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bi-monthly
HPASA newsletter. |
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April 2012
THE
CURRENT ECONOMIC CLIMATE IS AFFECTING
THE WAY YOU INSURE A TOURISM BUSINESS
By Gavin Courtenay,
Managing Director, SATIB Insurance
Brokers |
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According to the latest
results of the TBCSA FNB Tourism Business
Index (TBI), the tourism trade has shown
a marked improvement in business performance
for the last quarter of 2011.
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In fact, the data from ACSA, comparing
arrival stats for the period January to
October 2011 against the same period for
2010 indicates an increase in passengers
arriving on international, regional and
domestic flights.
So, if tourist arrivals are
on the increase, what’s the problem?
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Indications from the SATSA Market Intelligence
Report (MIR) for January 2012 are that tourists
have significantly reduced their length of stay
and accordingly, the number of bed nights sold
has reduced despite an increase in the number
of tourist arrivals. Indications from tour operators
are that the length of trips has also been reduced,
so total spend is down.
Double Dip Recession
Given the global economic recession, which many
economists think may head for a double dip recession,
the SATSA MIR advises tourism businesses to continue
reducing costs and to manage their cash flow.
So now you know why your hospitality clients in
particular have been asking for their insurance
premiums to be cut.
Premiums
If only it were as simple as that. As we all know
insurance premiums are primarily based on two
crucial aspects; risk exposure and self-insurance.
In order to reduce premium, brokers should be
advising their clients to either increase their
excess margin (the portion of a claim that would
be self-funded in the event of loss) or to mitigate
their exposure to risk - usually it requires a
combination of both.
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Mitigating
Risk
Mitigating risk requires a complete assessment
of all areas that could potentially result
in significant financial loss in the event
of an incident occurring and in compiling
written procedures to reduce and manage
such risks. A daunting task considering
the complexity and diversity of South Africa's
varied accommodation offerings, from home-stays
to guesthouses, hotels and remote safari
lodges but an area of expertise that we
at SATIB have perfected over our 21 years
of providing risk transfer solutions to
the tourism and hospitality sector.
Value-Added Benefits
Providing value-added benefits is another
area where insurance brokers can assist
their clients. Insurance underwriters will
rate an establishments’ premium favourably
if presented with documented risk mitigation
procedures. |
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For example,
to supplement and endorse our clients' insurance
proposal documentation, we provide underwriters
with proof of medical evacuation insurance
cover, which is provided to our clients
as a value-added service through our SATIB24
Crisis Call facility and underwritten by
our own Cell Captive. |
SATIB24 Crisis Call
This service not only provides 24-hour assistance
to our clients' guests but will also pay for medical
intervention costs. We have found that by handling
incidents of guest injury in a punctual and professional
manner, the likelihood of a claim being instituted
is vastly reduced and underwriters take cognizance
of this when rating the risk, which translates
into premium savings for our clients.
Cancelling Policies
Of course some distressed properties might consider
simply cancelling their insurance policies to
reduce expenses, but that’s not really an
option if they plan to continue trading, as legislation
requires that hospitality establishments have
insurance cover in place. Certain trade associations,
such as the Southern African Tourism Services
Association (SATSA) have minimum insurance indemnity
requirements for membership.
New Client Risk Profiling
When assessing a new client's risk profile we
often come across existing insurance policies
in place that are totally inappropriate. In fact,
if a claim were to be made these policies would
not respond, which is not only a waste of money
as it renders the client essentially uninsured
and exposed to the very risks that they sought
to transfer.
Tourist Financial Compensation
In addition, one also has to consider that tourists
themselves are under severe budgetary constraints
and will use any opportunity that presents itself
to make a claim for financial compensation, specifically
where physical injury, negligence, errors or omissions
are concerned. We have noticed an increase in
professional indemnity claims over the past year.
So the key message is really this:
The current economic situation should drive those
with cover requirements to engage in specialist
brokers/risk managers, who will be qualified to
structure their risk transfer needs in line with
their exposure and appetite to manage risk.
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| For
more information
on business liability
insurance and other
insurance options,
contact Brett Lazarus
of SATIB Insurance
Brokers on 0861
728 4248 or blazarus@satib.co.za |
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