Double trouble on insurance

18 September 2002 by
Double trouble on insurance

Sales a bit slow? Costs relentlessly rising and profits a bit down? Fear not, for I've got a brilliant wheeze to solve these problems. Shut your restaurants for a couple of months and post a sign saying "We Don't Want Your Business". Then reopen your doors and give your customers a big surprise: double your old prices. That's right, double, or even triple if you're feeling brave. Now, provided we work together on this, I can guarantee your old customers will flock back, begging you to let them spend their money in your premises. No, I'm not mad. I've seen this exact thing work a treat in another industry so I'm sure it can do for us.

Take the insurance industry, for example. I've stayed with my insurance broker for 25 years because I could rely on him to get the most competitive quotations. But this year, he sheepishly warned me that restaurant premiums would be rising horribly. I was not to despair, he said, because he would be scouring the market for the best deal going. The "best deal" turned out to be double last year's premium. Infuriated, I advised him that I would be doing a bit of scouring myself. "Feel free," he said, with just a bit too much confidence for my liking. Ten days later, after umpteen phone calls and faxes to other brokers and insurers I returned with my tail between my legs. Suddenly, double didn't seem so bad any more - one quote was triple my previous premium. It was too horrible out there.

A large number of insurers have decided not to underwrite restaurant businesses any more, effectively shutting up that part of their shop. So, the willing few (wink, wink) remained in control of a seller's market. Insurers blame 11 September for this. Can you think of one good reason why 11 September should result in the whacking up of restaurant insurance premiums? No? Me neither. The real reason is a commercial form of compensation culture. We poor schnooks, who have no alternative, are being forced to compensate British insurers for the significant losses they made while underwriting the American market. Our choice is to pay or go uninsured.

In August, the British Insurance and Investment Brokers Association (BIBA) warned that many companies would be breaking the law and some would even go out of business because they could no longer afford legally mandatory employer's liability cover. This is not surprising because insurers are all singing from the same hymn sheet. BIBA reported that insurance premium revenues in Britain were at a 40-year high.

So, if we follow the insurer's model of doing business, our customers can compensate us for flat sales and declining profits. And hey, if that doesn't work I've got another wheeze - we set up an insurance company to insure against rising premiums. n

Michael Gottlieb is president of the Restaurant Association and proprietor of Café Spice restaurants and Pencom (Service That Sells) UK

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