Bakery Insurance Explained
Commercial Bakeries face risks from fire hazards, equipment breakdowns, product liability and contamination, employee injuries, supply chain issues, and more. And the monthly bakery insurance payment is pretty significant, so you want to make sure you’re maximizing your purchasing power and getting the most value from your insurance program.
How do you do that?
How do you know you have the right protection and are paying the right price? Not having the right protection can lead to financial losses in case of a claim, and overpaying can strain your budget. It’s crucial to strike the right balance.
Shopping your account out is a significant pain in the butt, and the policies are so darn confusing. It’s a complex process that requires expert guidance.
This article is right for you if you face these questions and issues around bakery insurance.
In my opinion, getting your insurance program right means having a combination of robust protection, high-touch customer service, risk control services, competitive pricing, and, most of all, peace of mind.
That may seem like a tall order, but it is achievable, and in this guide, I’m going to show you how to do it effectively.
Hi, I’m Gordon Coyle. Welcome to my blog, where we discuss the risk and insurance issues facing business owners. If this article doesn’t answer your question, then reach out, and let’s connect. I’d love to hear from you.
Okay, so how do you reach this sort of insurance nirvana state where you have the right protection at the right price, you’re doing everything you need to do to control risk to maintain a low price, you’ve got a reliable relationship with your insurance broker so they will jump through hoops for you when you need them to? For instance, a reliable broker will expedite your claims process or negotiate better terms on your behalf.
The advice I’m going to give you comes from my 40+ years as a commercial insurance broker. This conversation has been built on hundreds of client relationships that were both good and bad. I’m going to give you my insights based on real-life examples of how I’ve seen things work and, frankly, not work so well.
Where do you start with bakery insurance?
I think the most significant first step to finding the best bakery insuarnce is to select a broker with the skill set you’re looking for, and that will include the following traits: skilled, knowledgeable, well-versed, and have a strong background in coverages and risks when it comes to commercial insurance. I would avoid using a broker who claims to be an expert in home and auto, business, and life or health insurance. The insurance business has become so complex that it’s impossible to be an expert in all insurance segments, so working with a dedicated expert will be the best bet.
When it comes to the broker selection process, it’s of course not just the salesperson that’s important – it’s also critical that they have a team of people behind them to service your account and be at the ready for day-to-day matters, so finding the right expert that has an expert team behind them to support you is critically important.
Unfortunately, this first step is often overlooked or glossed over when an insurance renewal date is approaching, and the lowest-priced proposal or most charismatic salesperson becomes your broker in a rush to secure the best renewal terms. For this reason, it makes sense not to start the broker selection process in the last 100 days of your policy term. By then, it may be too late to make the wisest choice.
In my mind, one of the most significant issues or considerations missing when going through this process is that clients will expect their brokers to operate in a communication vacuum, which is not good.
As the client, you play a crucial role in the bakery insurance process. You need to clearly communicate what you’re hoping for, what your concerns are, what your fears are, what you hold dear, and what you want to achieve in this relationship. The better job you do to have this open communication channel, the better off you’ll be.
Step 2: Coverage Audit
The skilled broker you selected in Step 1 will likely recommend a coverage audit or review as a starting point in their engagement. This audit will help identify deficiencies, overlaps, gaps, or incorrect elements of your existing policies and what enhancements should be considered. This is an excellent first step to assess where you are coverage-wise and where your new expert thinks you should go. It’s a process that can bring about positive changes in your quest to find the right bakery insurance.
I just mentioned communications, and in this step of the new broker process, I recommend writing a memo with the issues and concerns you’ve had with your insurance in the past. These issues could be uncovered claims, shortfalls in claims, poor service experiences, and other issues you’ve not been wild about. Send that memo to the broker and then schedule a call to review it during their coverage audit, as it will likely trigger better advice from them in their final report.
Upon completion of the report, the deficiencies should be discussed, the needed improvements prioritized, and some ideas of the cost of the improvements provided. Yeah, it would be great to get every improvement done in year one, but if your budget can’t support it, you need to have a realistic phase in these improvements.
Top Bakery Insurance Issues
When we’ve performed these bakery insurance audits, we have consistently found these top five issues needing to be addressed:
- Property limits are insufficient. Building, contents, and business interruption values are often well below replacement cost levels and haven’t escalated adequately for years. This is a big deal.
- Excess Liability limits are also insufficient. What I mean here is that the bakery’s general liability limit is $1M, and a $1M umbrella policy is in place. If there is a commercial auto exposure, that policy is often at $1M and included in the schedule of underlying policies. Excess or umbrella liability coverage is the cheapest but most valuable form of coverage, so we recommend looking at higher limits based on the company’s size and buying up.
- Cyber insurance is often not purchased, and the reason for this is not surprising. It’s not because the business owner didn’t want to buy it; it’s usually because the insurance broker hasn’t recommended or explained it thoroughly enough to get a bakery to purchase it. Cyber risk is the most frequent cause of loss within the small and medium-sized bakery business. It has the potential for catastrophic damage, especially when process machinery is connected to the company’s computer network.
- Crime Insurance is often missing or deficient and leaves the coverages found in the bakery’s business owner policy, where protection limits are usually limited to $25,000. The recommendation to include a stand-alone crime policy in Baker’s insurance program will be based on the company’s size. It may be perfectly fine for a small retail bakery to have crime coverage within their BOP policy with the limits of $25,000 I mentioned. Still, higher protection limits from employee embezzlement, computer fraud, forgery or alteration, and other crime perils should be considered for a more extensive operation that makes several million dollars a year in sales.
- Product Recall coverage is often limited to a small sub-limit within a bakery’s package policy (when available), which can be anywhere between $25,000 and $250,000. The scope of coverage is also very limited. The potential for catastrophic loss from a contamination event or recall is significant, so we often recommend a stand-alone recall policy.
Step 3: Claim & Loss Control Review
This step is often overlooked in the insurance procurement process, which is unfortunate because it has such a significant impact not only on the premiums you’ll pay but also on the costs you’ll pay with each claim that is not reimbursed by insurance.
For large companies, the process of viewing all the costs related to business risk is called TCOR, or Total Cost of Risk. It incorporates the insured and uninsured costs of running the business.
Let’s start with a claim review.
To perform this review, you’ll need to get your “loss runs” for all lines of coverage for the past five years, and you get them from your current and past brokers during that five-year time frame.
A word of caution here – when you request loss runs from your current broker, it will send up red flags with them that you’re going to shop your insurance, which may trigger them to begin that shopping process immediately without you wanting them to do it. To prevent this, you need to be upfront about why you need the loss run information and that you’re not going to market but rather evaluating your claims. It also makes sense to tell them not to overreact and begin any shopping process.
Loss runs should be back to you within a week; if they’re not, your current broker may be sitting on your request, worried that they will lose your account. There’s nothing you can do about that other than be persistent and keep asking for them. In some states, like New York, an insurer has ten days from the date requested to return loss information to the insured. Check your state’s requirements and press them if necessary.
The most common claims we see for bakeries are worker injuries involving burns, repetitive motion injuries, cuts, and abrasions. Operationally, we see equipment failures resulting in loss of refrigeration or machinery downtime business interruption claims. Then, there are claims related to theft, vandalism, and occasional product liability claims. Every account has issues, but a few large bakeries have had no claims over five years.
Okay, now you have a stack of PDFs from each policy with the claims over the past five years; now what? When we do this, we take that info and ask you, “What happened?” in each of these claims, at least for those over a certain dollar threshold. You’ll explain the scenario of each claim event. The next and more important question we ask is, “What steps have you taken to prevent this claim from occurring again?”
This is how you will build out your loss control program. If the conditions that existed in the past have not been changed, the claims you’ve experienced in the past will likely repeat themselves in the future. We’re looking for opportunities for better outcomes, which means fewer and less expensive claims.
Why?
Because the price you pay for bakery insurance is heavily weighed by your claims experience. To do better in the marketplace, especially in challenging market conditions like what we’re experiencing in 2024, clients with a better-than-average claims experience will do much better than their peers with below-average claims experience. This is true for bakeries as it is for any other type of business.
Reducing claim frequency and severity involves recognizing why a prior claim has occurred and then changing the conditions that caused it.
I could write volumes about risk control, but for now, my advice is that you need to address the specific issues in your bakery that have triggered claims in the past, whether that’s worker injury claims, slip-and-fall claims, auto accidents, or other types of claims. A skilled broker should be able to help you with the four basic risk management steps.
- Identify and categorize the risks you’ve experienced.
- Assess the potential risks from reoccurring.
- Treat that risk by educating and training employees on prevention, removing the hazard that caused the accident, and creating accountability around that risk.
- Finally, continue to monitor and report on that risk.
Here’s the bottom line around claim reviews and risk management. The best-performing companies in the world take claims and risk management extremely seriously, not just to reduce costs but also to reduce unneeded human pain and suffering, to reduce unnecessary waste, and to be good corporate citizens. It may sound altruistic, but it’s an excellent goal for small and medium-sized businesses to shoot for, too, and it can also help your bottom line.
Step 4: Putting it all together.
I’ve talked about coverage elements and getting them right, as well as claims and risk management. Getting that right now in step 4 is putting those two things together in an effective submission to a select group of underwriters in the insurance marketplace.
Too often, the typical broker process is to send a set of applications and loss runs to every insurer they represent and hope for the best. This approach will return results, but it may not be the best.
Why?
Because the average underwriter has two or three times the number of new business submissions on their desk at any one time that is humanly possible to manage, they are overwhelmed at work like everyone in the world today. Hence, they must choose wisely which accounts will get their full attention and best pricing. To achieve that, a skilled broker will converse with their best underwriters, who they know are aggressively interested in writing bakery accounts. They will “sell” your account to the most interested underwriters and provide them with more than the essential data to get a quote. They will formulate a submission that includes all of the coverage improvements we discussed in step 2, and more importantly, they will write a narrative to the loss run information that discusses what steps you’ve taken to prevent each claim from occurring again. We talked about this in step 3.
This is where the rubber meets the road. If you want to achieve above-average results, you need to have an above-average broker leading the charge in a manner that is different than what most other brokers do – which, quite frankly, is expending the least amount of effort to get a quote. What you’re looking for are results, and a skilled broker following these steps proactively will get the type of results you want.
Bakery Insurance Conclusion
Okay, I’ve covered a lot of ground here, and if you’ve made it this far and continued watching, you’re probably wondering how you find a broker like that who has a system and a process to get better-than-average results for your bakery AND can provide you with ongoing insight, advice, service, and support during the life of your business insurance relationship.
That’s a leading question and a sales pitch if you can’t tell. The answer is that The Coyle Group has this system built and can provide you with the resources, expert advice, and guidance on creating the best outcome for your next renewal. If you’re not happy with your current broker relationship, and that’s what caused you to click on this video, then I’d encourage you to contact us for a conversation. When I say there’s no obligation and there won’t be any heavy-duty sales tricks, I mean it. An intro conversation aims to see if we might be a good fit for you and your situation. It’s not to sell you on doing business with us or make you feel obligated to take the next step.
You may also question whether it makes sense to do business with a broker who isn’t local. I’m located in the NY Metro area, and if you’re not from this area, here’s my advice. Reach out, and let’s connect to have that conversation. Let’s see what the issues are and if we can resolve them without being local. If it means a visit with you, let’s see if that’s economically realistic. We have clients from all over the country, and not being local to them hasn’t proven to be a problem yet.
The bottom line is that if you’re looking for an advocate who can do the best job on your bakery insurance, The Coyle Group is here and ready to assist. Click the Let’s Chat button at the top right corner of this page to get started.
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