The QSR Insurance Crisis: Why Premiums Have Doubled Since 2020 and What Smart Operators Are Doing About It

The Bill Nobody Budgeted For

When Marco Reyes renewed the insurance package on his 14-unit Tex-Mex franchise in the Dallas–Fort Worth metroplex last October, the number on the proposal made him do a double-take. His total annual premium — covering commercial property, general liability, workers' compensation, and umbrella coverage — had climbed to $387,000. In 2020, he was paying $194,000 for substantially the same coverage.

"I thought the broker made a mistake," Reyes told QSR Pro. "He hadn't."

Reyes isn't alone. Across the quick-service restaurant industry, operators are confronting an insurance market that has turned hostile. Premiums have surged, deductibles have ballooned, carriers have pulled out of the restaurant space entirely, and coverage terms that were standard five years ago now come loaded with exclusions. For an industry already operating on razor-thin margins — the National Restaurant Association found that 38% of restaurants generated no profit at all in 2023 — the insurance crisis represents an existential threat to smaller operators and a serious drag on profitability for even the largest franchisees.

The numbers tell the story. According to the Council of Insurance Agents & Brokers (CIAB), commercial property and casualty premiums have risen for more than 25 consecutive quarters. Commercial property specifically saw average increases of 11.8% in Q4 2023 alone, with cumulative rate hikes pushing many restaurant operators' premiums well past the doubling threshold since the pandemic began. In the hardest-hit markets — coastal properties, urban locations, anything with significant liquor sales — increases of 150% to 200% are not uncommon.

"2024 ended up being the highest sales year probably in restaurant history, but that was also coupled with the highest costs in the restaurant industry," Paul DiBenedetto, senior vice president and franchise/hospitality segment leader at HUB International, told Insurance Journal. "More sales equals more insurance costs."

The Four Horsemen of the Insurance Apocalypse

Understanding why premiums have doubled requires examining four interconnected forces that have converged since 2020 to create what insurance professionals call the hardest market in a generation.

1. Catastrophic Weather and Property Losses

The most visible driver is the surge in natural catastrophe losses. Hurricanes, wildfires, severe convective storms, and flooding have battered commercial property portfolios, forcing reinsurers to dramatically reprice risk. According to Travelers Insurance, overall construction material costs across market sectors are nearly 40% higher than pre-2020 levels, meaning every property claim now costs significantly more to settle.

For QSR operators, this translates directly into higher property premiums. A restaurant that suffered no losses whatsoever can still see double-digit annual increases simply because the entire risk pool has deteriorated. Coastal restaurants near Corpus Christi or Galveston, for instance, face elevated property rates up to 20% higher than inland locations. In Texas alone, commercial property premiums have risen 5–7% annually since 2020, compounding to a cumulative increase that approaches or exceeds 30% before factoring in the broader hard-market surcharges.

2. Nuclear Verdicts and Social Inflation

Perhaps the most pernicious force driving insurance costs is the explosion in what the industry calls "nuclear verdicts" — jury awards exceeding $10 million. A study by Gen Re found 89 nuclear verdicts in 2023 alone, totaling $14.5 billion, a 15-year high. By 2024, the picture had worsened dramatically: nuclear verdicts surged 116% to $31.3 billion, with the median verdict climbing to $51 million from $44 million the year prior.

The U.S. Chamber of Commerce reported that verdicts above $100 million reached a record in 2023, up nearly 400% from a decade earlier. Swiss Re pegged U.S. social inflation — the tendency for insurance claims costs to rise faster than general economic inflation — at 7% in 2023, a 20-year high.

For restaurants, the exposure is acute. A dispute in a parking lot, a food-safety incident, or an alcohol-related accident can all spawn the kind of litigation that produces eight- and nine-figure verdicts. Society Insurance, a mutual carrier specializing in the restaurant sector, warned that California, Georgia, Florida, Illinois, New York, and Texas accounted for 61% of all outsized jury verdicts between 2013 and 2022.

"What you cannot predict is the liability, and what could happen and why, and when you will get sued," said David DeLorenzo, CEO of Ambassador Group Insurance and Bar and Restaurant Insurance, a Phoenix-based specialist who has personally owned and operated more than 13 restaurants. "That, to me, is a problem in every market now."

3. The Labor Cost Cascade

Rising labor costs don't just squeeze restaurant margins directly — they cascade into higher insurance costs through multiple channels. The National Restaurant Association reported that labor costs have risen 31% over the past four years for the average restaurant. In California, the April 2024 fast-food minimum wage increase to $20 per hour sent shockwaves through franchise operators' P&Ls.

"Where my operators are struggling is in the franchise, fast-food space — those that are now paying $20 minimum wage," Jon Siglar, executive vice president at ALKEME, which writes policies for major national chains in the fast-food, fast-casual, and fine-dining segments, told Insurance Journal.

Because workers' compensation premiums are calculated partly on payroll — as wages go up, so does the premium base. Wage inflation peaked at 9.3% in 2022 and remained above 4% through 2023, according to Indeed data. This means operators face a compounding effect: higher wages increase the payroll exposure base, which in turn elevates workers' comp premiums even before rate changes are applied.

The litigation picture compounds this further. Siglar described a common pattern in California: an operator terminates a chef for cause, and within five days receives notification of a cumulative trauma claim. Retaliatory workers' comp filings have become a cost-of-doing-business headache that drives up experience modification rates and, ultimately, premiums.

4. Carrier Flight and Market Contraction

Perhaps the most alarming trend for operators is the steady withdrawal of insurance carriers from the restaurant space. Tim Smith, senior vice president and national hospitality practice director at IMA Financial Group, told Insurance Journal that while carrier turnover is always a feature of restaurant insurance, 2023 was "probably the most difficult market" he'd seen, with two large national carriers exiting the restaurant business over a 12-month span.

The carriers that remain have dramatically narrowed their appetites. DiBenedetto described the dynamic bluntly: "Everybody wants fine dining, and liquor percentage under 30% of check averages. Everybody wants comp right now because comp's obviously very hot in the restaurant space. But liquor's getting very hard, and full bars are tough."

Any establishment with high-volume liquor sales, late-night hours, live entertainment, or even video games increasingly finds itself pushed into the surplus lines market — the insurance equivalent of subprime lending — where premiums can be multiples of standard market rates.

DeLorenzo described watching established carriers "charging double if not triple for liquor liability, and they're taking sub-limits on things like assault and battery, or just pulling coverage completely off." For QSR operators with bar components or late-night service, this represents a particularly painful squeeze.

The Coverage Gap Crisis

The premium increases are only half the story. Equally concerning is what insurance professionals call the "coverage gap" — the growing divide between what operators need and what policies actually provide.

DiBenedetto flagged a disturbing trend: smaller, independent operators are increasingly willing to "go bare" on certain lines of coverage, simply because they cannot afford the premiums. This creates catastrophic tail risk — a single slip-and-fall lawsuit or food-contamination event could bankrupt an uninsured operator.

Employment practices liability insurance (EPLI) illustrates the coverage squeeze perfectly. EPLI covers claims for discrimination, harassment, and increasingly, wage-and-hour violations — the fastest-growing category of employment litigation, up 200% over the past decade. Yet many EPLI policies explicitly exclude wage-and-hour claims, and those that do offer coverage typically provide only a sub-limit for defense costs, not for judgments or settlements. In California, where wage-and-hour litigation is particularly aggressive, Siglar described this coverage as "getting harder and harder to get for our clients."

Meanwhile, a NEXT Insurance survey found that nearly half (48%) of restaurant owners experienced weather-related damage during winter 2023–2024, but only 42% felt adequately insured. More than a third — 34% — acknowledged they were not prepared for severe weather losses.

What Smart Operators Are Doing About It

The operators who are managing through the insurance crisis most effectively share several common strategies. None of them are silver bullets, but together they represent a playbook for controlling what has become one of the fastest-growing line items on the QSR P&L.

Embracing Captive Insurance Programs

The most sophisticated multi-unit operators are turning to captive insurance — essentially forming their own insurance companies to retain risk rather than transferring it entirely to commercial carriers. The captive insurance market has exploded, with approximately 8,000 captives globally now writing $50 billion in premiums, according to 2024 research by Risk Management Advisors. The global captive market is projected to reach $250 billion by 2028, driven largely by businesses fleeing the hard commercial market.

The Restaurant Franchise Captive Program, operated by Specialty Captive Group, was built specifically for restaurant franchisees and offers operators ownership participation in their insurance program. For multi-unit QSR operators paying north of $250,000 annually in premiums, captives offer the potential to capture underwriting profit in good years, smooth out cost volatility, and maintain coverage when commercial carriers flee.

Marsh's 2025 captive report found that new captive formations are retaining over 55% of additional premiums written, with large established captives retaining 8% more risk year-over-year than the prior period.

Investing in Loss Prevention Technology

Forward-thinking operators are deploying technology specifically to build a risk profile that commands better rates at renewal. Video surveillance systems with AI-powered analytics can document incidents in real time, verify claims, and identify unsafe practices before they generate losses. IoT sensors monitor freezer temperatures, detect water leaks, and flag fire-suppression system failures — the kind of proactive risk management that underwriters reward.

"That's the reason that you really have to understand what the restaurant's doing," said Kimberly Gore, national hospitality practice leader and chief marketing officer at HUB International. "We're absolutely going to talk about pricing, we're absolutely going to talk about markets, but what we really try to do is understand what they're doing."

Getting Serious About Documentation

The operators seeing the best renewal outcomes are treating the insurance application process like a capital raise. That means clean financials, detailed incident tracking, documented safety training programs, and organized claims histories — the kind of underwriting package that MGO, a national accounting and advisory firm, recommends building year-round rather than scrambling at renewal time.

Accounting teams can model insurance cost scenarios, organize incident data for underwriter consumption, and evaluate whether alternative structures like captives or self-insured retentions make financial sense. The operators who present a compelling risk narrative — not just a premium check — are the ones finding coverage in a contracting market.

Working with Hospitality Specialists

Perhaps the most important tactical move is ensuring your insurance program is managed by a broker who specializes in hospitality. Generalist brokers often lack the market relationships and underwriting knowledge to navigate the restaurant insurance space effectively.

"Carriers want to be in the restaurant segment, then lose their shirts over time, and then they get out, so we're in a constant search for new entrants," Smith said. Hospitality specialists maintain relationships across the market cycle and can identify emerging carriers before they become widely known — a critical advantage when incumbent carriers are exiting.

DeLorenzo cautioned operators against chasing the lowest premium with unfamiliar carriers. "These newer markets — I've had it happen — they'll jump into a market for a year or two, do not understand the laws or the different types of exposures in those states, and they'll get out after a year or two," he said. "What ends up happening is these carriers come in, they buy rate, and then they get out or they just cut their coverages in half."

The Road Ahead

The insurance market is showing tentative signs of stabilization. CIAB data for Q4 2024 showed overall commercial premium increases moderating to 5.4%, down from the double-digit spikes of 2022 and 2023. Kimberly Gore at HUB International described the current market as having "found some stability," particularly for operators with clean loss histories and proactive risk management programs.

But stabilization at elevated levels is not relief. The premiums that doubled between 2020 and 2024 are not coming back down. The structural forces — social inflation, climate risk, labor costs, litigation trends — are not reversing. The National Restaurant Association projects industry sales reaching $1.5 trillion in 2025 with employment growing by 200,000 jobs, which means the payroll and revenue exposure bases that drive premium calculations will continue expanding.

For QSR operators, the message is clear: insurance is no longer a back-office commodity to be renewed annually without scrutiny. It is a strategic cost center that demands the same attention as food cost, labor scheduling, and real estate. The operators who treat it that way — investing in loss prevention, working with specialized brokers, documenting their risk management efforts, and exploring alternative risk transfer mechanisms — will outperform their peers by a wider margin every year.

The ones who don't will eventually discover that the cost of being uninsured — or underinsured — dwarfs even the most painful premium increase.