With the Australian tourism industry on the cusp of major growth Insurance Adviser spoke to experts in the industry on how brokers can capitalise on the rush.
Australia’s tourism industry is currently growing three times as fast as the rest of the Australian economy, according to the latest survey from Tourism Research Australia. International and domestic tourists pumped more than $100 billion into the Australian economy last year, making it an attractive sector for upcoming businesses.
Australia’s dramatic growth in tourism has created a need for brokers to keep abreast of the risks and potential liability involved in operating in the industry.
We always recommend people be extra aware of their public liability risks because that’s where the biggest claims tend to come from.
Melissa Donaldson of Allsure Insurance with bases in Geelong, Victoria and Hobart, Tasmania says, “We as brokers have increased opportunities to make sure clients are fully insured against more possible outcomes, as many clients only take the basics of cover.”
In fact, Julie Pernecker, Director of All Parks Insurance, points out that having the right cover in place is a concern for holiday parks and underinsurance is a common occurence.
LIABILITY AND BEYOND
Public liability claims are common in the tourism sector, and this is a trend that brokers believe is unlikely to change in the near future.
Donaldson says, “We’ve seen more and more liability claims, many are simple trip and falls.”
Lyn Sickerdick from Managed Insurance Solutions says, “We always recommend people be extra aware of their public liability risks because that’s where the biggest claims tend to come from. For example, we’ve seen a claim where a bloke was attending a wedding, and fell off a log he wasn’t supposed to be on… which ended up to be a $200,000 claim.”
But it can go beyond that. For example, she stresses that brokers should advise people who are thinking about setting up B&Bs, to be wary about things like supplying playgrounds for young children, and that pools and spas can create additional risks or insurance considerations even though they might be attractive to visitors.
Donaldson adds: “Having the right insurance can also cover the ‘products’ clients make (such as wine) and things like product recalls.”
BUSINESS INTERRUPTION BEYOND NATURAL DISASTERS
One type of cover that is vital but can often be a tough sell for brokers because clients don’t see the value of it until it’s too late is business interruption cover.
Only about 55 per cent of holiday parks take out business interruption cover, says Pernecker.
Putting together a good insurance solution, including things like key person insurance, good life policies, management liability, D&O insurance, natural disasters, and business interruption helps to position the business to financially survive.
“Unfortunately businesses don’t see the value unless they have had a terrible experience. In the past and even now with Cyclone Debbie – the weather tends to hit the parks hard right before their peak times. Not having business interruption cover can often make or break a business,” she emphasises.
Donaldson often asks her clients pointed questions that help them understand the importance of business interruption insurance and how it could help them to keep their business running.
On the other hand, Sickerdick notes, “Our clients seem to be more aware of the impact of natural disasters, they do seem to happen more frequently than ever before and areas aren’t immune to multiple disasters. Therefore, business interruption is becoming more front-of-mind than ever before.”
A lot of businesses in the sector are seasonal, with specific peak and off-peak times which is why taking a one-size-fits all approach to insurance is not really prudent.
For brokers to truly work with seasonal businesses it is important that they understand the concerns clients have.
Andrew Clarke, AJG Branch Manager from Perth, says, “Our clients are truly concerned that their turnover during the busy months is insufficient to sustain their business during the quieter months.
SIX THINGS BROKERS NEED TO KNOW
“We have had some clients cease trading in less than two years of being in business, which is one of the unfortunate downsides of being reliant on seasonal trade.
“Although the tourism industry is set to continue to boom in 2017, many of our clients are yet to experience a significant increase in their tourist numbers or revenue,” says Clarke.
Donaldson understands that insurance can be considered a ‘grudge purchase’ for smaller, seasonal businesses, but she insists on telling clients that risk cover helps if events arise that would normally decimate a business.
To combat the reluctance to invest in insurance she tries to give real-life examples to clients, such as: “What if your café is damaged by a storm and you can’t open due to the rain coming in the ceiling and ruining the kitchen, food prepped and the contents. How will you operate? How will you pay staff/retain their services, after all they took a long time to train and you don’t want to lose that. The bank will still want their loan paid.”