Want to buy restaurant Insurance for protection against a future outbreak?
It could be available sooner than you might think!
Those of you in the restaurant business belong to a sector that’s been hit hard during COVID-19.
Although we’re not yet in the post-COVID phase, businesses and communities alike are now trying to adjust and shift themselves into a better position as the recovery process gets underway.
According to recent media, insurance companies are now creating coverage that will be tailored to suit situations such as the Coronavirus pandemic.
Essentially, they are now considering outbreaks to form part of the ‘new normal’ in society; and they’re creating insurance products to help businesses insure against such situations in the future.
COVID-19 Losses Not Covered Under Current Business Interruption Insurance for Restaurants
The majority of restaurants who faced severe disruptions when they were asked to close and help limit the spread of the virus will not receive any coverage under their business interruption insurance.
For many, this is due to the fact that pandemics are classified as a key policy exclusion,
However, policymakers are now looking to develop commercial insurance solutions that will address the glaring gap in financial protection for businesses who suffer pandemic-connected business disruption in the future.
Filling the Insurance Void
While it’s not known exactly which insurers will and will not offer coverage for pandemics, it’s predicted that buying pandemic-proof restaurant insurance will not be cheap.
However, if another virus strikes, it could provide financial relief and coverage against losses and disruptions should a similar outbreak occur.
- Machine Cover, a HISCOX-backed business is aiming to offer coverage as early as 2021. This will provide specifics businesses, such as restaurants, hairdressers, car dealerships, and department stores with coverage that is based on the levels of traffic to their business. The idea being, that if their customer volumes dip below a certain level, it will make a pay out, irrespective of the reason. The company intends on using intelligent data sources and apps to help it deliver this type of coverage to the market and believes that buying insurance against future pandemics will eventually become as commonplace as insuring against fire.
- Marsh is a leading global insurance broker; and they’ve collaborated with AXA XL to develop products that are specifically designed to help U.S-based restaurants, supermarkets, and e-commerce retailers in the wake of the COVID-19 pandemic. As demand for delivery services spiked, and these businesses have been forced to hire freelancer drivers to meet this increased demand, there was an apparent need for affordable auto liability coverage to cover these ‘gig-based’ contractors. As such, they introduced a policy that is based on a price-by-mile / usage basis. For many, this insurance option proved to be more cost-effective than standard commercial auto insurance for restaurant delivery services.
- Another small insurance company in California (Elite Risk), has already started to offer COVID Outbreak Relapse Coverage which is tailored coverage for those businesses who are made to shut-down their operations for a second time. However, this is tailor-made insurance that is only designed to work with a limited number of businesses, and only makes a pay out when very specific conditions are met. For example, for a film production company, this policy will pay out if a member of the cast contracts COVID-19. In another example, a client that provides livestock for the restaurant sector now have coverage in the event it cannot obtain feed for its animals due to the pandemic.
According to the owner of the insurance firm, this tailor-made coverage is extremely costly due to the fact there is no historical data available for such events that could help support a more effective price calculation.
A $1 million policy benefit could cost anything between $80-100k; which is far from affordable.
So, while we are seeing various insurers hard at work, trying to develop pandemic proof policies for the future, and there are even some who have already brought very niche products to the market; we are still waiting for mainstream insurers to release their new insurance products to the global market.
Demand for usage-based insurance has also surged since the pandemic began, which isn’t entirely new, but over 50% of respondents in a major survey stated they would prefer to buy insurance this way going forward; leaving insurers scrambling to create innovative insurance products that meet the needs of their clients.
In Summary
The cost of any pandemic-proof insurance for restaurants is going to be substantial.
This is something insurers across the globe are voicing right now.
Assessing the frequency of a pandemic along with the potential severity of business disruption losses is extremely difficult.
According to a recent study published by the OECD, a single month business closure could present an estimated cost of between $250-430 Billion for the SME sector alone.
Because of numbers like this, buying pandemic risk insurance coverage for your business is unlikely to be affordable to all businesses.
So, while COVID-19 has highlighted an obvious gap in the insurance market, it is thought that while there will be an interest in buying restaurant insurance that is pandemic proof, the take-up might not match these high levels of interest due to the cost.
