How to Prepare for Hotel Insurance in a hard market
Increasing premiums, tightening terms and conditions in the Wordings, higher excesses and a limited number of insurers available, on top of what has already been an incredibly challenging period for hospitality industry – how hard is it now to find the right hotel insurance? It is an issue that has been under incredible spotlight for hospitality business owners, and one where scrutiny needs to be carried onwards to renewals.
What is a hard market?
Essentially it is an upswing in the insurance market cycle when premiums increase. There is a reduced supply of insurance as some insurers exit the sector. There also becomes less flexibility with underwriters that remain in the sector and increases in policy excesses. Inevitably there will also more scrutiny in claims as insurers have tighter controls over their costs.
The extent that your hotel will be affected by the hard market will vary depending on your risk profile, claims record, planning, risk management and of course how you shop around and what broker you go with and their relationships with underwriters.
Why is it a hard market for hotel insurance?
Much has been documented about insurance issues arising from the virus. With many hotels closed throughout the world, many have sought claims under their business interruption policies. Whist, in the UK and across the world , the validity of the claims and the amount of losses are still ongoing, the damage is already severe. It is a market under pressure, and has been for some time. In many areas, the impact of the pandemic merely compounded what was an exceptionally tight space to begin with.
What can be done to get best hotel insurance cover?
The hotel industry was one of the first industries affected when Covid 19 abruptly put an end to travel and may be one of the last to recover. Whilst many UK based hotels will see a rise in profits due to staycations , this will not be the case for many inner city hotels that depend on thriving tourism.
Whilst many high profile cases are still continuing, In response to Covid 19, insurers have of course added a communicable disease exclusion to policies. At the very least, you should have discussed with your broker a return premium to reflect the dramatic changes in projected trading.
Many insurers are also implementing higher exclusions than previously. Insurers have already begun to insist on levels of excesses beyond clients appetite and often terms and conditions have changed in the wording. In response to this, a client may look to mitigate increased costs by reducing areas of cover such as changing the business interruption indemnity period from 36 to 12 months. This is not a measure to be taken lightly and one to be advised against. In what has already been a devastating period, if a hotel would have a claim, they may not have enough time to rebuild its operations and recover lost customers – and this could prove fatal.
Spend some time. Spend some time finding the right insurance broker for your business. Research and see who fits well with you. Then spend time and work with them. Information is king. In a hard market, be prepared for everything to be picked apart more. It may feel like a frustrating experience but it is essential.
Assess your Turnover. This is vital to get right and keep your broker updated once policy has been placed. Whilst turnover expectations may well be lower now due to closures and limited trading – this is important to not overpay on insurance, as this is a key factor in pricing.
However, once trading picks up again, it is then of course vial to give your broker up to date figures. In a world where claims are increasingly being put under spotlight, having accurate figures for turnover throughout the policy period is paramount and more important than ever before.
Flexibility in how you approach your insurance requirements could be key. If you are willing to take on more risk than previously before, let your broker know what areas you have room for manoeuvre on. Work with your broker to break down the ratings and cost for every element of the policy. You may find you are paying a higher rate for something less important to you. Don’t just look at overall premium, ask for breakdowns and get granular with it.
If you are a multi site operator now may be the most appropriate time to consolidate your business. Build a single insurance policy that incorporates all sites and benefit from economies of scale. Have you considered insuring on a first loss basis? This may be the best time to explore your options
Should I be weary of new markets?
“We have seen many insurers exiting the market and no longer writing hospitality, or many extremely restrictive” says Director Matthew Dewen. This will naturally mean others come in and look to fill the void.
Its no doubt challenging times for all involved. The key to making the most of your insurance is to come prepared, come early, and be demanding from your broker! Be prepared to answer more in depth questions than ever before. Work with your broker to consider and work through all options up front – well ahead of key renewal dates – as there will be more that your broker can do in terms of programme design, policy coverage, structure, and choice of markets – which ultimately will have a bearing on how much premium you will end up paying.
If you wish to know more about our hotel products please see here