From the General Manager

Pubs Dealt Insurance Cost Blow

IAN HORNE – AHA|SA GENERAL MANAGER

WATCH VIDEO: https://youtu.be/_Konw7YYQ8g

Recent media reports suggest operators have been ‘blindsided by exorbitant insurance’ increases. Publicans across South Australia and in fact the nation reported similar issues, with operators concerned for the future of regional pubs like theirs, and the flow-on effects in communities, with the pubs a vital part of the local economy.

In some instances, new quotes have more than doubled what operators were paying just two or three years ago, leaving them facing closure. Such is the scale of the problem, that some operators have called for the government to exercise tighter control over the insurance industry, or even to step in to offer its own coverage of regional venues.

The AHA|SA is acutely aware of this issue and it’s not a new problem.

Insurance costs have been rising year on year, and unfortunately, it’s not just the regional pubs, but every hospitality venue. Every type of insurance has gone through the roof.

Hospitality venues are no different to other businesses that must have public liability insurance and adhere to health and safety rules.

However, education within the insurance industry is crucial to reducing costs, because many of the assumptions about hotels and hospitality industry are inaccurate and are unfair. Not every hotel is the same!

The AHA|SA believes there is a double standard in play, with insurance companies placing unfair costs and constraints on hospitality venues – particularly those in rural areas that are more at risk of natural disaster.

And the issue runs deeper.

There’s no competition, insurance companies are mostly using the same underwriter. So while we may see many different insurance brands, they’ll be going to their underwriter who might say that they won’t insure a certain type of property.

FACTORS AFFECTING HOTEL INSURANCE

• Reduced number of insurance companies willing / able to insure Hotels (particularly country)

• Lack of competition has created a “take it or leave it” attitude by insurers, rarely are they open to negotiation

• Uncontrollable increases in premium rates, excesses and in some cases reductions in cover

• Some insurers won’t quote on some risks without a formal risk survey being done, at the cost to the client!

• Insurers are dictating who they will insure and under what conditions they will insure them

• Risk recommendations are no longer a “nice to have”, they are a ticket for admission!

• For larger risks, insurers looking to reduce their capacity, require the involvement of a co-insurer to take some of the risk.

CHALLENGES FOR COUNTRY HOTELS

• Insurers concerns mainly centred around property insurance; liability still quite easy to source

• The age of the hotels, including heritage listing impact

• Overall condition and lack of maintenance (e.g. electrical rewiring etc.)

• Construction concerns (particularly wooden floors)

• Lack of permanently manned fire brigade, many towns only relying on CFS / Volunteers

• Inadequate fire protection on site (sufficient extinguishers, hose reels and in particular fire detection)

• Inadequate sums insured and rebuilding periods for Business Interruption

• Following COVID-19 in particular operators have left so the hotel is unoccupied for a long period of time

The AHA|SA is actively working on remedies to these issues with our endorsed broker AON.

These could include the potential of “group” buys but most likely educating members on how to reduce their risk, adopt strategies to educate their insurer and give them comfort and undertaking regular risk surveys, and adjusting expectations on what excess could assist.

Here are some strategies to consider.

• Give your broker plenty of time, for renewals start early and get information back to your broker promptly, the more time, the better the outcome – you need at least a month.

• Complete any risk recommendations identified promptly.

• Provide as much detail to your broker as possible regarding risk mitigation procedures - a positive story showing an insured that takes their risk seriously is a lot better chance of obtaining / maintaining cover.

• Beware of moving insurance program too often. You might have a good deal the first year but after that the insurer may withdraw from cover, and the previous insurer may not take you back.

• Look to secure a long term agreement, a longer term than the standard 12 months to try and lock in the pricing and insurer for longer.

• Consider retaining more of the risk yourself in the way of a larger excesses.