The hotel industry is facing a significant surge in insurance premiums across multiple coverage lines, forcing owners and management companies to bolster their risk management strategies and cost-control initiatives. Industry leaders discuss the current market conditions and approaches to securing affordable coverage.
The Current State of Hotel Insurance
Recent years have seen a consistent increase in insurance costs for hotels, with property, general liability, and umbrella premiums on the rise. Workers’ compensation remains variable, depending on loss experience. Cyber insurance premiums and coverage levels are also increasing, while property insurance, particularly for wind and hail damage from named storms, is becoming harder to secure and comes with steep deductibles.
Factors Driving Premium Increases
The main factors behind the rising costs include natural disasters, guest liability lawsuits related to human trafficking, and ADA compliance issues – both physical and digital. General liability and umbrella costs are escalating due to increased claims and larger settlements for incidents such as slip-and-fall accidents, sexual harassment, and trafficking cases.
Challenges in Insurance Coverage
The insurance market is becoming increasingly challenging, with fewer carriers writing policies and some of the less expensive options having numerous restrictions. Coverage availability is limited, and hotels often need to stack policies from multiple carriers to achieve the required coverage limits.
Impact on Older Properties
Older properties are particularly affected by the rise in insurance costs. Some insurers are refusing to write policies for older hotels, especially those with exterior corridors. When available, policies often come with numerous exclusions, including human trafficking, abuse, and molestation.
Strategies for Managing Insurance Costs
Industry experts recommend several strategies to balance insurance costs and needs:
- Prevent claims through risk management and property updates
- Implement human trafficking awareness training and security measures
- Ensure ADA compliance using available resources
- Consider Employee Practices Liability Insurance (EPLI) for ADA claims
- Work with brokers to shop around for the best rates
- Maintain a continued focus on safety and risk control programs
- Obtain multiple competitive quotes to access more carriers
The Higher Deductible/Lower Premium Strategy
Opting for higher deductibles can be a viable strategy to lower premiums, but it’s crucial not to reduce coverage amounts. Larger hotel companies can more effectively manage higher deductibles by spreading the risk across multiple properties.
The Role of Brokers in Mitigating Insurance Costs
A good broker plays a critical role in explaining coverage options, identifying suitable carriers, and securing competitive quotes. They help hotels understand what is and isn’t included in policies, potentially uncovering the need for additional specialized insurance such as cyber or human trafficking coverage.
Building Strong Broker Relationships
Hotels should seek brokers who understand their business, have good resources, and are invested in their success. Building long-term relationships with financially stable insurance carriers is essential, especially in a hard insurance market.
Brand Support for Franchisees
Franchisors can provide valuable support to franchisees by offering flexibility in required coverage levels, recommending insurance vendors, and providing training such as human trafficking certification. Early reminders about insurance expiration and assistance with ADA checklists can also be beneficial.
By adopting these strategies and maintaining strong relationships with brokers and franchisors, hotel owners and management companies can better navigate the challenging insurance landscape and manage rising premiums effectively.
