it’s more important than ever to make sure the risk profile of your restaurant is as attractive as possible to underwriters.
Insurance Carriers are Conducting More Physical Inspections. Be Sure Your Restaurant Inspects Well:
- Confirm fire suppression (Ansul) system and all handheld extinguishers are serviced and properly tagged by your fire system contractor.
- Hood and ducts should be professionally steam cleaned every three months. Be sure your contractor places a sticker on your hood showing the date of last cleaning.
- Ensure boxes or other flammable items are stored at least 36” away from all HVAC or electrical equipment, especially water heaters.
- Ensure electrical boxes are clean, have a working door and that there are no missing or damaged breakers.
- Place non-slip mats by entrances and self-service drink stations.
- Ensure fryer filters are clean and properly placed with no gaps.
Review the Terms of Insurance Program in Light of Increased Rates:
- Consider a higher property deductible. This will reduce your premium up front and eliminate smaller claims which cause your loss history to look less favorable to underwriters.
- Review coverage limits for your building and contents to make sure they are sufficient in light of recent inflation. Underwriters prefer to write risks that are adequately insured.
- Review the additional coverages included on your policy with your agent. Ask how much premium is being charged for ancillary items like Utility Failure or Spoilage and assess whether the coverage is needed.
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- Insurance carriers often elect to reduce their exposure to restaurant risk, especially in a hardening market, by raising rates. The best way to make sure you are with a competitive carrier is to get competitive quotes.
- Contact an agent that specializes in the restaurant industry 30-60 days before your next renewal and make sure your current carrier is still competitive.
