Safe to say that restaurants, both larger chains and smaller independents, have been one of the worst hit sectors as a result of lockdown. As some restaurants continue to operate, albeit in a limited way, many of the usual everyday risks remain. The requirement for insurance remains, and, as if the sector needed any further challenges, in a hardening insurance market, the cost of restaurant insurance premiums is increasing, in many cases not insignificantly. We take a look at why restaurant insurance premiums are increasing and what the options are for finding an alternative solution to your existing cover.
Since the forced closer to seated diners back in March 2020, the restaurant sector has been an extremely challenging sector to exist in during the pandemic. Not everyone has made it. Many restaurants have made the most of government support, and many have shown resilience and adapted to the circumstances. Recent announcements made about easing restrictions will no doubt bring relief for many restaurants, large and small alike, as some kind of normality can resume. But the costs have been massive and the challenges remain, for now.
Adapt and Overcome
Restaurants have needed to pivot and diversify to ensure that there is at least some revenue coming in. For fast food style restaurants in particular, as seated dining numbers dropped to zero takeaway sales have soared.
Technology and the emergence of takeaway services such as Deliveroo and Just Eat has meant that many restaurants have been able to get their product out the door. Covid secure, contactless deliveries has meant that consumers can still get their favourite curry, Chinese or pizza. However, for casual and fine dining establishments, heavily dependent on seated clients and neatly presented dishes, the likes of Deliveroo may not be as accessible. For these organisations, sales revenues really have hit £0. The number of Ghost kitchens being created and used has increased dramatically. If a traditional casual or fine dining establishment can keep the back of house operations going, while the front of house is closed, and have a Covid secure delivery or collection procedure, then they have the potential to trade, and perhaps survive.
Of course if a business is surviving, and trading, a number of overheads remain; staff, supplies, rent, mortgages and insurance to name but a few. The majority of the risks also remain, even if you don’t have people sat at tables.
Light at the end of the tunnel…
At the start of the pandemic, the restaurant chain, LEON, quickly adapted to the situation and made all of its 65 UK restaurants into shops. Restaurant chains like LEON, due to their size, may have a bit more resilience built into them when compared to smaller, independent restaurants, but without doubt, everyone has struggled. John Vincent, co-founder of LEON has recently confirmed the chain is losing £800,000 a week compared to what it should be doing under normal circumstances and that if the lockdown drags on, the UK restaurant chain could fold. Hopefully their repurposed restaurants will be enough to get them through the next 2 months.
The current road map for easing restrictions suggests that from the 17th of May, restaurants will be able to seat customers indoors. Outdoor dining should be possible from the 12th April. We for one look forward to the day we can wine and dine once more and pump some much needed money and activity into one of the hardest hit sectors.
…but it could be another train!
It’s not great news i’m afraid. This year, we have found that restaurant chains and takeaways have faced an additional challenge as their insurance premiums are rising dramatically. This has happened because some insurers are declining to quote for new risks as they have worries about longevity in the sector. Although existing insurers are generally offering terms, we have typically seen 40-50% premium increases at a time when turnover is dramatically down.
The insurance market was already showing signs of hardening before Covid-19 fell on our shores. The combination of a hardening insurance market, characterised by a reduction in market capacity, coverage restrictions and higher premiums, with the emergence of covid-19 has resulted in some really significant challenges for those in the restaurant sector. Perhaps now more than ever it is important to have the correct risk management measures in place in order to ensure the best rating can be achieved, thus helping with acceptance of the risk and the cost of insurance premiums.
What Types of Insurance does a Restaurant Need?
Restohub.org has a great article on this subject, so we wont go into great detail here, but to paraphrase, an operational restaurant should have these insurance covers in place:
- Public Liability Insurance
- Employees Liability Insurance
- Property Insurance
- Business Interruption Insurance
- Food Contamination Insurance
- Commercial Vehicle insurance
Requirements and costs for restaurant insurance will vary based on a number of factors so it’s always best to speak with a specialist insurance broker to make sure you have what you need and that you’re not paying for what you don’t. Generally we’ll need to know about the equipment used and it’s value, details on fire and security systems in place, an estimate of annual sales and number of customers, detail on the building from which you operate including it’s size, type and age and finally, number of employees. Underwriters are likely to want more information if you are operating a chain of restaurants or takeaways.
Naturally, although we haven’t gone in to the detail in this article, if you own or operate a chain of restaurants and/or takeaways, please call us to discuss the particular nature of your requirement.
Do you operate a chain of restaurants or takeaways? Are you facing increased costs?
Although there are limited choices, we do have access to markets that are still quoting for restaurants and takeaways. By providing our underwriters with good risk management information we find that we are winning business in the sector, especially if the business has a chain of restaurants. So if you operate a restaurant or takeaway, or a chain of restaurants and takeaways, and would like to review your insurance cover, we can certainly help.