Restaurants, bars that are struggling to survive also face soaring insurance premiums

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Soaring insurance premiums continue to plague the hospitality sector despite the Insurance Bureau of Canada’s attempt to find affordable rates for establishments that have been struggling to remain open during the COVID-19 pandemic.

Last fall, as restaurants and bars across the country were forced to shutter their doors for a second time because of a spike in COVID-19 cases, Tony Siwicki was shocked to see the insurance premium for his family-owned restaurant in Winnipeg was about to increase by $2,000 a month – a 25-per-cent hike in his annual premium.

But after shopping the market for a better insurance rate, he realized he was one of the “fortunate ones” in the hospitality sector to still have insurance at all – and his current provider was “significantly” cheaper than competitors.

“I understand things go up – but restaurants are seeing premiums go up by 100 per cent or getting dropped altogether during a time when we are just trying to survive until we can fully reopen,” said Mr. Siwicki, who runs the Silver Heights restaurant and lounge, a business his grandfather opened in 1957.

“At first I was really scared at that increase – and really pissed off – but now I am counting my blessings that we have insurance at all. But what will happen in November when we are up for renewal again?”

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Last fall, the Insurance Bureau of Canada – a national industry group with 74 insurance company members – introduced a “business insurance action team,” or BIAT, to help the hospitality sector in Ontario find affordable insurance as the province began to see a higher rate of complaints.

The move was made after Toronto Mayor John Tory called on commercial insurance companies “to do better” and stop “gouging” restaurants, bars and music venues with “skyrocketing rate increases.” Ontario’s finance minister at the time, Rod Phillips, also urged insurers to stop discriminatory pricing and warned them to “treat customers fairly.”

Despite stern government warnings – and the IBC’s efforts – restaurants continue to see rate hikes.

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Most businesses must have commercial business policies, covering them for fire, theft, liability and, in some cases, business interruption. Some bars and restaurants saw premium increases of as much as 300 per cent when they went to renew policies last year, while others have been refused insurance entirely.

Over the past year, the Canadian Federation of Independent Business, or CFIB – an association with 110,000 small-business members – has had a growing number of small-business owners contact its hotline with concerns about the rising cost of insurance.

Corinne Pohlmann, senior vice-president of national affairs at CFIB, said even with the help of IBC’s action team, the organization has seen an uptick in the past month in the number of calls about insurance costs. In its latest monthly survey, insurance is now at the top of the list of cost constraints for members, for the first time ranking ahead of taxes and regulations.

“We are hearing from businesses right across the country and in several industries, including the hospitality sector,” Ms. Pohlmann said in an interview. “This is one of the worst times for these types of insurance changes to be occurring. In normal times, these cost increases would have been very difficult for a lot of small businesses to absorb, but now – with COVID-19 – it is catastrophic.”

IBC’s chief strategy officer, Celyeste Power, said the rising cost of insurance is partly because of a correction in the global commercial insurance market that started before the onset of COVID-19. Rising claims costs, increased frequency of weather-related losses, and low-interest rates have contributed to eroding insurers’ profits – commonly known as a hard market.

As well, the Canadian market is having a supply and demand issue after two major global insurers – Allianz Global Corporate and Specialty and Lloyd’s of London – exited the hospitality market last year. Allianz told The Globe and Mail it discontinued underwriting new policies on certain products last July, including insurance for restaurant and hospitality establishments, but declined to comment on the reasons for the discontinuation.

In addition to launching its insurance action team for Ontario – which could be expanded to other parts of the country, if needed – IBC opened an insurance hotline for all sectors, as well as a risk management service to advise brokers or businesses on issues at the company that may be contributing to higher premiums.

“We recognize this is an extremely challenging time and COVID-19 exacerbated the commercial insurance market challenges,” Ms. Power said. “But it is a cycle and it will come to an end.”

Over the past seven months, the IBC’s BIAT has been able to assist 20 establishments in the hospitality sector secure insurance policies.

John Sinopoli, co-owner and executive chef at the Ascari Hospitality Group, which runs three restaurants and a bar in Toronto, said IBC’s action team isn’t enough to help the thousands of businesses in the hospitality sector that are facing rate hikes on an annual basis for basic insurance coverage.

“There is a deeper issue around the number of insurers who are no longer offering liability insurance for hospitality venues. We need an insurance policy that meets our needs and there is no one forcing Canadian insurers to step up to the plate and provide that,” said Mr. Sinopoli, who helped create a coalition of about 1,300 restaurants through website SaveHospitality.ca during the pandemic.

Emily Hogeveen, spokesperson for Ontario’s new Finance Minister Peter Bethlenfalvy, said the minister has spoken to IBC “several times” since taking over the portfolio in December and is following the situation “closely.”

“The ministry is monitoring the outcomes of the supports being offered by insurers and will not hesitate to take further action if necessary,” she said.

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