In my first column, I identified three areas where tourism operators are exposed to risk. These were building ownership – how you and your team manage the risk; the fine print – specifically the lack of specialist advice or wording regarding your chosen policy; and incident management – your ability to determine best outcomes in the event of an incident.

Previously, I looked at building ownership to manage risk, highlighting five preventative measures you can take as a business owner. In this piece I will look at how to understand the fine print of your chosen insurance policy.

Have you ever read through your policy wording with complete understanding? Not having a complete understanding of a policy exposes your company to risk and unless you engage with a specialist broker you may be left none the wiser – specifically in the tourism industry!

Indeed your broker himself may not be completely comfortable, not being a specialist in tourism – so the first you know of a clause or exclusion may be in the event of a claim. Not the best time to get to know your policy. My point is this – tourism is becoming an attractive market, yet most do not understand its intricacies as they are primarily involved in standard commercial risks. Your first step in understanding the fine print is engaging with a broker who understands your business and can explain every aspect of the cover to you.

Be particularly aware of exclusions and limitations. They are inserted into all policies to manage the level of risk the insurers takes on. These can create gaps in insurance cover which you assumed were there, and which can cause a claim to be rejected or not paid in full. It is imperative that you understand the fine print in your insurance policies and identify any uninsured risks as well as areas where your cover may not be adequate.

An example of exclusion is contractual liability. The contracts you sign with booking agents must be scrutinised to ensure they do not slip in a clause that indemnifies them for everything and anything that may go wrong with regard to guests while in your care. It can however be accepted if it includes ‘where you are seen to be negligent’, which is deemed reasonable. Should you sign such a contract it may nullify your insurance because you cannot bind your insurer to a third party contract. 

An example of limitation is legal defence costs.You will find most defence costs are capped at around R50 000. No prizes for those who guess how much time that buys you in a court room! The fact is the capped amount is likely to be grossly insufficient and cases of litigation in this industry are not simple, considering the possibility of an international guest being involved. 

So in terms of fine print it is important to consider the following:

  1. Engage in a specialist broker to ensure the product you buy is comprehensive and caters for your specific needs
  2. Spend time understanding your options and how they can be applied
  3. Ensure full detail is discussed with you so you are comfortable that the terms and conditions, exclusions and limitations, excess structures and cover limits are in fact going to adequately cover you in the event of a claim.

 

This article is the second in a series, to read the first article, click here.