Report asks if Australian tourism industry can be insured?

Ongoing issues with business insurance, particularly in the activity, attractions and tourism sectors, have led an insurance industry publication to ask ‘Can the Australian tourism industry be insured?’.

Published last week in Insurance Business Australia, the article lays the issues operators are experiencing on top of the crisis in tourism, highlighting how the halt in international travel, combined with internal state border shutdowns, has resulted in massive losses for the industry.

Dale Hansen, Chief Executive of the Queensland-based Austbrokers Coast to Coast, told Insurance Business Australia last month, “when you get to a traditional Queensland tourist hotspot like Surfer’s Paradise, there’s just not really that many people around.

“There’s been so much changing with the regulations about crossing into the Queensland border that, even though people from most Australian states have been able to enter quite easily, they’re a bit hesitant to come here in case the border gets shut down again.”

Queensland Tourism Industry Council (QTIC) Chief Executive, Daniel Gschwind told Insurance Business Australia that before COVID-19 struck, QTIC had already decided that “insurance issues would be a top priority for us in 2020.”

Though these plans were delayed by the pandemic, the continuing rise in insurance prices for many Queensland-based tourism businesses has seen QTIC announce a new project that aims to identify the specific issues concerning this kind of insurance both in the state and across the broader country.

Gschwind explained “a growing number of our members, which include hospitality businesses, travel companies, hotels and more, had told us that their insurance premiums were seeming to increase dramatically.

“In some cases, these prices increased twofold, even threefold, and left many businesses in an extremely difficult position - they couldn’t afford to pay for the insurance cover, but their businesses couldn’t keep functioning without it.”

Focussing on public liability, Gschwind added “some businesses had to curtail the variety of activities that they offer, as things like rope walks, abseiling and horse riding became too expensive for them to get the necessary cover and protection for.”

Gschwind points out that that a number of factors have caused insurance companies to have greater exposures and that QTIC is “looking to work together with government regulators and insurers to find solutions that work for all parties involved.”

Jonathon Ross, Tourism Account Director at JMD Ross Insurance Brokers, explained that premium increases in the tourism industry appear to be largely a result of capacity restrictions.

He noted “it’s not so much that liability rates are going up for tour operators, but instead that hardening of the market and restriction of capacity have reduced the number of insurers that could previously offer the coverage.

“Many leisure underwriters have thought that premiums for high-risk tour activities needed to increase for some time and have now been validated by the removal of low-cost insurance product for this niche industry.”

Ross advised that “more international reinsurers beyond just Lloyd’s are pulling back and are tightening their capacity offering, and, as a result, much of the cheaper tourism insurance products that were once available don’t really exist anymore, as the low-cost underwriting agencies struggle to keep their book together and make significant restrictions to their appetite.”

In his view, proper risk management and investment in safety equipment and upgrades are key for high-risk tour operators, adding “it is not impossible to cover high risk tourism activities, but there’s definitely been, and will continue to be, an increase in premiums for high-risk activities like quad bikes and white-water rafting.

“For a company operating in this space to be covered, they would absolutely need to have a really good business case and capital to front increased premiums. This will unfortunately have a big impact on smaller, high risk tour operators whose cash flows have already been devastated by COVID-19.

“Individual high-risk placements are difficult for underwriters to consider at present, but they appear more amenable to making a case to their reinsurers if they can promise higher placement numbers with specific safety protocols in place.”

Insurance Business Australia also quoted John Lewis, Wholesale Manager at Maroochydore-based AIB Insurance Brokers, who indicated his company’s decision several years ago to forgo insuring businesses related to adventure tourism activities such as quad bike and jet ski riding has proved to be a very smart choice.

Lewis told the publication that AIB’s tourism operator insurance scheme, which is supported by QBE, has continued to attract new clients as competitors have dropped out of the market, stating “premiums might be a little bit higher, but we’ve managed to retain our tourism clients and bring many more on-board

“It’s clear to us that the appetite is still there.”

Click here to read the original article.

Image: Paddle boarders at Pumicestone Passage on the Sunshine Coast.