Vol. 27, No. 43
August 11, 2014
FAST CASUAL RESTAURANT PROGRAMS ARISE
Carriers will seamlessly expand their coverage of restaurants in response to an increase in fast casual and
limited-service food and beverage establishments. This growing marketplace, bridging the gap between fast
food and traditional sit-down restaurants, provides an easy in for insurers, allowing them to simply expand
current business owners or package policies to include more classes. Carriers such as Utica National, XL,
Liberty Mutual, The Hartford, Argo, Erie, Travelers, Nationwide, Farmers and Hanover will see
quick organic growth as these accounts are easily placed.
Established restaurant insurers and those offering attractive policies will be able to pick and choose the best
accounts from an abundant pool of restaurants. More stable carriers will also gain accounts displaced after
the rating downgrades of Tower, SPARTA and Meadowbrook last year by A.M. Best and Fitch. There
will be slight upward pressure on pricing from newer players and those that have incurred large losses in
the last few years, but competition will moderate any change.
Restaurant sales this year are up 3.6 percent from 2013 so far, making it the fifth year of growth in a row.
Sales are projected to exceed $683 billion by the end of the year. Restaurants are still the second-largest
private employer industry with nearly 100 million restaurants in the U.S. employing about 13.5 million
Americans. Overall restaurant growth is still considered slow compared with previous post-recession
periods but this time the increasing popularity of easy dining is changing the restaurant landscape, giving
way to widespread emergence of new concepts such as microbreweries and independent coffee shops that
offer lunch. In addition to fast casual, carriers are favoring franchised restaurants over independent or large
fast-food restaurants because they offer a clear business model, higher success rate and proven experience.
High-Premium Programs
Starr Indemnity, ProSight, United Casualty, Travelers and Liberty Mutual will all write more coverage
this year for fast casual and franchised restaurants, including property, general liability, crime, auto and
umbrella. The average premium will likely be about $15,000 for single-locations with deductibles of
$1,000 to $10,000 and limits of $1 million/$2 million. Those five carriers have seen their restaurant
business increase about 15 percent so far this year. Liberty Mutual and ProSight subsidiaries New York
Marine, Gotham Insurance Co. and Southwest Marine took over the RCA restaurant and tavern
program, which includes coverage for fast casual restaurants in more than 30 states this past spring. The
RCA’s previous backer, the Indemnity Insurance Corp. risk retention group, went insolvent in April. The
package program includes multi-line property and casualty, general liability and crime insurance.
To mitigate losses as much as possible, most insurers will combat common fire and slip and fall claims by
requiring certain fire extinguishing systems, liquor sales equaling less than 30 percent of total sales and
proven restaurant management experience. But with increased competition among the restaurants
themselves, some are adding off premises catering, theme nights and novelty entertainment in an attempt to
attract more customers. Expect carriers to respond with new exclusions and higher pricing where necessary
to address these emerging exposures. Property premiums have already risen in Eastern and coastal states,
where severe winter storms, hurricanes and nuisance flooding are increasingly common. In response to
average national losses of 159.7 percent for property and 143 percent for liability from 2008 to secondquarter 2013, Farmers increased its Restaurant BOP rates by about 15 percent. The change goes into effect
for 943 New York policies on Dec. 15 and Sept. 15 for new policies. Policies are offered at a minimum
premium of $500 or $1,000, depending on the restaurant class. This increase targets a combined ratio of
93.2 percent for the program.
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Crittenden’s Insurance Markets
HEALTH FOOD STORES
ARGONAUT INSURANCE CO. (A) / GROCERS INSURANCE CO. (A): Rollie Corneliusen, AVP, Sales & Marketing,
10101 Reunion Place, Sutie 500, San Antonio, TX 78216, (719) 494-1283, [email protected].
GREAT AMERICAN INSURANCE GROUP (A): Mark Kaptoes, President, 2374 Boston Post Road, Suite 203,
Warwick, RI 02886, (888) 467-3330, [email protected].
MMG INSURANCE CO. (A-): Pamela G. Johnson, VP, Commercial Lines Manager, P.O. Box 729,
Presque Isle, ME 04769-0729, (207) 764-6611, [email protected].
RESTAURANTS
LIBERTY MUTUAL INSURANCE CO. (A) / NEW YORK MARINE AND GENERAL INSURANCE CO. (A) /
STARR INDEMNITY & LIABILITY CO. (A) / TRAVELERS PROPERTY CASUALTY CO. OF AMERICA (A) /
UNITED CASUALTY & SURETY INSURANCE CO. (A): Jeffrey M. Hallman, VP, National Accounts, Restaurant
Programs of America, 8 Wood Hollow Road, Parsippany, NJ 07054, (866) 577-7007.
QBE (A): Jackie Bourret, VP, Program Development, MarketScout, 12700 Park Central Drive, Suite 300, Dallas, TX 75251,
(972) 934-4263, [email protected].
UTICA NATIONAL INSURANCE GROUP (A-): Bill Skorzyk, Director of Commercial Marketing and Sales,
1 Jericho Plaza, Jericho, NY 11753, (516) 479-1636, [email protected].
All readers qualify for free access to the Crittenden Insurance Program Directory. The directory contains
contacts for more than 1,000 programs. Contacts not listed in this newsletter may be found in the directory.
For more information or to register, send an email to [email protected].
FAST CASUAL RESTAURANT PROGRAMS ARISE…
Continued From Previous Page
In addition to higher pricing, look for insurers to roll out new programs to meet expanding demand. Earlier
this year, MGA MarketScout gained underwriting authority for an admitted QBE restaurant program
geared toward single-location restaurants, including pizzerias, sandwich shops and sushi bars. It will be the
first restaurant program administered and written by the MGA. The company will write about $10,000 in
premium per policy with a minimum property deductible of $3,000. The product includes property, general
liability, crime and inland marine coverage, as well as liquor liability in some states. Insureds can also
purchase hired and non-owned auto and umbrella coverages. The QBE-program will target accounts that
show a good loss history, positive financial standing and at least three years in business. Underwriters will
also scrutinize specific restaurant features, such as the type of fire extinguishing system in place if the
account has a grill or a deep fat fryer. The program is available in 48 states and the District of Columbia,
excluding Alaska and Hawaii. New ventures will be considered, depending on prior management
experience of the restaurant’s operators.
Utica National also introduced a new restaurant BOP as well as special restaurant endorsements that will go
into effect in December. The new program targets casual dining restaurants — bistros, cafes, diners, delis,
coffee shops, pizzerias and bakeries — that have been in business for more than three years with liquor
sales of no more than 40 percent of total sales, total gross sales of up to $10 million and seating for no more
than 250 patrons. Utica previously wrote restaurants on a commercial package policy and will still consider
restaurants that fall outside of the BOP criteria for a CPP. Some restaurants with unique exposures, like
tableside cooking or special events, can obtain a policy tailored to its needs. The new BOP is being rolled
out nationally and is pending approval in several states. Premiums vary but the minimum is $500 with
limits as high as $2 million. Utica National will provide liquor liability for eligible risks and coverage for
spoilage and loss or damage to customers’ autos for an additional premium. Additional commercial auto
and workers’ comp policies from Utica can be paired with the BOP.
Erie will start insuring restaurants in North Carolina on Dec. 1 with its Ultrapack Plus Policy, designed for
small to mid-size businesses. The policy includes property and liability coverage for the building, business
personal property, income protection, crime and liability needs, including $10,000 for employee
dishonesty, which protects against the dishonest acts of employees and loss of money, merchandise or any
other real or personal property. A restaurant enhancement endorsement is offered at $175 per policy to
cover typical needs, such as the Cooking Protection Equipment Accidental Leakage coverage and $25,000
of food contamination coverage. Earthquake and windstorm or hail endorsements are also available. These
additional coverages target fast casual restaurants like bakeries, delis and coffee shops.
Continued on Next Page
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Crittenden’s Insurance Markets
Page 3
FAST CASUAL RESTAURANT PROGRAMS ARISE…
Continued From Previous Page
The program will cover fast food, family-style and fine-dining restaurants, as well as limited cooking
restaurants, such as breakfast/lunch cafes, concessions, convenience/grocery stores, cookie stores, juice
bars and pretzel stores. Coupled with the roll out of its restaurant insurance, Erie implemented a rate
increase of 6.5 percent to 23,136 Ultrapack Plus policies in Pennsylvania, resulting in a premium increase
of nearly $2.3 million, to go into effect on Dec. 1. The carrier currently writes about $35.3 million of
premium through the program.
NEW MARKETS FOR CELL PHONE REPAIR
The proliferating cell phone repair service sector will draw additional admitted markets as more carriers begin
to quote and bind more ISO-based business owner policies that can cover these accounts in the coming year.
The number of cellular telephone repair shops grew 6.8 percent last year and could increase by 9 percent this
year as cell phone owners increasingly shift to repairing phones rather than pay the higher cost of
replacements . There are 2,455 independently owned cell phone repair shops in the United States that can find
coverage at Hiscox USA, Travelers Property Casualty, Great American, Hanover Insurance, State Auto
Mutual and Utica Mutual. Most of these BOPs will likely have built-in exclusions regarding the sale of
illegally imported aftermarket parts, a major exposure associated with this class.
Look for Travelers Property Casualty’s Select Account division to pick up cell phone repair accounts on its
Master Pac BOP. Travelers underwrites cell phone repair service risks with comprehensive employee
dishonesty and equipment breakdown covers built into the BOP. The carrier’s pricing of BOPs continued to
rise in the second quarter, when new account premiums were up 8.8 percent. Even with higher pricing, it
saw its quarterly retention rise to 79 percent from 76 percent a year ago.
Hiscox USA plans to expand the availability of its BOP to Alaska, Delaware, Hawaii, Kentucky, Maine,
Montana, North Dakota, South Dakota, Vermont, West Virginia, and Wyoming before the end of the year.
The carrier is well known for providing comprehensive general liability and E&O coverage for businesses
in the small technology field. Its BOP is currently sold in 40 states and the District of Columbia.
Great American and State Auto Mutual will improve their offerings. State Auto Mutual will upgrade its
Businessowners Choice Program to capitalize on higher average new business premium and an increase in
renewal pricing during the first quarter of the year. The regional carrier increased BOP rates an average of
2.9 percent from January through March. Effective Dec. 15 in North Carolina, it will introduce new
optional Data Compromise Plus and Broadened Bodily Injury Definition endorsements. The Data
Compromise Plus endorsement provides per-event limits of $50,000 for named malware, $5,000 for
forensic IT review, $5,000 for legal review and $5,000 for public relations services. State Auto charges a
$100 premium for the Broadened Bodily Injury Definition endorsement. Great American offers three
optional time periods for its Business Income Changes-Waiting Period within its SafePak Businessowners
Policy. It sets a rating factor of 0.998 if an eligible cell phone repair service risk selects a 24-hour time
period, 0.995 for a 72-hour time period, or 0.992 for a 120-hour time period. The optional time periods
went into effect July 1 in North Carolina. Look for Great American to also increase rates for its SafePak
Businessowners Policy. The insurer increased renewal pricing by 3 percent during the first quarter and
recorded a retention rate of 81 percent.
Upgrades will also be a theme at Utica National and Hanover. Utica National could improve on last year’s
already strong 97.6 percent retention rate with upgrades to its Commercial Edge BOP by adding an
independent rule for Exclusion-Access or Disclosure of Confidential or Personal Information and DataRelated Liability–With Limited Bodily Injury Exception. The rule will go into effect Dec. 1 in North
Carolina. Hanover will add to its Avenues BOP coverage for business income from dependent properties and
reduce the additional coverages and coverage extension deductible from $500 to $250, effective Nov. 1 in
North Carolina. Hanover’s program caters to cellular phone repair risks by selling a Telecommunications
Services Provider BOP under the Avenues program that specifically covers this class. Hanover sells optional
technology E&O coverage and an electronic data process extra expense endorsement with limits increased
above the $5,000 limit at any building. The insurer also builds into the BOP money and securities cover with
limits of $10,000 on-premises and $5,000 off-premises.
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Page 4
Crittenden’s Insurance Markets
SHIFT IN HEALTH FOOD STORE COVERAGE
Great American could take the lead in writing health food stores on a national basis. Most national
insurers, including Argo Specialty subsidiary Grocers Insurance, tend to shy away from this class of
grocery store because of moderate loss exposures to food spoilage, equipment breakdown and product
liability claims. Regional insurers like Farmers Insurance Co. of Flemington will be more willing to
underwrite health food stores because, like these accounts, the limited scope of these carriers’ geographic
reach allows for more cohesive underwriting of the risk. Sales revenue in the health food and supplement
industry is expected to reach $35 billion by the end of this year and grow another 25 percent by the end of
2015. There are 20,000 stores countrywide with a heavy concentration in the West.
Great American plans to pen 1,000 health food stores and 70 natural food cooperative accounts with the
assistance of experienced program manager Kapatoes Insurance Services. The program was launched April
1 and is offered through Great American’s Alternative Markets Division. The product includes an optional
endorsement for reimbursement of refrigerated products damaged due to a storm or power failure. The
coverage can include privately labeled and/or relabeled products, but excludes coverage for formulating
vitamins, something considered to be an exposure more appropriately underwritten on a neutraceutical or
pharmaceutical liability policy.
Grocers Insurance writes some health food stores with its Grocers and Market Property Extender
Endorsements, which provide inland marine and property covers, but isn’t a major market of this risk.
Farmers Insurance Co. of Flemington covers health food stores under its Food Service Specialty Program
and sells MSO-based business owners policies and commercial package policies for eligible health food
stores.
Look for Selective Insurance to become more price competitive on grocer accounts, including fruit and
vegetable retailers. The carrier writes these accounts on a CPP and will be increasing rates for the policy by
2.7 percent on Sept. 1 for new and renewal business in North Carolina folling an average rate increase of
6.4 percent during the first quarter. RLI Insurance began to utilize new equipment breakdown rate and
rule manual pages for grocers andhealth food stores eligible for its RLIPack Program. The new rate and
rule pages went into effect June 1 in Pennsylvania. RLI builds into the BOP program limits of $25,000 for
water backup coverage and $50,000 for employee dishonesty coverage.
MMG Insurance plans to enhance its businessowners program, which covers grocery and health food
stores, with an additional limit option of $1 million to fire legal liability coverage. The carrier insures
grocers with up to 40,000 square feet per location in Maine, New Hampshire, Vermont and Virginia. The
new limit option will be available Sept. 1 in Pennsylvania.
The Insurance Markets Team
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Quotation not permitted. Material may not be reproduced in whole or in part in any form whatsoever. Copyright © 2014 Crittenden Research Inc.