Randle Frankel, who runs a commercial property insurance broker with clients throughout Los Angeles County, could only shake his head when several people looted shops over the weekend saying this would not hurt anyone because the business was insured.
Yes, most retailers are protected for such criminal activities, Frankel told me, but not necessarily for total damage or loss. As with all insurance, it depends on how much coverage they buy.
In addition, responsibility does not stop with insurance companies.
“If operators pay claims for losses of hundreds of millions, they will try and compensate,” Frankel said. “There will be consequences. Rates will go up. “
Higher insurance rates will definitely be passed on to customers in the form of higher retail prices, which means, going forward, higher out-of-pocket costs for shoes, clothing and other items obtained without a five-finger discount.
In other words, looting is not a victimless crime, because some have tried to argue in defense of such behavior.
This has very real consequences for business owners and, in turn, their customers. In the long run, we all pay.
“In my experience, after every event like this, there will be an increase in prices,” Frankel said. “Rates must go up.”
If it needs to be underlined, theft and vandalism have nothing to do with mostly peaceful protests over the death of George Floyd. This is criminal behavior, stop completely.
My colleagues Sam Dean, Laurence Darmiento and Ronald D. White did a good job of describing how not all landlords need commercial tenants to insure their inventory.
As a general rule, they report, small business owners with up to 100 employees can spend $ 1,200 per year on protection. Larger companies, I say, pay significantly more than that.
But this is an extraordinary time. Because of the COVID-19 pandemic, many businesses let their insurance policies pass or reduce coverage because they have no money in for months.
“Many of my clients have cut back,” said Gino Mattunts, a commercial insurance broker based in Glendale. “There have been many cancellations.”
He also said theft insurance often came with a large deductible to make protection more affordable. The shoe shop owner who was destroyed by looters, in other words, may be on the hook for most of the loss.
Mattunts said, the possibility of insurance companies will issue new requirements for businesses in connection with the surge in theft and damage to this property.
“Think about what it’s like to walk at night in downtown L.A.,” he said. “Everywhere you look, you see a heavy steel gate. That’s because of past experience in the area. We can see that in the future throughout the city. “
Karl Susman, a commercial insurance broker at Brentwood, agrees that high security measures are possible.
However, first, he expects insurance companies to try to reduce their risk by adding business deductibles, making business owners absorb more financial risk.
They will also stop issuing new policies until they can take into account this latest development, Susman said.
I ask whether local businesses have no risk of looting that is reflected in their policies since the Rodney King riots in 1992, which caused about $ 1 billion in property damage. Hasn’t that changed the insurance landscape?
“No,” Susman answered. “That hardly makes a blip in terms of level and deductibles because it’s so local.”
“What we see now is different,” he said. Recent property damage in some of the region’s most prosperous commercial districts far exceeds, in terms of geography, what was experienced by business owners in 1992. Similar dynamics occur in national commercial centers.
“It’s more like a brush fire,” Susman explained. “This is very broad, and the industry will respond with new steps.”
For consumers, the fire brush metaphor is a good one. Major fires in recent years may not have caused everyone’s homes to burn, but it has changed the way home insurance is offered in California.
Several insurance companies left the market, concluding that the danger of a country’s fire would only get worse. That still raises rates and reduces for almost all homeowners to reflect the reality of climate change that we are living in trouble.
“With home insurance, the tariff continues to rise because we are experiencing loss after loss after loss,” Susman said.
“We can now see the same thing for commercial insurance, and businesses will provide higher costs to customers.”
Mitch Davis, a commercial insurance consultant based in Austin, Texas, told me that no coverage service provider will now begin to weigh heavier theft and vandalism in setting rates.
“Insurers have already included exceptions for infectious diseases due to coronavirus,” he said. “We have never really seen that before. The same thing will happen because of looting. “
His advice for businesses that lack money is not to file relatively small damage claims, such as broken windows.
“By absorbing the loss, you might be able to avoid a rate hike in the short term,” Davis said. “In the long run, tariffs and deductions will rise.”
Tony Cignarale, California’s deputy commissioner of consumer services insurance, said the possibility of tariff increases for businesses – and thus higher prices for consumers – was very real.
“We are monitoring minute by minute and trying to find out where rates will go in the future,” he said.
Spoiler warning: Above.
Enjoy new kicks, looters. We all pay for it.
