As featured in the latest edition of QHA Review Magazine
It goes without saying that there are numerous challenges and risks associated with operating a hotel business. To ensure you are managing these risks adequately, it is important to take out insurance for both the business and the premises, whether you use the premises under a leasing arrangement, and/or own the freehold.
The type and level of your insurance cover will be informed by the risk profile of your location and the unique attributes of your asset/s.
In this article, we refer to some of the types of insurances a prudent business operator ought to be establishing or considering, to protect their business.
We also look at how risk mitigation at an operational level can benefit your business and maybe reduce, both your premium, and quantum of excess.
COMMON INSURANCES
Most business operators would be familiar with the following insurance products:
PUBLIC LIABILITY
- This is crucial for safeguarding your business from legal and financial consequences of accidents, injuries, or property damage occurring during operations, and it is the minimum insurance any responsible business operator should have. Coverage should encompass claims from third parties, with the amount varying based on business size and needs, potentially requiring higher limits (in excess of $20m) for larger venues hosting more people.
PROPERTY/BUILDING
- This allows you to protect your business against unforeseen events like natural disasters, accidents, or vandalism, ensuring financial recovery and business continuity. Typically, this insurance covers 90% or more of the property/building replacement value.
PLATE GLASS
- This is typically a requirement under commercial leases and allows you to insure glass whether internal or external to the premises for damage for the cost of replacement and repair.
BUSINESS INTERRUPTION
- This helps cover lost income and ongoing expenses during unexpected closures, ensuring your business can ‘weather the storm’ and resume normal operations afterward.
FIRE/FLOOD/CYCLONE INSURANCE
This is especially relevant in Queensland which is particularly vulnerable to a range of hazards including tropical cyclones, floods, bushfires, severe weather, heat waves and coastal inundation. Whether you have coverage for these kinds of weather events through the property/building insurance or independently, you may not realise that improving the resilience of your business to these kinds of events by (as an example):
CYCLONE
- Strengthening doors and windows with storm shutters and debris screens;
- Strengthening garage doors with wind locks; and
- Roof retrofitting to strengthen key tie-down points.
FLOOD
- Elevating the floor above defined flood levels;
- Wet-proofing using water-resilient materials such as polished concrete or tile floors; and
- Utilising water-resilient wall framings and internal linings.
FIRE
- Utilising non-combustible internal and external construction materials;
- Designs that limit the ability of embers to enter the building such as cavity-less construction or tight-fitting cladding; and
- Siting buildings away from unmanaged vegetation.
These measures should be presented for consideration to insurers when setting your premiums.
*All hotels should obviously have a QFES approved fire management plan.
CYBER LIABILITY INSURANCE
As technology becomes more integrated into business operations, cyber insurance’s importance cannot be understated. This type of insurance can provide coverage for losses caused by cyberattacks or data breaches. However, you must have a robust prevention strategy in place to prevent or minimise these events such as:
- Ongoing staff training;
- Keeping systems up to date;
- Utilising a firewall and antivirus software;
- Backing up data;
- Controlling or limiting access to computer systems;
- Securing Wi-Fi networks; and
- Utilising complex passwords.
This will likely reduce the likelihood of having a claim denied as well as putting your business in a better position to mitigate this growing threat.
In summary, when reviewing your budgets for this new financial year, you may want to consider adding some of the above-mentioned insurance products or determining if the initial investment in prevention strategies, risk mitigation/reduction plans or renovations would be worth your time and money. This could increase the likelihood that claims are not denied or to help obtain lower insurance premiums in the long run.
