Labour shortages remain a persistent burden for the hospitality industry in Canada – and one of the reasons insurance rates have yet to return to pre-COVID levels, says Mitch Insurance commercial lines manager, Jake Hovinga (pictured).
“We have somehow skated through COVID, and the sector is now mostly in the rebuilding mode, trying to strive again,” Hovinga said.
One of the most significant impacts of the staffing gaps, he added, is on the liability side.
With fewer qualified workers available, hospitality operators are often left with no choice but to hire less experienced employees or stretch their existing staff thin. The result is a workplace operating under pressure – where employees are working longer hours and where training may be rushed or skipped altogether.
This environment, he said, can lead to a rise in everyday operational mishaps. Accidents in kitchens, oversights like failing to put out a wet floor sign, or breakdowns in standard safety protocols are all more likely when staff are inexperienced or overworked.
A particular area of concern is the erosion of basic training practices. New hires brought in quickly may not receive adequate instruction on foundational risk management tasks – such as maintaining incident logs or understanding standard documentation protocols.
“There can be all sorts of liability claims if you have a stressed operation,” he said.
While insurers haven’t yet introduced specific exclusions or deductibles tied directly to staffing issues, Hovinga said that the consequences of poor staffing are often visible in an organization’s loss history.
A spike in claim frequency and payout severity can have immediate effects on renewal terms, premiums, or even the willingness of a carrier to renew coverage at all.
“Staffing shortage can just snowball into other issues,” he added.
As the liability risk grows, so does underwriter scrutiny. While staff shortages themselves are not an insured peril and don’t qualify for business interruption coverage, Hovinga said that they are increasingly influencing how underwriters assess risk.
Since there's no historical loss data tied directly to staffing challenges, any attempt to price or insure against them would likely be costly and highly conservative at first.
"At the start, underwriters always go on the safe side” and err on the side of caution, often opting to charge a higher premium upfront and assess actual loss experience over time, Hovinga explained.
They are also drilling deeper into operational questions. Today, they're asking about management’s hands-on involvement, employee turnover, the presence of training programs, and whether staff have certain certifications, he said. In some cases, he added, they’re even reviewing three years’ worth of staffing data to evaluate how stability – or a lack of it – might correlate with claims history.
"If [hospitality operators] can show good risk management and good loss experience, it helps us tell that story to the underwriter,” Hovinga said. “The more they can tell us... the better it will be for them.”
The understaffing risks aren’t evenly distributed across the sector. Hovinga said that full-service, dine-in restaurants are especially vulnerable due to the number of employees needed to run day-to-day operations – from front-of-house servers to kitchen staff and dishwashers.
A shortage in any one area can cause cascading operational issues, increasing the chances that less experienced staff are forced to step into critical roles.
In contrast, takeout-focused restaurants tend to face fewer staffing challenges. These establishments, Hovinga said, often rely on smaller teams and can more easily pivot, especially with the support of third-party delivery services. This flexibility helps reduce staffing pressure and, in turn, lowers the operational liability risks tied to overwork or undertraining.
Looking ahead, Hovinga is optimistic that premiums will eventually return to pre-COVID levels. He notes that the broader property and casualty market is beginning to soften, with more insurers expanding their appetites and starting to offer more competitive rates. However, that relief hasn’t fully reached the hospitality sector.
For now, premiums in hospitality remain relatively flat. In cases where businesses are seeing decreases, it’s often not a sign of improving conditions – but rather a reflection of reduced revenue. Because liability exposure is typically rated against revenue, businesses with lower sales may see lower premiums, but it comes at the cost of their bottom line.
“Some may be getting price decreases, but, unfortunately, it's at the detriment of their business not being as successful,” he said.
