How We Are Doing Things
In an effort to continue our transparency, we will share with you why we believe this is actually a viable long term solution. We will compare how we are doing things to the way they are done now and why we believe our product is a better fit for Restaurants, Bars, Taverns & Venues in South Carolina.
Right Now...
Insurance companies take your money and make the profit
How We Do It...
We are structured so that when we make a profit, the insured locations and owners participate in those profits.
Why We Believe Our Way Works
When the insured (aka you) participate in profits, the insurance company and insureds interest align. We are playing on the same team. We both want the same things. Restaurants are less likely to participate in risky behavior and are less likely to file false claims. This also prevents the insurance company from raising premiums to high because if they do all they will be doing is returning it to the policy holders.
Right Now...
Insurance underwriters are assigning risk based off of numbers.
How We Do It...
We are much more interested in the atmosphere you create than just numbers on a paper. We call this community underwriting.
Why We Believe Our Way Works
Insurnace companies make snap choices based on what boxes you check, not who you are. These boxes don’t always tell an accurate story. We believe that you, the restaurant owners, are better equipped to understand the risk of another restaurant than some underwriter in a different part of the country. You know which locations are “trouble” and which ones aren’t and because you participate in the profits, this again aligns our interests. We will ask you for feedback and options of potential insured that are near you before accepting them. You are motivated to give us accurate info because letting in a high risk will increase claims, reduce profits and in turn reduce your profits/return of premiums.
Right Now...
The primary driver that insurance companies use to measure risk is the percentage of alcohol sales.
How We Do It...
We believe a more accurate measure of risk is the volume, meaning number of units, of alcohol sold.
Why We Believe Our Way Works
The conventional way of measuring risk does not take into account macroeconomic changes of the last few years. As food prices have risen restaurant owners have has their food margins squeezed lower and lower. This has reached a boiling point with customers not willing to pay the higher prices for things like burgers or wings. In contrast, liquor prices have remained somewhat stable and consumers have shown more willingness to pay higher prices for alcohol. As a result restaurant owners have had to find their margin on alcohol sales vs food sales. The old way of thinking makes this establishments SEEM more risky than they actually are. Our way puts more emphasis on the number of drinks you sell, not what you sell them for. In fact so far there seems to be an inverse relationship to risk, meaning the higher price you sell something for the less risk you actually have. Think about it like this, if you can sell a Bud Light for $8 while the place across the street sells them for $4 which place do think will have more intoxicated people leaving?
Right Now...
The default coverage amount is $1 million per occurrence and $2 million aggregate.
How We Do It...
We believe the default coverage amount should be $500,000 per occurrence and $1 million aggregate.
Why We Believe Our Way Works
First lets break this down. The aggregate amount is the total amount an insurance policy will pay during the life of the policy (typically 1 year). The per occurrence amount is the amount an insurance company will pay per loss event (lawsuit). It is a misunderstood fact that the legally required amount is $1 million per occurrence. In fact the only thing the law states is that you are required to have $1 million in aggregate coverage. One way we believe we can bring stability to the market is by reducing the average claim amount. Doing this is simple. Right now when an attorney gets a hold of your insurance coverage and see your insurance will pay up to $1 million dollars where do you think settlement negotiations start? By simply reducing this to $500,000 we believe we can achieve a settlement amount that is satisfactory to plaintiffs while still bringing down our average claim paid.
Right Now...
Insurance companies are fast to settle lawsuits.
How We Do It...
We won’t be settling any lawsuits with any type of speed.
Why We Believe Our Way Works
Most insurance companies are publicly traded, meaning they have to produce earnings reports to shareholders. Shareholders hate uncertainty and pending litigation is an uncertainty. The result has been they settle fast and lawyers have figured this out. We aren’t publicly traded and work for you. The longer we can delay a claim paying out the longer we can gain interest on that money and the more power we have during settlement negotiations. This should also reduce our average claim size. We are also willing to fight back against some of these lawsuit.
Right Now...
Insurance companies take your premium and offer little in the form of helping you prevent large losses.
How We Do It...
We believe that if we can teach you how to structure yourself to protect your business against losses the result is a win-win.
Why We Believe Our Way Works
We will not only teach you how to structure your business to help protect your assets, we will also help pay for it. The use of shell companies, holding companies and lease buy-back agreements are just some of the tools we can use to help put you in a position of power when a lawsuit does present itself. The stronger the position we start from the lower our settlements will be. How this may end up working (depending on your exact situation). Bar XYZ is owned by Mr. Smith now. What we will set up is ABC LLC that owns all the furniture of the restaurant, DEF LLC that owns the building and leases it back to Bar XYZ, XYZ management LLC runs Bar XYZ. Mr. Smith owns all three LLCs. When a lawsuit presents itself lets say plaintiff is dead set on suing you for $2 million, much more than the $500,000 insurance will cover. They essentially have two options:
Option 1 – Take a settlement for less than the $500,000 that insurance will pay.
Option 2 – Continue the lawsuit. At which point the management LLC files for bankruptcy. We can do this because it doesn’t actually own anything. Remember two other organizations own all the assets and lease them to the management company. Mr. Smith is just an employee at that point. No matter what an attorney will tell you, they do not want your business to file for bankruptcy because when that happens that will realistically push out any settlement several years. You can only make this threat if you are properly set up PRIOR to a lawsuit.
Always negotiate from a position of power.