Understanding Tourism Trade Insurance
We all know that insurance is an essential component of risk management that requires annual review to adjust to changes in the commercial circumstances and legal environment in which we operate. What we may need reminding of are the specific risks that are unique to the tourism trade and need to be considered when mitigating and transferring risk, writes Des Langkilde.
The following article will be published in the Tourism Tattler as a series each month, and has been extracted verbatim (with slight editing) from the Southern African Tourism Services Association (SATSA) Insurance Directive booklet with acknowledgement to SATSA and the sponsor of the booklet, SATIB Insurance Brokers, in whose employ I originally re-wrote the text in 2005 and updated in 2015.
Insurance is an emotive issue and viewed by most as a ‘grudge purchase'. No-one likes paying insurance premiums for something that may or may not occur but it just might happen to your company and you owe it not only to yourself and your clients, but more importantly to the tourism industry at large, to be adequately insured and fully aware of the procedures in the event of an accident or a claim.
The SATSA Insurance Directive is intended as a general guide for companies operating in the tourism field within Southern Africa. It is directed to all companies undertaking tours, offering accommodation of any nature, those providing an auxiliary activity, and operating or hiring out any form of transport whatsoever.
It is not the intention of this Directive to frighten anyone, in fact quite the contrary. It aims to put forward a realistic set of parameters that apply to Southern African conditions and circumstances and is not based on threats and prohibitive laws that may govern other countries. As a professional tourism service provider you live, work and operate in Southern Africa and it is imperative that it is the tourism industry itself that set the guidelines by which you are prepared and in fact able to function. Obviously these must be based on world norms and the industry must aspire to first world standards.
The European Community Directive 90/314/EEC relating to the Package Holidays and Travel Trade Act, 1995 is legislation that governs the conduct of Tour Organisers operating from within European Community member states.
The Act seeks to protect the consumer by making the Tour Organiser liable for the proper performance of the whole tour package, even if the failure or improper performance is due to the fault of a supplier outside of the EC of one or more of the services provided. If a tourist books a safari holiday in South Africa through an organiser in the UK and is injured at a Game Lodge in South Africa, he need only prove that the Lodge was liable for the injury in order to succeed in a claim against the organiser. Thus, the UK tour organiser is held legally liable for an incident where there is no ‘fault' on their part. In light of this ‘liability assumed by contract' ruling, tour organisers in the EC member states are very cautious in their dealings with Southern African tourism service providers and will want reassurance that the service provider's liability insurance will respond to valid claims and extends to cover the service provider's sub-contractors. In effect, the local tourism service provider would need to ensure that their liability insurance policy wording extends to cover the EC Directive as ‘liability assumed by contract' would generally be excluded in most insurance policy wordings, unless specifically requested.
The first thing to understand about risk is that it is part of our everyday lives.
“Risk is universal, present in all things, all lives, inherent in being. The concept of a person free from risk is as theoretical as the concept of perfection” (Jawarharlal Nehru – 1889-1964).
Given that risk is inherent in being, the question is not so much about how to avoid risk as it is about how to minimise the consequences of risk occurrence, from both a financial and reputation point of view. Consider these three basic theoretical principles:
• Whenever an event results in the loss of tourist lives (especially international tourists), the global media are almost certain to report it, forcing the local tourism industry to be embroiled in acts of crisis management.
• Perceptions about a particular tourism related crisis tend to be almost as devastating as the crisis itself.
• The farther away one is from a crisis location, the worse the crisis will appear to be and the longer the crisis will remain in the collective travel subconscious.
These principles highlight the need for responsible risk management procedures in every aspect of the tourism industry, from transport to attractions, from hotels to conferences.