Hospitality industry’s unusual risks bring specialised insurance needs

The official start of spring is always a reminder that South Africa’s peak holiday season is not far away – making it more important than ever for hotel owners to have a proper risk management plan in place. The hospitality industry has unique insurance n

This is according to Denleigh Wilensky, Executive Director of Hospitality Industrial Commercial Underwriting Managers Pty Ltd (HIC), who says, “Whether we are talking about a small guesthouse or a large hotel, certain basic insurance is required, including cover for the buildings and contents against fire and perils such as storm, earthquake and hail.

“A hotel or guesthouse would also need theft cover and that cannot, as is the case with the normal commercial policy, be subject to forcible and violent entry, because the premises are usually open nearly 24 hours a day. Theft of guests’ belongings would also need to be covered, even though the property is not owned by the hotel.”

Delving deeper, this niche insurance market brings interesting adaptations on normal standard commercial insurance. Wilensky continues, “Hotels should also ensure that all vehicles are covered, including game drive vehicles. Passenger Liability cover should also be in place. Furthermore, if a hotel has a golf course, then insurance should be arranged to cover the greens, not only against normal fire and storm perils, but also if the incorrect fertiliser is used, which would subsequently damage the green.”

Public Liability is obviously very important to guesthouses and hotels and the liability would vary depending on what activities were available. For example, you may have a standard guesthouse which offers only overnight accommodation or one which provides food, which introduces the risk of food poisoning.

Wilensky clarifies, “In your larger hotels or game lodges you have all sorts of other activities available such as game drives, horse riding, quad biking and abseiling, and the insurance requirements would therefore depend on what activities were available. If the hotel is a game lodge then there is the animal risk. HIC has recorded incidents involving guests being harmed by wild animals. Two of these incidents included an elephant attack on a game drive vehicle, when the tusk penetrated the vehicle injuring the guest, as well as a situation involving a rhinoceros, where the game warden had allowed a guest to get out of the vehicle to take a photo, and the rhino charged and injured the guest.”

Business Interruption cover should be a must for all hotels and guesthouses and needs to be specifically tailored to the hospitality industry.

Wilensky says, “There should be additional extensions to the normal Commercial and Industrial policy such as cover for loss of revenue as a result of wild animal attack, or death, murder or suicide at the premises. Insurance should also be in place to cover against the loss of a tourist attraction. For example, the tourist attraction might be a visit to the Cango Caves but if, due to for example, a flood, access to the caves was temporarily impossible, then the incentive for someone to stay at the nearby hotel or guesthouse would be gone.

“You could also have a situation where perhaps there had been shark attack at a nearby beach and the beach was either closed or people were too nervous to use the facilities and therefore cancelled their bookings. A few other examples would be a failure of the air-conditioning at a hotel which could result in cancelled bookings, the loss of a liquor licence, or the closure of the premises due to defective sanitation, vermin or pests, or a notifiable disease.”

Risk management is also important, as it is in everyone’s best interests to try avoid a loss occurring.

Wilensky concludes, “We see this as a three-way partnership between ourselves, the client and the broker. Risk management is particularly important in game lodges where generally they have thatched roofs, are surrounded by bush and situated a long way away from any fire brigades, and are often close to rivers. An unusual situation during the Limpopo floods in January 2012 saw some guests having to be evacuated from their hotels and this cover is available. Specialist knowledge is required to provide the insured with the correct risk management advice and to underwrite the risk correctly.”