Editor's Note: This article about social media and insurance underwriting recently appeared in the Oregon Restaurant and Lodging Association’s blog. Reprinted with permission, this piece includes helpful tips for hospitality, entertainment, and other businesses that serve alcohol.
Insurance underwriters research your business before issuing a quote or renewing coverage. They find clues about your day-to-day operations in customer reviews, social media profiles, and even the image gallery on your website. Since this analysis can affect your insurance rates, you want to make sure your online presence conveys an accurate story. Here’s what underwriters look for and factors you need to think about:
If you say you’re a restaurant, but you’re open until 1 a.m., are you really a bar?
Suppose you describe your business as a family restaurant where people of all ages bond through great food and conversation. However, on Yelp, several reviews compliment your cocktails and live entertainment. And your Instagram feed features young adults dancing, a flashing disco ball, and a crowded bar.
At the very least, you can expect the underwriter to ask questions to classify your business correctly. Maybe you are a family restaurant until 8 p.m. But after that, you cater to a different target audience that wants to drink and party. The latter scenario is more expensive to insure.
What kinds of risks are you taking?
An insurance company can deny or cancel coverage if they don’t like what they see online.
One establishment featured its ice shot glasses on social media. Fun-loving patrons downed the liquor then smashed their ice “glasses” on the floor, creating a slip hazard.
At another place, a bartender stood on top of the bar to toast a patron’s birthday. The restaurant added this celebratory picture to their website.
Standing on the counter was not a normal activity in this workplace, but the insurance company didn’t know that. They assumed it was part of the business’s culture, and the worker’s comp carrier spoke up. They didn’t want the risk exposure.
Do you comply with laws and regulations?
Recently, a bar advertised its “happy hour” on social media with a photo showing “$1 beer all day.” Oregon law prohibits promoting happy hours on social media. Additionally, the beer price and event duration posed underwriting concerns since both factors can contribute to over-consumption of alcohol. In this case, the insurer canceled the bar’s entire insurance package.
7 tips for avoiding an adverse underwriting decision
In five minutes, an underwriter is sizing up your business by looking at your online presence. They are asking themselves, “Do I even offer insurance to you? If I let you in the door, will I need to charge you more because I perceive you as riskier?”
To position your business in the best possible light with underwriters:
- Examine your website through an insurance lens and regularly review your online presence: Does your photo gallery and social media activity accurately portray the nature of your business? Is there anything that might raise alarm bells for an insurer?
- Set up monitoring so you receive real-time alerts if someone posts about your business: This way, you can leverage positive reviews, while managing anything that could be harmful.
- Reassess your business hours: There’s an old saying, “Nothing good happens after midnight.” Understand the insurance implications of staying open late. Many insurers want a midnight closure (or earlier) as a condition for coverage. Those willing to consider longer hours will charge more. Are you bringing in enough revenue to cover the extra insurance costs?
- Make sure the business description in your insurance policy matches what’s happening today: Maybe you were a breakfast-lunch establishment when you first started your venture, but now you serve dinner and late-night drinks. As your business evolves, you may need to adjust your insurance. An inaccurate business description can lead to coverage gaps and worse.
- Decide if “flex hours” are delivering ROI: Some businesses allow the night manager to close early if business is slow. If your website says you’re open until 2 a.m., but you regularly close at 11 p.m., you may benefit from officially adopting an earlier closing time. You could transition your business from being “high risk” to “medium risk” just by shortening your hours.
- Update your website: A 2018 photo can signal to an underwriter that you aren’t maintaining your website, which creates a cybersecurity concern. And if you’re not maintaining your site, what else is out of date?
- Evaluate your website through an ADA lens (Americans with Disabilities Act): Some hospitality businesses are facing lawsuits over sites that are non-compliant. Insurers don’t want that liability.
The insurance coverage you need depends on the classification of your business. Are you a bagel bakery or a brew pub? What percentage of your revenue comes from alcohol sales — 0%, 20%, 50%, 80%?
If there’s a mismatch between the info on your insurance application and online presence, you risk an adverse underwriting decision. Insurers may decline to quote. Or if you already have coverage, you risk claim denials and the potential for policy cancellation.
Take the opportunity to shape your story. Submit a letter or video with background information you want the underwriter to consider. Highlight the steps you’ve taken this year to improve your risk profile. Provide context to help insurers understand your online reputation and business vision.
About the author
Rob Hoover is a national expert on hospitality insurance and risk management. In addition to designing comprehensive insurance programs, he helps businesses evaluate the potential impact of online reputation on insurance pricing.
