Gabe Derzhavets, vice president of Roush Insurance Services, Inc., gives this overview of the industry. “In today’s era of ‘enhanced beauty,’ a modern beauty salon is not the same as it was 10 or 20 years ago. You do not have to live in Hollywood or be a movie star to understand the benefits of looking good and being healthy. Therefore, beauty salons are offering many more services than just cutting hair and doing manicures. Successful ventures derive much of their revenue by performing services that involve applying chemicals, lasers, blending products, selling supplements and offering tanning or bleaching.”

Chris Beshore, vice president of Insurtec, Incorporated sees change coming from another direction. “The beauty industry, specifically the tanning industry, is undergoing a change towards more corporate ownership and more ‘professional’ salons. This has led to more chains and fewer single location owners.”

The beauty industry has always been on the cutting edge of change. Fashions change and if a salon does not make appropriate changes, it will not survive. Being nimble is often the salon owner's secret of success. Many use independent contractors rather than employees. This allows for a steady flow of booth rental revenue plus profits from product sales. However, the better stylists will stay only if the salon is creative and offers services that attract additional customers and stylists.

The professional exposure is not limited to just the salon owner. According to Sean Brownyard, assistant vice president of SASSI Agency (A division of the W.H. Brownyard Corp.), “Salon owners, spa owners or any beauty professional providing professional services to their clients, including independent contractors working in salons or spas, need professional coverage." He points out that not all salon/spa coverage includes the independent contractors, so it is “important for them to secure their own professional liability coverage.”

The concern with independent contractors does not end with just hair stylists or manicurists. Kenneth Hegel, Jr., of Cosmetic Insurance Services (A division of Frenkel & Co., Inc.) explains, “If a high-end salon decides to bring in a physician or a registered nurse to do Botox injections a few times a week, it’s essential that either the salon owner or the physician or nurse be licensed to do the injections and also carry malpractice insurance. This is because in most instances the salon’s policy does not pick up that coverage for that particular exposure. Furthermore, the salon owner should get a certificate of insurance from that doctor or nurse, naming the salon as an additional insured in the event that the salon chooses to not purchase the coverage themselves.”

Professional coverage is available from both the admitted and nonadmitted markets. Mr. Derzhavets notes that the nonadmitted carriers typically offer more flexibility with rates and forms. Mr. Hegel states that any time there is a difficult exposure, such as Botox injections, usually only nonadmitted paper is available. Our experts agree that the overall professional liability market is good and that there are no real capacity issues. Some are seeing slight decreases on renewals while others have seen some increases. A variety of companies are making some marketing efforts into this industry so the soft market continues for the easier to place risks. Increases might be seen in the more difficult to place exposures and larger accounts.

Our experts mentioned Hartford, USF Insurance Company, AIG, Victoria Insurance Company, Fireman’s Fund, Scottsdale, OneBeacon, Evanston, Essex, Century Surety and CNA as some of the markets that are very active in this industry group.

Some companies are not interested in writing business in New York City. Others follow the general industry trend of avoiding the coastal areas. However, the consensus seems to be that capacity is not a problem. Primary limits of up to $3 million are available and excess can be purchased up to $25 million but it gets expensive.

The experts all expressed a concern about exposure identification. Many markets are available to provide coverage but their appetites vary. A complete identification of all services provided is needed so that the correct insurer can be selected and the policy endorsed appropriately. Carriers usually specifically list the exposures covered and consider all others excluded. An exclusion that may be added is one excluding all services that require training beyond that of the salon operator’s license. Mr. Beshore expressed a particular concern of occurrence versus claims made coverage. He believes that any risk with a tanning exposure should purchase an occurrence form because “cancer claims may arise years down the road.”

Although professional liability is the major exposure for barber and beauty shops, it is not the only one. Mr. Brownyard points out that independent contractors who work at more than one location need inland marine coverage for the tools of their trade, both while in transit and at each location. Mr. Derzhavets doesn’t believe the property exposures receive the attention they should. He believes that equipment breakdown, business income and crime coverages are often overlooked and that this lack of coverage can affect the survival of the business.

General liability exposures are significant for a number of reasons. The first is the simple slip and fall exposure. These are present with any retail risk but are more significant in these operations because of water and other liquids present that are an inherent part of the operation. Sexual abuse exposures are also present and losses may occur because of the very personal nature of the client/hairstylist relationship. Products liability is another common exposure that is easily placed, provided the salon does not sell products under its own label.

According to Mr. Hegel, coverage for products manufactured or sold under the salon’s own label could pose a concern because in most small business owner’s policies this coverage is excluded. It may be necessary to purchase a separate policy to cover the products liability exposure in this instance.

This market is open for business but the experts know that dangers exist. Professional liability coverages are not written on as comprehensive a basis as other industries because underwriters realize that a simple salon could change to a full blown spa and they want to know about it before it happens.