The insurance market for pawnbrokers is limited with only a few insurance companies interested in the class. The advantage for the markets that do write this class is that pricing has remained fairly constant throughout the soft market. However, there is a problem, according to David Price, executive vice president and chief underwriting officer at Burns & Wilcox. “Few agents are able to write pawn shops correctly, causing this to be a class that is underserved. As a result, this class presents agents with a lot of opportunities.”

One company experienced in writing pawnbrokers is Century Insurance Group. Tom Rossi, vice president underwriting at Century Insurance Group, explains that Century's program is meant for risks that loan money on articles/personal property left as security and that it entertains both single and multiple location risks.

Jon Walker, president of Union Life & Casualty Insurance explains that Northland Insurance Company is a very active market and states that they write both pawnshops and other similar risks.

Some markets write coverage on an admitted basis while others do so on a non-admitted basis. The approach used depends on the coverage, location and type of exposure.

Our experts agree that the coverages most needed are property and general liability. Both are available without any particular geographic concerns except for the obvious windstorm considerations that are typical of any property risk.

According to Mr. Walker, the two coverages most difficult to purchase are full theft coverage on firearms and jewelry and firearms products liability. Mr. Price agrees on the firearms liability concern and further states that “obtaining crime coverage is difficult.”

Other than concerns over firearms, the liability exposure is not considered a major concern. Mr. Rossi explained that Century's rates are very affordable and minimum premiums are relatively low. For example, monoline commercial general liability coverage with a $500,000 limit has a minimum premium of only $500. He believes that pawnbrokers should carry at least $1,000,000/$2,000,000 primary limits with up to $5,000,000 in excess limits.

Mr. Price identified property as the area with the greatest potential for coverage gaps. He explains that gaps occur when the commercial property coverage form is used because of the three sets of values associated with pawnbroker items. These are pawn value, wholesale value and actual value. In addition, the commercial property coverage form has a theft limit of only $2,500 on certain property commonly found in pawn shops. Mr. Walker states that few markets offer adequate theft coverage limits on firearms and jewelry.

Other coverages are available. Mr. Walker noted that two important ones are for shipments and off -premises property. Mr. Price added both building and business income as two additional coverage needs.

Other coverages that should be considered are crime and workers compensation. Mr. Walker indicates that his company writes these coverages in most states at competitive rates, even though he expresses concern that, “Crime seems to rise in a bad economy.”

The current economic climate is increasing activity at pawnshops, according to Mr. Rossi. “In a declining economy, cash constrained consumers might be turning to pawn shops to find deals and secure cash instead of visiting the local mall or the neighborhood bank. We might see an increase in the number and size of pawnshops, even in affluent areas.”