Burns, burglary and bouncers - when it comes to insuring small and medium-sized businesses, those in the hospitality industry require a certain level of bravery, according to an MGA-based expert.
Doreen Teoh, senior underwriter at South Western Insurance Group Limited, says that given the difficulty of underwriting small restaurants, pubs and clubs, many domestic market insurers would rather not deal with the complexities.
“The losses are quite high due to cooking, slips and falls,” she says. “They’re trying to get away from the restaurant operations – but some of them are brave enough to come back in.”
She emphasizes that brokers are instrumental to ensuring such businesses are outfitted with proper coverage, as restaurant owners are often tempted to cut price corners.
“It’s very price sensitive - even if you’re up by $200 or $300, a lot of clients will go with the cheaper one,” she says. “They’d rather be without some coverages so insurance becomes affordable for them.If you’re a small business owner, it’s a personal loss if you don’t have that coverage – so they’ll often just go with the basics.”
While business owners are keen to acquire necessary liability, contents and business interruption coverages, Teoh says crime coverage - which can cover incidences ranging from petty employee theft, to a mugging of the day’s deposits while en route to the bank – is often passed over by mom and pop shops.
“They don’t want to buy crime coverage if they are small,” she says. “With large restaurants it’s more common, because it will cover them for loss of cash or employee dishonesty. But when you have a small – say 10 – staff and you know them, you normally wouldn’t rely on that coverage because everything is based on trust.”
She adds that it’s especially important for establishment such as nightclubs to ensure they have proper liability, in case physical incidents escalate.
“I have done a lot of nightclubs and adult entertainment, and I think the minimum that they should carry in liability is $5 million,” she says, adding in Canada the concern is less about gun violence and more regarding security and bouncer staff hired by the club – a need a smart broker will be sure to identify.
“It’s not so much the shootings because you’re checked and patted dowd; trying to get a gun into a nightclub is difficult – but you never know these days,” she says. "But sometimes the bouncers will take it outside, or you’ll see two patrons arguing and they break it up – sometimes the bouncers can stop the fight, or in the midst of it, they may hurt someone.”
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