Experience and Specialization Matters When It Comes to Complex Hospitality Insurance

In my view, along with a good banker, lawyer, accountant and doctor, the next trusted person for business and personal matters that one should have a long term relationship with is an insurance agent. As a business grows and wealth is accumulated, the greater the importance of having a professional insurance agent obtain the broadest insurance for risks typically not even contemplated by the operators of a business operation, especially a complex business typical in the hospitality industry.

Who do many people typically purchase their insurance from? Agents they like and trust. But, caveat emptor — buyer beware! The traits that make an insurance agent a good salesperson are often not the same traits that make someone competent to obtain proper insurance, especially when it comes to complex commercial insurance.

There is often a huge gap between those who “sell” and those who “advise.” Experience and knowledge in a specific industry matter so that an insurance package can provide maximum coverage at the best price. The insurance package must work in such a manner that it is significant, but subtle, without gaps of coverage leaving the business financially vulnerable.

Unfortunately, many insurance company cost cutters want to save on agent costs and now suggest customers shop and learn about insurance purely online. This method of insurance selection is akin to representing one’s self in court or self-diagnosis of major medical symptoms with just as devastating financial and personal consequences. I strongly encourage all policyholders to learn and consider insurance information on the Internet, but they should buy through a knowledgeable and reputable agent.

Insurance agents sell contracts. Every word in the contract can impact whether a claim is covered or not. Some agents rarely read the policies and delegate checking the policies to employees who have little insurance knowledge and even less understanding of the needs of a specific trade or business. In this scenario, the financial safety blanket insurance could otherwise provide is an illusion. A second coverage disaster is then likely when the unexpected happens and the claim is submitted.

As an attorney who represents the policyholder, I am generally reviewing the insurance product after the second disaster. When it pertains to a hospitality business, many policies contain devastating exclusions of which the client is unaware, as well as the inexperienced agent. Hospitality industry businesses have myriad property, business, and liability risks and require a variety of policy forms to meet most accidents and disasters which result in financial and legal claims. It is not an industry where general commercial insurance products should be sold because coverage gaps will certainly occur.

Agents have to understand not only insurance, but the insurance needs particular to the client they are selling. Intimate knowledge of the hospitality trade and the particular hospitality client is crucial to providing an insurance product that works to provide peace of mind that when the unanticipated happens, the financial safety blanket of insurance works to soften the blow and protects against a second financial disaster caused by not having insurance coverage. Agents should be expected to spend considerable time asking about the business operations with detailed checklists regarding the most innocuous aspects of the operation and its business plans.

Insurance agents need to do a better job convincing commercial policyholders to purchase business interruption, and especially, extra expense coverage. Coverage for these additional items will help many more commercial establishments remain in business following a catastrophe. Extra expense coverage can help maintain the goodwill of a business so customers will return after the disaster has past.

Many hotels and resorts have ancillary businesses and services operating within them. Policies have to consider each of these risks, and agents have to examine the contractual requirements related to each. Contingent business income and extra expense coverage can be purchased to protect dependent business loss. Excluded claims arising from language which does not consider these operations, services, and contractual issues occur with great frequency because many agents do not anticipate the broad needs and risks relevant to the hospitality business.

When a business owner entrusts his financial viability with an insurance agent, he deserves great customer service. That service can be no greater than the agent’s clear understanding of the risks particular to that industry and particular need of that business.

Topics Agencies