A recent survey of Australian attitudes towards coffee found that one in four “cannot survive the day without it.” The sheer number of cafes in cities and towns suggests insurance opportunities for brokers. More than 90% of them are also independently owned and often located in unique properties that lend themselves to a broker’s risk managing expertise.
“For cafés, brokers should pay close attention to fire risks — particularly around cooking equipment and grease traps — as well as the housekeeping and maintenance around those areas,” said Peter Takos (main picture), CEO of Halo Underwriting.
His Sydney-headquartered agency in York Street is in a heartland of the nation’s coffee culture. Cafes are among the wide range of businesses his brokers find covers for.
One advantage for brokers arranging the insurance covers for a café, he suggested, is that insurers don’t expect an overly complex risk management survey like they might for other businesses.
“It doesn’t need to be a full-scale engineering survey — just a solid understanding of operational exposures and controls,” said Takos.
Other risk management considerations for brokers and their café clients are fire-suppression systems, he said, and ensuring the regular cleaning of exhaust ducts.
“From a liability perspective, floor surfaces, spill management procedures and any outdoor seating areas also deserve close review,” said Takos.
These public liability risks are often the source of any insurance claims. Another potential risk is food poisoning – for example, from expired milk – covered by product liability insurance. However, industry stakeholders say it is important to check the definition of a product in the insurance policy wording.
For many SMEs, including café owners, the current soft market has widened insurance options and delivered discounts on premiums.
“In a soft market, brokers face increased competition, which often leads to downward pressure on pricing,” said Takos.
However, he suggested brokers need to keep a close eye on the terms in insurance contracts.
“While this [soft market] might seem like a win for clients, it can result in carriers broadening terms or reducing premiums to retain business – sometimes at the expense of underwriting discipline,” said Takos.
He said this can also create challenges for brokers trying to ensure long-term placement stability.
“Another issue is the increased complexity in differentiating between meaningful coverage and superficial pricing wins, making it harder for brokers to advocate effectively for the right policy over the cheapest one,” said Takos.
The Halo underwriter is also seeing soft market impacts on his brokers’ submissions.
“We're seeing a noticeable lift in ‘shopping around’ – brokers are marketing accounts more frequently, even those with minimal change in risk profile, simply because the market allows it,” he said.
Takos said more brokers are also pushing for extended coverage or higher sub-limits with little or no premium increase. He also suggested a warning to brokers around the quality of their submissions.
“In some cases, we’re receiving more rushed or lightly prepared submissions, as brokers manage higher volumes in pursuit of competitive quotes,” he said. “While understandable, this can delay decision-making or result in suboptimal terms for the client.”
Extreme weather events in Brazil and Vietnam, two major coffee-producing countries, have reduced crop yields and diminished bean quality. These supply disruptions have caused international coffee bean prices to reach record levels.
As prices soar, small coffee plantations are multiplying in Australia. According to Southern Cross University there are about 50 growers across the east coast’s tropical and subtropical areas. Scientists at the university are trialling dozens of coffee trees to determine which varieties have potential for large-scale local production.
Are you a broker with clients who own cafes? What risk management and insurance challenges have you noticed? Please tell us below
