Professional indemnity (PI) and public liability (PL) remain the strongest recommended insurance covers to be placed across the tourism industry for travel agents, tour operators and tour wholesalers – even during the tourism industry pandemic lockdown.
These insurances provide legal liability cover for negligence while advising, curating and leading clients on an array of leisure experiences – for which clients hold very high expectations for service and enjoyment. Despite best efforts, it is inevitable that, occasionally, errors occur that lead to injury, death, financial loss or perception of loss. Your insurances must be in place to safeguard your business, its reputation, and your business suppliers and contractors’ reputations.
When a significant loss occurs, it is unlikely that only a single entity will be targeted and required to legally defend their position. Whether directly culpable or not, if an issue arises among any of your partnering businesses, you may become entangled in incurred legal defence expenses. There have been many instances where more than one entity in the supply chain is held responsible for a client’s loss and the result may be a settlement paid by the primarily responsible party and the contractors and suppliers on which it relies.
Minimum insurance requirement stipulations in standard supplier contracts are arranged for just that reason – when you insure your business, you are helping insure others, creating a net of business legitimacy. In the same way that a property owner could be held responsible for someone tripping over a rock in their parking lot, liability for injury and loss could come from any unseen direction. That is why maintaining public liability insurance is crucial at all times.
A professional indemnity insurance policy, which covers legal liability resulting from professional advice and arrangements you provide as a travel expert, has even more reason to remain active.
PI insurance is known as a “claims made” policy. That means the policy can only respond to claim occurrences while it is currently active. So, if you allow your policy to lapse and an allegation from the past is brought against you from a time when the cover was in place, you cannot claim on your insurance.
In Australia, claims can be brought against you for business activities that occurred up to seven years prior. That’s why professional indemnity polices have “retroactive date” cover so the policy can cover you for incidents that occurred before the insurer began its coverage.
Retroactive covers often are subject to a “continuous cover” clause that stipulates that if there was a gap in your PI coverage at any time, cover may not be awarded for a prior incident. If you are reinstating PI cover after coming off risk, you may have sacrificed a large proportion of the intended coverage permanently, which puts your future business at risk.
To ensure your business is properly protected from historical events, and against vicarious and unforeseen liabilities arising from non-direct matters, it is important that your insurance remains in effect at all times.
How can your insurer support you during the Covid-19 crisis?
Types of tour activities, travel locations and company history are all factors considered in calculating your insurance risk premium. However, the largest premium factor is often annual turnover – either actual turnover from your previous trading period or estimated turnover for the oncoming financial year.
So why should you pay your standard premium during a time of reduced or no turnover? Short answer – you shouldn’t.
Insurers have all reacted to the Covid-19 situation differently, some disappointingly sticking hard to rigid cancellation terms and exit policy fees, while others have taken unprecedented steps and proved that insurers can support their clients in far greater ways than simply paying claims.
From the myriad Covid-19 responses, JMD Ross recommends your insurer consider one of two actions to provide premium relief now and keep your policy active, or ensure your renewal premium structure is built to accommodate poor trading years.
Recommendation 1 – Restricted liability cover (policy hibernation)
If a truck driver becomes seriously injured, they can no longer drive their insured vehicle to produce income, yet the valuable business asset remains and must be protected.
Most truck insurers offer “laid up cover”. The insurer recognises that insurance must still be in place, but the risk is drastically reduced, so a sizeable portion of the paid premium is returned to the client immediately. When the driver can return to work, the insurer is notified and a relative reinstatement premium is paid for the time left on risk.
Cover is in effect, assets are protected, and financial support is provided.
Tourism-supportive insurers are extending this popular concept to all tourism clients, existing or new. Select insurers are offering to keep your policies active, which is important for the reasons above, with the knowledge that no business activities are currently occurring.
When business activities resume, your insurer can be contacted and full cover reinstated immediately.
For JMD Ross clients, this option is very popular and has saved clients thousands of dollars in premiums during this difficult time.
If your insurer won’t provide this option, new polices can be placed with restricted cover already in place, so your initial premium is less than set minimum premiums, and no money is wasted.
For more information on restricted liability cover endorsements, please read the frequently asked questions article – click here [PDF].
Recommendation 2 – Understand how your future premium is rated
Some insurers model your premium based on your actual prior year figures, as opposed to estimates, so restricted cover may not be an option.
If that premium model is continued into your next insurance renewal, a Covid-19 influenced low turnover would be used to calculate your rate, likely resulting in significant premium discounting.
Many JMD Ross clients use this model, so can expect premium relief down the track during a business recovery period when overhead costs need to be tight. That style of premium relief is better suited to larger companies, because many smaller operators may already sit in the lower premium bracket, so the discount may not be as large.
If your insurer is not offering one of the two options, it may be time to consider switching providers. JMD Ross Insurance Brokers specialises in the tourism industry and is available to assist any tourism industry client with their insurance package.
Author: Jonathan Ross, Tourism Account Manager, JMD Ross Insurance Brokers Pty Ltd
JMD Ross Insurance Brokers specialises in the tourism industry and is a supporting partner of the Australian Export Tourism Council (ATEC) and the Institute of Australian Tour Guides (IATG).
Please contact our tourism industry specialists:
| Jonathan Ross – Account Manager
Office: 02 9478 0825 Mobile: 0420 796 628 Email: jross@jmdross.com.au |
Tim Ross – Director
Office: 02 9478 0808 Mobile: 0419 251 568 Email: tross@jmdross.com.au |