CAN'T GET BUSINESS INSURANCE
Back in 2021 a close friend of mine approached me with a business idea. He and his business associate wanted to partner up with the owners of one of the biggest clubs in Miami and set up an events and nightlife security company. The club owners wanted to outsource all security operations to reduce the liability for the club and throw that liability at a third-party operator, in a way that will be cost effective.
A 100 guards operation. The insurance coverage will not only need to cover the guards but the patrons of the club and the actions of the crowd-controlling guards as well.
Their attempts in securing the obligatory business insurance to initiate operations were unsuccessful. They were about to give up. Not only did every insurance broker they contacted rejected them on the first phone conversation, but most didn’t even take their calls.
WHAT BUSINESS INSURANCE DO I NEED?
When going on a new venture and creating a budget, factoring in business insurance is at the top of your list. You will need, at the very least, to come up with Workers’ compensation to cover any damage or injury on work grounds, even if one of your employees gets hurt on his way to work.
Back to my friend, when they approached me for help, the first thing I asked is what kind of insurance program do we need to get things started. For them, the answer was a tough combination of: (Workers Compensation + General Liability + 5M Excess Liability (umbrella)) the prerequisite to attain a contract for a security gig focused on the nightlife sector in Miami.
BUSINESS INSURANCE IN FLORIDA
I rolled up my sleeves and dug in; did my research, found the best insurance brokers in the country and started making phone calls. Needless to say, they all rejected my attempts after two calls. Their replies were: “The Market” – the few powerhouses supplying the premiums and controlling the market – didn’t want to come near it.
I found insurance brokers who specialize solely in the security field and thought that would do the trick. I managed to convince them to take a chance on us and persuaded them to let me fill out an application. I waited a week and of course got the same answer – no! Miami is too risky. It is fraud capital. Too expensive. The premiums will be astronomical, etc. No thank you!
BUSINESS WITHOUT INSURANCE
It is impossible to stress it out hard enough – A business without insurance, especially one that cannot operate without one, is like a jumbo-jet without a roof; sure it’ll fly, but how long till someone goes flying out the window? It’s a risk you cannot afford to take! One mistake. One wrong move, One disgruntled employee and not only your business is at risk but also your freedom and personal assets (house, car, bank accounts, etc.). All can be seized as a result of negligence.
HOW BUSINESS INSURANCE WORKS
What I came to realize, after an arduous trial and error, is that when approaching insurance providers, your focus should be centered on the sector you’re trying to break into (i.e., nightlife, equipment, transportation, manufacturing, technology, industry etc.) rather than the type of business you’re in.
I got to work again. Did another research and got a list of insurance agents specializing in nightlife, clubs, and bars rather than companies specializing in security guards insurance. Within the first few calls, I applied with three agents.
Now, you don’t want to apply with too many agents, and they will tell you this themselves. The market (the suppliers of premiums) focusses only on one application per entity. Which means, if they get multiple applications for the same business, one will be underwritten, the rest will be rejected.
CAN INSURANCE COMPANY INCREASE PREMIUM?
The short answer is YES. The long answer is ABSOLUTELY F@$%& YES, you should expect and factor in your budget the increase of your premiums after the first year. Anticipate a double-digit increase and allocate the proper funds to cover that expense.
To reduce costs, an employee handbook, post orders, and other guidebooks and rules for employees can do the trick. Keeping your records in check, radiating professionalism, and understanding of the business you’re in can help reduce your costs.
DID WE MAKE IT YOU ASK...
One broker out of maybe a hundred we approached got us the insurance that closed the deal.
How to get enrolled in insurance with 5 Million umbrella for a brand new security company or nightclub which no one wants to touch…
Having a tenacious and relentless business consultant who doesn’t know the meaning of the word no or give up, is a very good idea. If you do not have the proper connections with vetted insurance brokers, a good business consultant with the right connections and the know-how is invaluable.
Author
Asaf Antman is a pioneer of the alternative lending industry with more than two decades of extensive experience in the business world under his belt. Throughout his career, he dissected thousands of businesses; underwrote, analyzed, advised, negotiated debts, secured deals, and funded small to mid-size companies in a variety of industries and locations across the U.S.