3 Ways Franchising is Poised to Change in 2020 From an Insurance Supplier’s Perspective

As a supplier to the franchise industry in the realm of insurance, compliance tracking and management solution EZ CERT has a unique vantage point from which to assess industry trends. Team members Andrea Denton and Doug Groves underlined what is on deck in the world of franchise insurance for 2020 that has the potential to shift the way the industry operates as a whole.

Insurance cost trends

Automobile insurance costs will continue to rise.

Whether it be through rates, commercial or personal, fewer carriers competing, automobile insurance is an expensive aspect of the industry right now, and the outlook is only trending towards higher premiums and fewer players in the market.

“Any franchise business that owns commercial vehicles and insures their fleet under auto insurance will feel an impact in 2020,” Groves said. “It’s getting harder to write auto insurance policies and the insurance itself is getting extremely expensive. Franchisees should expect premiums to go up and for claims to become costlier.”

Third party liability

Brands will become increasingly more liable in relation to third-party delivery.

“Food delivery via a third party is not going away,” Denton said. “People are finding creative ways to take their business beyond the four walls. A lot of traditional restaurant businesses and franchises alike use third-party, and carriers look at the use of third-party delivery differently.

Sometimes, carriers look at it favorably due to perceived less risk, while other carriers don’t care who is doing the delivering and charge the same rate across the board. Brands need to look at their policies and read their contracts to best understand what makes the most sense for them as this becomes more and more the norm.”

With EZ CERT, restaurant franchises can ensure that they are covered under their third-party delivery partner’s policy. Checking in on whether a given partner’s insurance extends back to you as the source of the delivery order is essential to making sure your business is protected from all angles at the unit-level.

Epli coverage changes

EPLI coverage is rapidly changing—and brands need to proactively rely on company culture and policies with the coverage as a safety net.

“The price of any and all coverage related to workplace misconduct and sexual harassment is skyrocketing,” Groves said, noting that certain brands are more susceptible to claims than others, such as massage and wellness brands and any and all children’s services concepts. “Toxic organizational cultures are being revealed because people won’t take it anymore.”

EPLI coverage, Employment Practices Liability Insurance, relates to claims of this nature, and in 2020, premiums are rising due to the financial ramifications harassment and discrimination claims bring about, in addition to their social and cultural ramifications.

As with any claim, the specific facts and circumstances surrounding the matter will be critical in determining whether EPLI coverage is ultimately triggered. That being said, Groves warned that while coverage is indeed available to protect franchisors and franchisees in the event these claims arise, it’s becoming costly because insurance companies are treating said claims differently than they were in the past. As a result, it compels franchisors to look inward and establish the necessary systems organizationally to prevent these situations in the first place.

The obligation, Groves said, ultimately falls on companies to have the proper safeguards and culture to limit these types of claims as well as purchase EPLI coverage as part of their overall risk management strategy.