Hospitality Industry Faces Growing Liability Risks Due to Staffing Shortages
Canada’s hospitality industry continues to grapple with persistent labour shortages, leading to increased liability risks and insurance challenges. According to Jake Hovinga, Commercial Lines Manager at Mitch Insurance, the sector’s struggle to fill roles is not only straining operations but also contributing to higher insurance rates.
“We’ve somehow navigated through COVID, and the sector is now mostly in rebuilding mode, trying to strive again,” Hovinga explained. One of the most significant impacts of staffing gaps is on the liability side. With fewer qualified workers available, hospitality operators often have no choice but to hire less experienced employees or overextend their existing staff. This creates a high-pressure work environment where training may be rushed or skipped altogether, leading to a rise in operational mishaps.
Training Gaps Create Hidden Exposures
The erosion of basic training practices is a particular area of concern. New hires brought in quickly may not receive adequate instruction on foundational risk management tasks, such as maintaining incident logs or understanding standard documentation protocols. “There can be all sorts of liability claims if you have a stressed operation,” Hovinga warned.
Underwriters Take Notice
While insurers haven’t yet introduced specific exclusions or deductibles tied directly to staffing issues, Hovinga noted that the consequences of poor staffing are often visible in an organization’s loss history. A spike in claim frequency and payout severity can immediately affect renewal terms, premiums, or even the willingness of a carrier to renew coverage. Underwriters are becoming increasingly scrutinous, asking detailed questions about management practices, employee turnover, and training programs.
Full-Service Restaurants Hit Hardest
Hovinga emphasized that full-service, dine-in restaurants are particularly vulnerable due to their complex operational needs. Staff shortages in any area can cause cascading issues, increasing the likelihood that less experienced staff will be forced into critical roles. In contrast, takeout-focused establishments tend to face fewer staffing challenges, as they often rely on smaller teams and can adapt more easily with the support of third-party delivery services.
Looking Ahead
While the broader property and casualty market is beginning to soften, relief hasn’t fully reached the hospitality sector. Premiums remain relatively flat, and in cases where businesses see decreases, it’s often due to reduced revenue rather than improving conditions. “Some may be getting price decreases, but unfortunately, it’s at the detriment of their business not being as successful,” Hovinga said.
As the industry continues to navigate these challenges, demonstrating good risk management practices and loss experience will be crucial for hospitality operators to secure favorable insurance terms. By showing underwriters evidence of robust training programs, low employee turnover, and effective management practices, businesses can better position themselves for success in a challenging insurance market.
