The hospitality sector in the UK, worth some £1.6bn in property and casualty (P&C) premium, is badly served by the insurance market.
That was the message from David Poet, broker Arthur J Gallagher’s managing director for its international hospitality and leisure practice, speaking to Reactions at the AIRMIC conference for UK insurance buyers and sellers, held in Harrogate this week.
“We don’t do a good job at all as an industry. Our insight into the dynamics of the sector is shallow,” said Poet, who works within the US broker’s London market offices.
“In understanding the effects of Millennials, for example”, he said, “it’s the biggest generation shift since the 1950s, in terms of their use of technological advancements, things like Wifi and the sharing economy. As an industry
The UK hospitality industry’s size is even bigger when including visitor attractions and sports clubs, but insurers view it as just another P&C segment, doing clients a disservice, Poet suggested.
“It’s not seen as a separate discipline, and there’s a dearth of expertise,” he said.
Poet gave the specific example of restaurants buying coverage; now such business serve a Millennial clientele, they are more akin to nightclubs with later opening hours and offering a broadened service, something lost on outdated underwriting thinking.
“That can mean very different risks,” he said, adding, “In restaurants people don’t tend to get so lairy.”
In practice, that can mean errors and omissions coverage, he suggested, in the event of a fire and the risk of overcrowding within a venue.
“If it’s open to 2AM and the insurer
“We should understand that. In terms of the dynamics, our industry should be ahead, but instead we’re behind,” he added.
He noted that of the £1.6bn figure, 80% of the market consists of small and medium sized enterprises (SMEs), but insurance is more comfortable dealing with the minority of larger more sophisticated insurance buying corporates.
“Arguably we’re underserving the people
“It’s seen as a simple market, but actually it’s very complicated, and the SME expects their broker to get it right,” said Poet.
He cites the risk landscape for the sector as ranging from innovation and technology for evolving consumer demand, to pandemics, terrorism and political risk.
“As an industry we just see P&C; there’s not enough deeper understanding of the dynamics.”
Understanding the role of footfall is crucial, he argued, “whether for a tea shop in Harrogate or the Marriott hotel”.
“We’re very concerned with looking at what might disrupt that footfall,” said Poet.
This involves business interruption and non-damage business interruption, he said.
He said Gallagher was looking at what has happened to footfall as important hospitality sites in the aftermath of events in the vicinity which caused no direct damage to businesses or even to transport links but led to major dips in footfall.
Examples given included the restaurants and cafes of London’s Covent Garden market after the 7/7 attacks of 2005, and, more recently, businesses in central Paris after last year’s terrorist attacks on the French capital.
“It’s our fault as an industry that we’re not doing a better job at this,” said Poet. “These groups have tight budgets and they aren’t going to increase.”
He gave the example of a hotel and hospitality group active across 29 countries, but with only four members of staff dedicated to risk management and insurance buying.
“So, we need to support them, and we can’t do that unless we work to understand the dynamics,” added Poet.