In the rapidly evolving franchising industry, maintaining an updated and accurate digital presence is crucial for your business's success. While websites and marketing materials are often the first touchpoints for potential clients, they also play an essential role in how insurance carriers perceive and assess your franchise. Unintentionally misleading insurance carriers by failing to update your site with current services can lead to delays or outright denials in coverage approval. Adding all new services can be equally problematic, insurance sees this as potentially all new risks. For many franchisors, this creates unforeseen obstacles that not only slow growth but also jeopardize the carrier interest in the franchise. That means they may non-renew or add significant increases to current coverage. Some carriers may have no interest in the new risk, and therefore leave you in a lurch.
Franchisors frequently feel the frustration of insurance carriers scrutinizing their digital footprint, but we see that underwriters review businesses through their websites and advertising. The introduction of new products or services often happens swiftly at the executive level, but the steps required to reflect those changes on both websites and in insurance policies lag behind. As a result, outdated digital content can misrepresent the current risk profile of the franchise to insurers, causing headaches during underwriting or policy renewal.
The Unseen Consequences of Outdated Marketing Materials
Marketing materials, including websites and brochures, are the main drivers of franchise visibility to their customers. When launching new services, franchisors often prioritize advertising and attracting new customers, but they frequently overlook the implications for insurance carriers. New services, even minor ones, can increase the risk for insurers. If these services are not properly reflected in both the marketing materials and the insurance documentation, a gap potentially arises.
Consider a scenario where a franchise specializing in home maintenance services decides to add mold remediation to its service offerings. The franchisor quickly adds this new service to its website to entice new clients, but fails to update the insurance carrier about the expansion. Mold remediation is considered a higher risk service due to the potential liability associated with property damage and health issues. As a result, when the franchise attempts to renew its policy, the carrier denies coverage based on the outdated information. Without proper coverage, franchisees can expect to fail insurance checks and miss out on bids.
Many franchisors mistakenly believe that minor service additions do not significantly impact their risk profile, especially if they are not central to the franchise’s core operations. This is a common misconception that can have consequences. Insurance carriers need accurate and up-to-date information to properly assess the risks associated with your business. Without it, you’re not only risking delays in obtaining coverage but also leaving yourself vulnerable to being underinsured.
Why Carriers Scrutinize Your Website?
Insurance carriers have grown increasingly sophisticated in assessing the risks associated with franchising operations. For carriers, a franchise’s website is more than just a marketing tool—it’s a critical component of risk assessment. They assume that a franchise will disclose their main operations in an insurance application, but be more forthcoming in their marketing material. Think about a contractor's van wrap which describes an endless list of potential services. The marketing material for a business is usually exhaustive. The insurance company is wise to review all the businesses' marketing material as part of the risk review process. Websites that list inaccurate, outdated, or misleading information about a franchise's services raise red flags for insurers, as they create uncertainty about what risks they are actually underwriting. In some circumstances, the underwriter may by left questioning the maturity of the business, and the overall operation as being undesirable.
A particularly challenging situation arises when franchisors introduce new services that may fall outside the scope of their original insurance policy. For example, a home servicing franchise may begin offering minor electrical services in addition to its usual landscaping services. While this may seem like a logical expansion, electrical work carries a different set of risks than landscaping. If this addition is not properly communicated to the insurance provider, it could result in policy denial or insufficient coverage in the event of an incident.
Insurance underwriters are trained to look for potential discrepancies between a franchise's online presence and the information provided in insurance applications. Even small inconsistencies—such as a service being advertised online but not listed in the official franchise documents—can lead to delays in policy approval. The underwriting process may become bogged down as the carrier tries to reconcile the difference between what is publicly advertised and what the franchise claims in its application.
The Importance of Accurate Representation
To stay ahead of insurance challenges, franchisors must be proactive about ensuring their websites and marketing materials accurately reflect the services they offer. That means that if your website lists products or services you rarely sell, you should consider removing them altogether. Consult between the marketing team and the executive team if the service produces enough income to justify the risk exposure. This is particularly important when expanding into new areas of service, as even a slight misrepresentation can result in significant insurance roadblocks. Simply put, accurate representation of your business on all fronts—digital, promotional, and contractual—is essential for protecting your franchise from the costly consequences of misalignment with your insurer.
Accurate and transparent communication between franchisors and their insurance carriers should be a priority, especially when new services or products are introduced. Every time a new service is added, franchisors must reassess their insurance needs with their broker. Failing to do so can create a mismatch between what is being advertised to potential clients and what is covered by insurance policies, leading to significant exposure in the event of a claim. The carrier doesn’t want to be the last to know.
For example, a franchise in the pest control industry expanded into wildlife removal, which involves a different set of risks and liabilities. Without notifying their insurance provider of this expansion, the franchise faced policy cancellation when the insurer became aware of the increased risks associated with the new service. This left the franchise vulnerable to lawsuits and regulatory fines until they could secure new coverage.
This real-life scenario emphasizes the importance of ensuring your website and marketing materials are aligned with your insurance policies. A simple oversight, such as failing to notify the insurance carrier about a new service, can result in unexpected consequences. Franchisees will then experience unexpected consequences such as premium increases, cancellations, or left paying out of pocket for a claim.
Misconceptions About Simplifying Marketing
A common misconception among franchisors is that simplifying or generalizing the services offered on a website will make the insurance approval process easier. Unfortunately, this strategy can backfire. When services are generalized, omitted, or downplayed, it creates a lack of transparency, which can cause carriers to question the integrity of your business. Inaccurate or vague descriptions of services can prevent carriers from properly assessing the risks involved, leaving the franchise vulnerable to uncovered liabilities.
Many franchisors believe that streamlining their service descriptions will make it easier for clients to understand their offerings, while also avoiding potential complications with insurance coverage. However, this simplification can lead to confusion when carriers conduct their due diligence. Carriers may perceive vague descriptions as a deliberate attempt to hide high-risk activities, which could lead to delays in policy approval or even denial of coverage.
Instead of simplifying, franchisors should focus on providing clear, detailed, and transparent information about their services. It is far better to fully disclose all aspects of your business to your insurer than to risk being underinsured. Carriers value transparency and accuracy, and being upfront about the services you offer can help foster a smoother underwriting process. Viewing the carrier as a partner in your business will more closely align with how the relationship should be viewed. Do they want to be partners with someone who can only vaguely describe their operations? They want to see a business be clear about their operations and know exactly what risks they are exposed to.
Conclusion: Proactive Steps to Align Your Marketing and Insurance
To avoid frustration and ensure your franchise remains on a solid path to growth, it is essential to keep your website and marketing materials aligned with your insurance policy. Regular updates and open communication with your insurance provider are key to avoiding costly delays, coverage denials, and unforeseen obstacles that can derail your business.
Remember, an outdated website is more than just a minor inconvenience. It can significantly hinder your ability to secure or renew insurance coverage, which in turn can affect your franchise’s ability to operate and grow. As your franchise expands and offers new services, ensure that your marketing materials are in sync with your insurance policies to prevent unnecessary risks and liabilities.
If you’ve recently added new services or products to your franchise and aren’t sure if your insurance policy reflects these changes, reach out to Rikor to discuss how to best protect your business from potential risks.
Comments