Exploding gas bottles, cyclones, fires, armed hold-ups… insurance for the hospitality industry is always diverse, often complex and never boring, says Justin Riseley, an authorised representative with Gallagher in Brisbane, whose 30+ years in the sector have delivered some colourful claims.
Riseley’s role encompasses providing advice and obtaining insurance cover placement for all things hospitality related, and he says that approaching each business on an individual basis is both necessary and what makes the job interesting.
“The diverse nature of hospitality and insurers’ varying limitations and requirements in the acceptance of risk requires individual analysis and review of each and everyone’s needs,” he explains.
The scope of these needs is broad and can include multiple areas of operations: “In my world, there’s construction and location risks, maintenance of equipment and infrastructure, public and management liability, clients’ attitudes to risk management and claims and their frequency.”
To do this he usually visits the businesses concerned. “I’ve visited 90% of my clients, it’s key to seeing what we’re insuring, whether that’s via an independent risk survey by a third party or a personal visit – which is preferable for getting a real understanding.”
A key concern for hospitality businesses he deals with is the adequacy of sums insured for both property damage and business interruption, he says.
While many businesses may opt to carry part of their risk themselves by adjusting excess options so they are essentially self-insuring for a proportion of the value – which can be viewed favourably by insurers in their willingness to provide cover ‒ a lack of understanding about under-insurance and its ramifications leaves many businesses exposed in ways they may not have considered.
Riseley says this has particular relevance for premises built of timber that suffer a partial loss: if the nominated sum insured is less than 90% the replacement value in a more durable material, part of the loss will not be covered. Where accommodation is involved rebuilds can be costly due to the need to meet modern fire safety regulations.
Key hospitality risks to avoid and mitigate
Fire risk is major exposure, Riseley warns. Hospitality businesses need to take a proactive approach to risk management procedures and the correct maintenance of cooking equipment, particularly deep fryers, cooking hoods and ducting.
“These are one of the major causes of premises fires where the oil and grease builds up and a ‘flash fire’ occurs causing catastrophic consequences.”
Another issue that shouldn’t be overlooked as cyber criminals are targeting Australian businesses of all sizes is the vulnerability of sensitive data. “The ongoing requirements of the COVID check-in regime means that there is more customer information stored and therefore an exposure to cyber hackers.”
Hotels with online booking and payment facilities and options for guests to use their personal streaming accounts for entertainment also need to be vigilant about their digital security.
How hospitality businesses can meet the coverage challenge
Queensland hospitality businesses also face challenges in achieving full coverage for their risks, he says. “A hardening insurance market together with a shrinking appetite of insurers for those clients located in northern Australia means a strategic approach to presenting their case is essential.”
- Before renewing your insurance obtain an up to date independent risk analysis.
- Be prepared to supply records of continuous maintenance of the property, from roofs to electrics and preventing slip and trip hazards.
- Demonstrate proactive management of guests or patrons by observing responsible service of alcohol laws and maintaining adequate and professional front of house security.
- Show willingness and balance sheet capacity for self-insuring a proportion of business risks.
Get hospitality insurance help from an industry specialist
Find out more about how a Gallagher hospitality specialist can help you protect your business.
Gallagher provides insurance, risk management and benefits consulting services for clients in response to both known and unknown risk exposures. When providing analysis and recommendations regarding potential insurance coverage, potential claims and/or operational strategy in response to national emergencies (including health crises), we do so from an insurance and/or risk management perspective, and offer broad information about risk mitigation, loss control strategy and potential claim exposures. We have prepared this commentary and other news alerts for general information purposes only and the material is not intended to be, nor should it be interpreted as, legal or client-specific risk management advice. General insurance descriptions contained herein do not include complete insurance policy definitions, terms and/or conditions, and should not be relied on for coverage interpretation. The information may not include current governmental or insurance developments, is provided without knowledge of the individual recipient’s industry or specific business or coverage circumstances, and in no way reflects or promises to provide insurance coverage outcomes that only insurance carriers’ control.
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