The current state of the business insurance marketplace

Due to claims volume and overall industry performance, the insurance market for hospitality businesses was challenging prior to the onset of COVID-19, with further deterioration of the market since the pandemic began. For business owners in the hospitality space, this translates to a turbulent insurance environment where increasing rates and coverage concessions are the new norm. Carriers are focused on both property and casualty/liability lines of coverage in seeking to return to underwriting profitability:

  • Property: As a whole, the property market is sparing almost no industry, including hospitality. 2020 has brought another historical west coast wildfire season, the third straight year in which insurance claims will exceed $12 billion for these events alone. Last, civil unrest throughout major cities this summer was declared a catastrophe by insurance regulators. In all, policyholders can expect rate increases of 5-50% for well-performing accounts, depending on characteristics.
  • Liability: Insurers are actively seeking to reduce excess liability/umbrella liability capacity in their underwriting while maintaining or increasing rates year over year.  Put simply, carriers are offering lower limits for pricing equal to or greater than last year. Many hospitality business owners are facing a difficult decision to purchase less insurance or pay a sometimes significantly increased premium year over year. Carriers primarily point to increasing jury awards for bodily injury claims across the United States.
  • Management Liability/Employment Practices: Given the economic uncertainty following the coronavirus, many management liability carriers have drastically changed pricing and coverage offerings. Given these carriers pay claims involving allegations relating to discrimination and wrongful termination, the level of unemployment following the onset of the pandemic instilled a much higher level of caution from these underwriters. Of note, carriers are asking hospitality businesses to carry a higher deductible/retention for these lines of coverage, and in some cases, are seeking to add specific coronavirus layoff exclusions to policies. Finally, many underwriters are asking for thorough coronavirus questionnaires to be completed to consider new or renewal business.

This article was published in collaboration with Parker, Smith & Feek, our program partner for business insurance. Check out our program here and see how we can help lower your rates.