Hoteliers on rising premiums: ‘The insurance market is broken’

A 43 per cent hike in insurance costs over two years would be tough for any company to absorb. For a “small seasonal business” like Arnolds Hotel in Dunfanaghy, Co Donegal, it is “hugely detrimental”, says Aisling Arnold, managing director of the fourth-generation family establishment.

The hotel shopped around before renewing its cover at the end of October, but weak competition in the insurance market left it exposed to a higher premium at what is already “a turbulent time” for the hospitality sector.

Arnolds, a three-star, 30-bed hotel that celebrated its centenary in 2022, is like many hotels across Ireland in that it relies on food service to sustain its revenues throughout the year. Like others in the industry, it is doing so at a time when wage costs have gone up, yet disposable incomes remain visibly strained.

“While we have seen a lull in inflation, it is still impacting on the consumer. People are being cautious,” says Arnold.

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“It’s just a very fine line in terms of how much you can charge on your menu or for your accommodation before customers stop coming through the door.”

“As an industry, we are just struggling,” says Peter Wilson, general manager of Avalon House Hotel in Castlecomer, Co Kilkenny. With more than 30 years of experience in the hospitality sector, he is conscious that high insurance premiums have been a particular scourge for Irish businesses for at least 20 of them.

“We don’t seem to be making any inroads,” he says. The benefit of updated guidelines on personal injury damages, introduced three years ago, “just doesn’t seem to be filtering down”.

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Avalon House Hotel, a four-star, 30-bed hotel, has seen its premium for public liability, employers liability and commercial property insurance rise 24 per cent over the past two years, he says. Such premium hikes represent “another hurdle”, exacerbating the frustrations of the sector.

If there is a better premium available from another insurer at renewal time, it is usually because the excess — the sum that must be paid by the policyholder before the insurer will cover the cost of a claim — is “crazy” [high].

“The market is broken, it’s broken,” he says.

A report published this week by the Central Bank of Ireland found insurers’ profits for business cover rebounded in 2021 and 2022 to profitability levels not seen since 2010 as claims cost fell relative to the premiums they charged.

While the data suggests insurers barely broke even on business insurance over 14 years starting in 2009, that is of little comfort to the sectors that have endured double-digit rises in their premiums since the pandemic at a time when other operating costs have surged too.

Echoing Arnold, Wilson says any moves to pass on higher costs, including insurance, are “a Catch-22 situation” because consumers are also being squeezed.

“Guests can only pay so much for a coffee, they can only pay so much for a sandwich, they can only pay so much for a steak.”

The Government, he concludes, is “out of touch”.

The Irish Hotels Federation, meanwhile, has described the cost of insurance for hospitality businesses as “excessive”, warning that many hotels and guest houses are now facing “eye-watering increases in the cost of doing business” at an uncertain time for tourism.

Several cost pressures — such as the VAT rate, which reverted to 13.5 per cent last September after almost three years at 9 per cent — are within the control of the Government to alleviate, Arnold notes.

“I will be doing what I always do and pivoting to the best of my ability,” she says. For its part, the Government “just needs to step up”.

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