According to Kristen Skender, corporate vice president of USG Insurance Services, the hospitality insurance marketplace is currently in a state of flux.
“Our clients who have liquor sales in excess of 25% of their total sales are experiencing changes in their coverage, including lowered limits, higher rates and more restrictive policy language or coverage exclusions.”
There are a couple of factors driving this trend, Skender says. “This is due to the losses, both in frequency and severity, on this classification, coupled with fewer new
entrants of carriers and several carriers exiting this marketplace. Those who have remained committed to this industry have made adjustments necessary to remain as a coverage solution.”
She says most of the carriers USG represents have had to make some sort of adjustment over the past 12 months and plan to continue adjusting as needed.
“Currently, hospitality is one of the most competitive and hard-to-place lines of business,” adds Aimee Leahy, a first vice president at USG. “With carriers changing their appetites and available coverages so frequently, we find that we’re shopping each and every one of our renewals year after year. We have come across many carriers who jump in and then immediately out of this business due to the high loss frequency. The biggest issue is finding a steady market that the insured can stay with from year to year, without massive rate increases and restrictive coverages.”
Cyber has arrived
As is the case across much of the insurance industry right now, cyber is a hot topic of conversation in hospitality.
“More and more businesses are in the very beginning stages of … understanding their exposure in this arena, and they’re still hesitant to purchase coverage, I think, given this factor,” says John Poucher, sales manager at Abram Interstate Insurance Services. However, there’s no denying that hospitality businesses, particularly hotels, are major targets for hackers, given the huge volume of credit card transactions they process, as well as the sizable amount of personal data collected about guests. Often this personal information can be stored for extended periods of time.
In 2015, Hilton Hotels, Starwood Hotels and Trump Hotels all faced their own cyber attacks. But it’s not just the major chains that find themselves targets.
“A lot of business owners don’t really believe the peril is applicable to them and that it’s really only applicable to the Fortune 500 companies,” Poucher says. “Brokers have got to do a better job of really showing the small businesses where their exposures are, sharing loss stories of other small businesses that have been affected, and how it can really impact the financial viability that they would have ... if something like this were to happen.”
Skender adds that the cyber threats facing hospitality businesses are growing every day.
“The prevalence of these exposures increases as technology integrates into every aspect of their operation,” she says, “including online ordering/reservations, apps/mobile sites, loyalty programs, restaurants that use tablets at the table or bar for payment, or hotels with internet access through the television or touchscreens on-site.”
Public Wi-Fi networks also pose risks, as they can inadvertently facilitate hackers’ access to unsecured networks.
So how can brokers best assist their hospitality clients to manage their cyber exposures?
“Most of our data breach, cyber and network security markets provide an opportunity during underwriting for the client to learn more about their exposures,” Skender
says. “We like for our agents to not only provide a list of current technology and exposures, but also their future development plans. This allows us to not only assess with the carrier the current exposures, but also provide insight for the growth of the client’s technology infrastructure with risk management in mind.
“We work with our retail agents and carriers to provide feedback, but at this point it is still rare for hospitality businesses to recognize their risk exposures and request coverage,” she adds. “For us, education is primarily on the coverage need, in which we see influxes when large franchises or brand names are under attack, but we would like to see this become a mainstay coverage that is requested for each insured.”
Leahy agrees that education is a necessity.
“It seems that most people are under the impression that their business is ‘too small’ to be subject to a cyber threat. The reality of the situation is that anyone with a credit card machine is in danger of a cyber threat. Providing examples of threats and the actual cost of repair to the client may be a way to help them understand the severity of the situation.”
Poucher raises the importance of hospitality employees participating in training around cyber threats.
“If you look at what brokers can do to assist their customers, really it’s at the employee level where the exposure is,” he says. “We have a lot of low-wage-earning individuals that typically aren’t tech-savvy, that might be working on computers. We’re a smallish organization We’ve had cyber training focused on what we can do in terms of being preventative, being cautious and being aware of what a potential breach could look like.”
Read Part 2 here.