Insurance Premiums to Rise in 2000: What Can Hotel Owners Do to Minimize the Impact? / Aon Hospitality Services / January 2000

Making sure our hospitality clients receive quality insurance products

Insurance Premiums to Rise in 2000:
What Can Hotel Owners Do to Minimize the Impact?
January, 2000
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by Matt Smith

The Changing Marketplace

The insurance marketplace is taking -- make that -- has taken a distinct turn for the worse. It has been some time since the last “hard” insurance market, and insurance premiums on average have fallen in each of the past few years. 2000 looks to be a different story. Beginning in fourth quarter 1999, many hotel owners were seeing double digit percentage increases on their renewal premiums. The increases have mainly occurred on automobile, workers’ compensation, and property policies, but all lines of coverage face the potential for increases.

While many economic factors have contributed to the rapid rise in insurance premiums, a large increase in losses over the past few years is blamed as the main culprit. Insurance companies are being forced to look for alternative means of increasing revenues to offset their larger than normal losses. Hospitality accounts are being targeted specifically for increases because of their poor loss history over the past decade. Many insurance companies no longer have the appetite they once did for new hotel business and some are withdrawing from the industry altogether. The distaste of some carriers for the hospitality industry is shrinking the ranks of large national carriers willing to write hotels. The majority of these companies are looking to increase premiums for 2000 renewals in one area or another.

The main question being asked by hotel owners is “What Can I Do to Avoid an Increase at my hotel?” While the increases are affecting all policyholders, not only those with a negative loss experience, there are certain steps that can be taken to avoid the impact of a major rate increase at your hotel.

1. Accept Larger Deductibles to Offset Rate Increases – By increasing deductibles you decrease the insurance companies liability. This should provide some premium relief.

2. Review and Revise your Risk Management and Loss Control Procedures – Unfortunately the absence of losses are not going to guarantee your premium will not increase, but it will definitely help your cause. By reviewing your current procedures and implementing improved procedures where necessary, you will be taking the proactive steps necessary to reduce your exposure to loss. Eventually these steps should provide substantial insurance savings due to a reduction in losses.

3. Market Your Existing Insurance Program - It is advised to re-market or bid your insurance program at least every three years. The presence of competition on the account will often drive down premiums. Additionally, having an extra set of eyes review your account allows a more comprehensive, and often times non-biased, review of existing coverages and limits. Many insurance exposures and products exist today that were not in place three years ago.

4. Provide Insurance Markets with a Complete “Picture” of Your Account – Insurance agents and brokers are trying to tell a story to the insurance carriers about your account. The better they feel about your hotel, the more comfortable they are going to feel writing the insurance for it. By providing the carriers with all the information they might need to tell a complete story – including complete property specifications, accurate financial statements, a summary of operations, and 3 years of loss runs – you will allow the insurance company to charge a premium that accurately reflects your property’s exposures.

5. Research your Agents Leverage with Your Existing Insurer – Ask your agent or broker to give you a listing of other hotels they currently insure with your insurance company. An agent that has 1,000 hotels insured with XYZ Insurance Company is in a much better position to fight a proposed increase than an agent would be who has only one hotel with a carrier. While insurance is heavily regulated at a state level, the leverage your insurance agent or broker has in the insurance marketplace plays a very large role in the pricing and degree of coverage on your account.

6. Budget for Increases – This might not help you save money, but it is a way to prepare yourself for an increase. Increases in premium are going to be the norm in 2000, and it is important to be aware of their affect on your bottom line as you prepare your budgets for the new year.

Though no one looks forward to the return of a “hard” insurance market, it looks like it is here to stay for a while. Luckily, the potential effects can be greatly minimized by being prepared. Your insurance agent or broker can be of great assistance in this process, and it is strongly recommended that you consult with them about the changing market conditions and their affect on your hotel.

Matt Smith is an Account Executive with Aon Hospitality Services in Portland, OR

Bryan Green
Aon Hospitality Services, Inc.
Account Executive
Business Development
1211 S.W. Fifth Ave., Suite 600
Portland, Oregon 97204-3799
phone: 503-306-2862
fax: 503-224-0094
bryan_green@ars.aon.com

Aon Hospitality is dedicated to making sure our hospitality clients receive quality insurance products, risk management, and financial services. We accomplish our mission through a highly-trained and motivated professional staff which is committed to always providing client-focused quality services.

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