A Brewing Niche: Insurance agencies adjust to suit craft beverage market

When the craft beverage industry exploded about 10 years ago, it led to some big changes in another industry: insurance.

Mark Irwin, agency principal for Bellaire’s Fischer Insurance Agency, happened to be in the right place at the right time in 2004. Short’s Brewing Company opened its doors down the road and the brewery approached Fischer for coverage.

“In those early days of Short’s, breweries were rare,” said Irwin, a 2002 graduate of Central Michigan University. “[I]nsurance companies … like history and volumes of data to put together their policies. Because then they can analyze and ask questions like ‘What are the risks?’ ‘What are the odds something is going to happen?’ ‘How much money do we need to charge to pay a future claim?’”

Irwin was put in charge of the Short’s policy. Rather than shrink from the challenge, he embraced the opportunity. He liked the idea of beer insurance and saw potential for building that niche into a career.
Irwin studied the beer industry and its risks, which include fermenter tank collapses, product contamination and liquor liability. He discovered that most insurance companies offered traditional manufacturing coverage packages.

Those policies, Irwin says, were “boilerplate” and insufficient to address the complexity of the craft beverage industry.

“Something like tank collapse, it sounds simple,” Irwin said. “’Someone forgot to release the pressure valve on my $20,000 tank and it collapsed. Buy me a new tank.’ Well, that’s easy if it’s the first tank in the line and it’s easy to pull apart and get out the door and put a new one in. But what if it’s a tank that’s in the back corner and you have $50,000 in cost to remove that $20,000 tank? You need a plumber. You need an electrician. In some breweries, you’re going to need a crane to lift it out of the roof.”

Irwin built an insurance program for clients like Short’s, dubbed “Protect Craft Beer.” The program was designed to respond to the unique challenges and complexities of the brewing industry. For instance, today’s tank collapse policies not only cover the cost of the tank itself, but also all the costs that revolve around the tank replacement.

In total, the Protect Craft Beer program at Fischer Insurance Agency offers more than 50 different types of coverage for craft beverage companies. Clients can pick and choose the types of coverage they want to design policies that fit budget and coverage needs. Irwin’s model has drawn a slew of businesses to Fischer … and not just brewers. Today, the client list includes 36 breweries, four wineries, three distilleries, and a range of associated vendors, such as hops farmers or canning businesses.

For Fischer Insurance Agency, the craft beverage industry accounts for about 25 percent of clientele – a sizable amount, given that the agency started 50 years ago. Irwin, meanwhile, spends about 50 percent of his time working with craft beverage clients. The focus on that one industry has also rewritten the narrative for Fischer Insurance Agency as a whole, which Irwin says is much more focused on niche markets than it once was.

“Insurance is a wide-ranging thing,” Irwin said. “It’s tough to be an expert in all things. So instead, we kind of try to do things that we like to do. We’ve got the craft beverage niche. We’ve got an environmental pollution insurance niche. I like to mountain bike, so I’m working on a bike shop insurance program. That niche stuff works, because then you’re focusing your energy and you’re a lot better at it.”

Irwin isn’t the only local insurance professional who has taken a deep dive into the craft beverage niche.

Garrett Boursaw at Ford Insurance Agency is also heavily focused on craft beverages, ranging from beer and wine to hard ciders and kombucha tea.

In Boursaw’s view, the entire model of the insurance industry is shifting toward niche expertise.

“Going local isn’t as important to people anymore,” Boursaw said. “Technical knowledge and an expertise in a certain niche are really what people are looking for.”

Boursaw recalls working with a winery whose past policy had been written by an agent who was entirely new to the industry.

“He didn’t do it right,” Boursaw said. “He did a fine job writing a general business policy, but he also missed some crucial stuff.”

Even compared to breweries, wineries have their own risks and insurance complexities. For example, a winery policy needs to cover the vineyard’s grapes and the trellis systems – all of which are situated outdoors, which adds its own issues. Many wineries self-distribute their product, which carries a greater level of risk because of third-party distributors. Boursaw says that even cyber liability is a must, since wineries store names, credit card numbers and other personal information for their monthly wine clubs.

The exception, for now, is distilling. Boursaw says that insurers typically “underwrite a lot harder” when dealing with distillers. The main reason is that distillers are working with purer alcohol, which is more dangerous to produce, more flammable and more likely to result in a toxic product if something goes wrong. According to Irwin, there are also other factors at play that make distilling more difficult to insure.

“Distilleries are sourcing ingredients from a wide variety of pieces,” Irwin said. “If they bottle a particular spirit that is made with a certain item that can only be procured from one vendor, what happens if that vendor disappears? You’re going to have a hard time replicating that spirit. And spirit drinkers are very particular about taste, so consistency is very important. So you’ve got those kinds of dynamics, too.”

Nonetheless, covering craft beverage companies is a growing business. While local agencies like Fischer Insurance and Ford Insurance are building expertise in the craft beverage niche, many national insurance carriers have gotten into the game as well. Boursaw says that most of the carriers Ford Insurance represents – a list that includes Cincinnati, Hanover, Westfield and Fremont – have been writing craft beverage insurance policies.

“In the last five years, it’s become really easy [to find this type of coverage],” Boursaw said. “A lot of the insurance companies are treating these as mainstream businesses.”