Things That Go Bump in the Night for Restaurant Owners

Things that go bump in the night for restaurant owners look a lot different than for the average Joe and Jane. Instead of monsters under the bed and ghosts lurking in the shadows, it’s catastrophic storms, cost of materials and civil unrest. 

Ahead of Halloween and spooky season, Society Insurance explores some of the scary factors, some more rare and some more common, that can affect premium rates. 

1. Catastrophes and Storms

In 2023, the U.S. saw 28 weather disasters that cost at least $1 billion each – the highest number of billion-dollar disasters on record. As these events become increasingly common, it comes as no surprise that premiums have risen as insurance companies pay out large claims. As a result, insurers need to increase their premiums as they face increased liabilities and risks from storms and other weather-related phenomena. 

2. Reinsurance

Reinsurance, to put it simply, is insurance for insurers. Insurers spread the risk through reinsurance. By collaborating in this way, no company is left alone to bear the burden of disasters like the derecho. However, as we’ve seen the regularity of weather events increase, the cost of reinsurance has increased as well, and that trend doesn’t seem to be changing  particularly soon. This increased cost for insurance companies results in increased policy premiums.

3. Cost of Building Replacement and Inflation

Costs of building materials and construction have increased every month in 2024. As a result, if your bar is severely damaged in a storm or fire, the cost to replace the building will be exponentially higher. 

While the rise in construction prices has many confounding factors, it does illustrate how inflation impacts insurance costs. As inflation raises prices, insurers must raise premiums to adequately cover those higher costs, whether they’re construction costs or costs for other products your business uses. 

If you’re underinsured, you might only be covered for a portion of the building replacement cost, which would be notably higher due to shortages and strains on the supply chain. 

4. Social Unrest

As we’ve seen in recent years, social unrest can truly have an impact on businesses and insurers alike. Claims from social unrest in 2020 cost insurers $1-2 billion, making it the costliest instance of civil unrest for insurers in the country’s history. The impact social unrest can have on insurance costs can manifest in a similar form as supply chain strains or storms—or both. If social unrest becomes more common, the risk to your property can increase, or your bar may be unable to operate as intended. Both of these scenarios can lead to risks for your business and to increased premiums.

5. Social Inflation

Social inflation is the least concrete driver of insurance costs. It’s a newer phenomenon that’s more difficult to predict, prepare for and protect against. As the country sees more and more lawsuits yielding higher awards to plaintiffs, the costs surrounding this extensive litigation have become a greater burden. Like catastrophes and storms, the massive settlements reached in courts can affect insurance premiums. As insurers face the increasingly common-yet-unpredictable risk of social inflation, they’re forced to raise premiums. 

We all more or less understand why auto insurance premiums change over time. As you get older, more experienced and become a less risky driver, your insurer is exposed to less risk, and your rates drop as a result. However, what drives premiums for bars and restaurants isn’t quite so simple as predictable factors like age or gender. The right insurance carrier will help you prepare for the unexpected – and common – issues that might arise and be the best partner should any problem ever arrive.

This is only a general description of coverages and is not a statement of contract. All coverages and limits are subject to the terms, definitions, exclusions and conditions in the policy. This information does not amend, modify or supplement any insurance policy. Consult the actual policy or your agent for details regarding available coverages. This information is provided as a convenience for informational purposes only. It is provided to assist you in recognizing potential unsafe work problems or conditions and not to establish compliance with any law, rule or regulation. This information does not constitute legal or professional advice. For a legal opinion, please seek legal counsel from a qualified attorney.