Do You Have Enough Insurance?
A company that sells small-business insurance says you're probably underinsured.
Here are today’s highlights:
The IRS is offering a get-out-of-jail-free card.
Americans are planning to spend a lot more on the holidays this year.
Would you open a “super-opulent” restaurant in San Francisco right now?
The competition among airline loyalty programs is heating up.
A survey by Hiscox, which sells small business insurance, finds small businesses need more insurance: “[The survey] found 75 percent of small businesses are underinsured. For small businesses operating for 10 years or more, 39 percent have never updated their general liability insurance. Peterson said a lack of education is sometimes a factor. About 71 percent of small-business owners did not understand what a business owners' policy covers, and 83 percent failed to correctly describe their general liability coverage. Overall, about 65 percent of business owners surveyed had general liability coverage while about 45 percent had property insurance for their businesses. Just 32 percent had professional liability insurance and 35 percent had workers compensation insurance.”
“Racheal Allen has started a number of businesses but, until she needed office space, she didn't realize how important insurance is for a small business. In 2019, Allen launched Operations School in the Detroit area, helping thousands of underserved business owners learn how to better operate their companies through workshops, technical assistance, and a 10,000-square-foot location with incubation and office space.”
“‘Most of the small businesses I have talked to only get insurance because they are required for some reason. Most small businesses have never thought about it,’ Allen said.” READ MORE
California’s insurer of last resort is getting overwhelmed with applications: “As a string of major insurers have pulled out of California or restricted business in the state, more and more homeowners have been forced to seek coverage from the California FAIR Plan, a fire insurer for high-risk properties. Last month, Insurance Commissioner Ricardo Lara said that 3 percent of Californians now use the FAIR Plan, short for Fair Access to Insurance Requirements. But in a recent webinar for homeowners in Butte County, a FAIR Plan representative shed light on the true scope of demand for the ‘insurer of last resort,’ which cannot turn a property down as long as it meets minimal underwriting requirements. ‘In the last 60 days, I think the application volume is around 1,000 applications a day right now, which is just astronomical,’ said Phil Irwin, the plan’s public relations representative and president of Gold Insurance Solutions in El Dorado Hills.”
“That statement, which Irwin made nonchalantly in the Oct. 4 webinar, visibly shocked Amy Bach, executive director of San Francisco-based nonprofit United Policyholders, who moderated the discussion. ‘Sorry, you’re getting a thousand a day?!’ she asked.”
“This month, the FAIR Plan began mailing out renewals with higher premiums starting on Dec. 1. Although the average rate increase for policyholders will be around 15 percent, it will vary heavily based on the wildfire exposure of their properties.” READ MORE
Concerned you may have overreached with your Employee Retention Credit application? The IRS is offering an off ramp: “This new withdrawal option allows certain employers that filed an ERC claim but have not yet received a refund to withdraw their submission and avoid future repayment, interest and penalties. Employers that submitted an ERC claim that's still being processed can withdraw their claim and avoid the possibility of getting a refund for which they're ineligible. The IRS created the withdrawal option to help small business owners and others who were pressured or misled by ERC marketers or promoters into filing ineligible claims. Claims that are withdrawn will be treated as if they were never filed. The IRS will not impose penalties or interest.”
“Those who willfully filed a fraudulent claim, or those who assisted or conspired in such conduct, should be aware that withdrawing a fraudulent claim will not exempt them from potential criminal investigation and prosecution.”
“‘The IRS is committed to helping small businesses and others caught up in this onslaught of Employee Retention Credit marketing,’ said IRS Commissioner Danny Werfel. ‘The aggressive marketing of these schemes has harmed well-meaning businesses and organizations, and some are having second thoughts about their claims. We want to give these taxpayers a way out.’" READ MORE
Americans are planning to spend a lot more on holiday shopping this year: “In its Holiday Shopping Survey released Thursday, credit reporting giant TransUnion found that Americans on the whole are planning to make larger, more expensive purchases on holiday gifts. In a survey of over 1,500 adults conducted in August, TransUnion found 21 percent of respondents were planning on spending over $1,000 on holiday shopping this year, compared to 14 percent last year. Meanwhile, while 17 percent spent under $100 last year on holiday gifts, only 4 percent plan to spend that little this year.”
“A third of households reported planning to give more practical gifts this year, such as gas cards. Around 21 percent said they would replace tangible gifts such as clothing or electronics with experiences such as travel and events.”
“Many are also shopping earlier this year — 22 percent said they already started shopping as of August — as well as searching for deals well before December.” READ MORE
The average American is wealthier than ever: “Net worth for the average American skyrocketed 37 percent during the pandemic, thanks in part to government stimulus initiatives along with higher home and stock prices. The Federal Reserve's Survey of Consumer Finances found that net worth for all age groups rose between 2019 and 2022. This was more than double the next-largest increase in net worth since 1989, when the Fed began the survey. Median net worth — which measures household assets like houses and vehicles, minus debts like mortgages and student loans — surged to $192,000 when accounting for inflation.”
“One of the stand-out numbers was median real net worth gains for Americans under 35 years old, who experienced a 143 percent rise, the largest of any group. While this group, comprised of younger millennials and Gen Zers, has a much smaller net worth than any other age group, median net worth grew from $16,100 to $39,000 during the three-year period.”
“Americans in the 55 to 64 age group saw median net worth gains of 48 percent, while those between the ages of 65 and 74 had a 33 percent rise in median net worth. What's more, the 65 to 74 group had the highest median net worth at nearly $410,000.” READ MORE
Wages are expected to increase 4 percent in 2024: “For the third year in a row, companies are planning a median raise of 4 percent for their employees, according to Salary.com, which provides compensation market data, software and analytics. Previously, the average increase hovered around 3 percent, but a competitive job market in the background of record inflation rates led to a new norm, explains David Turetsky, vice president of consulting for Salary.com.”
“Depending on one's industry, expected raises vary: media, hospitality, healthcare and retail will see median merit increases hover around 3 percent, while energy and utilities, finance, construction and aerospace are predicted to rise by 4 percent.”
“It comes down to which industries and employers have decided they cannot afford to lose talent, and which industries are pressured to work with less talent to maximize profit in the short-term.”
“‘The ones that are facing the highest pressures are the ones that are being squeezed on margin constantly, like hospitality and healthcare,’ says Turetsky. ‘Whether it's construction or financial services, you'll see a higher increase purely because they can't afford not to.’” READ MORE
A “super-opulent” restaurant is opening in San Francisco: “The wait is ending for San Francisco’s arguably most-hyped restaurant to open in 2023. Following a private launch party on Friday and a years-long, Covid-delayed development process, the appropriately named Chotto Matte — meaning ‘wait a sec’ in Japanese — will open this weekend with sushi, ceviche and ambitions to become the nouveau dining destination of San Francisco’s world renowned luxury shopping district. This development was already the Business Times’ 2021 buzziest deal of the year. The 14,000-plus-square-foot rooftop restaurant is the crown jewel of an $80 million renovation of the former Macy's Men's Store at 100 Stockton St. started in 2019, and a major milestone in the transformation of the eight-level building since its acquisition by Blatteis & Schnur for $250 million in 2017.”
“Promising a ‘vibrant and electric’ ambience, in the venture’s online words, Chotto will try to make Union Square a place for global travelers and locals alike to compete for reservations, and a reason for remote-working recluses to bet on a downtown day for what’s on tap that night.”
“The significance of Chotto is the idea of a rejuvenated downtown. Like San Francisco’s other most-hyped retail debut of 2023 [an Ikea], Chotto is betting on something more than the sum of its parts: wearing new footpaths into Union Square for destination dining and creating momentum to help fill the many large retail vacancies in the area that will need more than incremental zoning tweaks to budge.” READ MORE
There’s a battle brewing over how airline rewards programs are evolving: “Virtually every travel company has some form of a loyalty program where customers are rewarded for how much they stay, fly and spend. When the programs first began in the late 1970s, earning elite status usually involved a straightforward combination of money spent with the program and actual time spent in the air or in a hotel room. And it wasn’t unheard-of for a traveler loyal to a specific airline or hotel company to spend extra money — or take an inconvenient flight or make a so-called mileage run, in which they took flights just to rack up miles — to earn or retain status. More recently, dollars spent on loyalty credit cards are becoming the primary way for travelers to earn points and, more important, elite status, which can bring numerous perks.”
“The so-called Big Three airline loyalty programs include American Airlines’ AAdvantage, Delta’s SkyMiles, and United Airlines’ MileagePlus. Of those, Delta’s is by far the most popular among fliers, and as the proposed changes made clear, credit card spending and dollars spent on flights have become the most important segment of the program, rather than miles flown or flights taken.”
“JetBlue Airways began offering a status match from Delta to its TrueBlue program in which up to 30,000 Delta defectors could trade in their Delta status for a similar elite status with JetBlue. For instance, top-tier Delta Diamond Medallion members could receive a status match to JetBlue’s Mosaic 4 tier, which grants perks such as credits for Blade helicopter transfers between Manhattan and Kennedy International Airport or Newark Liberty International Airport.”
“Mark Ross-Smith, the chief executive of Loyalty Status Co., which helps travel brands acquire and retain customers, said that at their core, loyalty programs are about emotions. ‘All these reasons mostly are emotional things,’ said Mr. Ross-Smith, referring to why a flier might be loyal to an airline. ‘You don’t fly Delta because it’s the cheapest airline to go from A to B, so people are paying a premium to fly Delta. That is an emotional-based decision because if it were a transactional, money-based decision, they’d be flying whoever’s the cheapest, and they’re not.’” READ MORE
Pitchbook’s latest ranking of the fastest growing startup cities has some surprises: “PitchBook ranked cities by ‘growth score,’ analyzing one-year, three-year and five-year growth rates for VC deal, exit and fundraising activity. The goal was to provide a multi-year look at each city's startup growth to avoid outlier years where a city saw one or two mega deals. By ranking cities by fastest growth, the report identifies areas of ‘potential upside’ for venture investors, PitchBook said, even if those cities have less developed startup ecosystems compared to traditional tech hubs. The report aims to highlight ‘VC clusters that have been growing in recent years,’ identifying places ‘growing their VC activity at a faster rate than more established, expensive and saturated locations.’”
“Venture capital data firm PitchBook recently introduced its Global VC Ecosystems ranking, a look at both the most developed markets for venture capital activity and cities seeing the fastest growth. The top startup cities based on size and maturity are the usual hot spots: San Francisco, New York, Beijing, Shanghai, Los Angeles, Boston, and London.”
“But in its ranking of the fastest-growing cities for venture activity, PitchBook's report uncovers where startups are quickly gaining momentum. Topping the list is Dubai, followed by Detroit, the fastest-growing U.S. city on PitchBook's report. The next-fastest growing U.S. startup cities are Raleigh, North Carolina; Houston; Indianapolis; Miami; Philadelphia; and St. Louis.” READ MORE
THE 21 HATS PODCAST
We Haven’t Signed a New Client in Eight Months: This week, we meet Jaci Russo, the co-founder and CEO of BrandRusso and the latest addition to the 21 Hats Podcast team. Jaci tells Jay Goltz and Laura Zander how she went from working for Barry Diller to starting her own marketing agency. Jaci also explains why she recently decided to introduce a four-day workweek and why she thinks her agency has now gone eight months and counting without signing up a new client—the longest such stretch in more than 20 years in business. “I find it interesting,” responds Jay. “You just said this is the first time you've ever had such a long period without new business. And, ‘Oh, we went to a four-day workweek.’ Hmm, how interesting.”
Plus: Laura talks about what happened when venture-backed competitors came for the knitting industry and how stressful it is to buy and operate another business in another state.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren