Dave Jack, BnBSure.
There seems to be an idea amongst certain sectors of the insurance industry that risks in the tourism industry are like any other and can be underwritten on the same basis as any other risk – the one-size-fits-all concept.
Nothing could be further from the truth. This particular industry is unique and, as a result, has unique risks. Then there is the obvious danger of these liability claims reaching huge amounts (a figure of some R80m was the “value” of a certain category of tourist who had become quadriplegic following an accident in Southern Africa) most one-size-fits-all policies do not offer liability limits anywhere close to that sort of figure.
The other risk that is very different to the ordinary, one will find in terms of the Business Interruption problems that tourism risks face. Some lodges offer elephant rides. The “one size fits all” policy seldom offers that sort of cover. There is the risk of cancellation beyond the control of the guest and with the new Consumer Protection Act this could result in a loss of income to the establishment. It is unlikely that the general type commercial policy sold to the local florist shop would have that sort of cover.
One of the biggest dangers facing the tourism industry is the tendency to still sell on price and to get as cheap a product as possible and not to worry about the cover. This is the most expensive policy one can buy if there is no liability for injury to a guest as a result of an incident whilst riding an elephant or diving into a murky swimming pool and becoming badly injured (and this sort of thing has happened) when the “cheap” policy had just R5m in liability cover – or even less as many policies have.
The list however goes on and on. Bilking, theft by guests, theft of guests goods, damage to gardens, water loss, damage to sign posts and everybody’s favourite, damage to beds as a result of soiling!
So is a specialist policy needed for risks in the tourism industry. Not even a debate! Tourism is a unique industry and policies sold to any sort of tourism operator should also be unique.
Specialist cover is essential
Joan Jackson, Head of Etana Wildlife and Tourism
The tourism industry has developed into a leading sector of the South African economy. It is becoming more regulated to set norms and standards to ensure that South Africa stays in the top 20 holiday destinations in the world. Going forward, more specialised insurance products will definitely be needed to underwrite and comply within this sector.
South African Tourism Board Chairperson, Jabu Mabuza, recently appealed for unity to sustain and grow our tourism industry; during 2010, South Africa pinnacled, globally, as a recognised tourist destination. The events of 2010 stimulated tourist arrivals to reach over eight million, resulting in an unprecedented 15% growth in tourism numbers; however, this year, with the rest of the world, tourism is under pressure – our local performance index of 74,5 in the second quarter of 2011 is lower then expected.
This pressure on our tourism industry makes it more vital than ever for brokers to be fully informed and guide their clients to new generation affordable and effective financial protection.
The Tourism Draft Bill will undoubtedly change the offering of insurance products going forward and we will have to be prepared to amend insurance wording and products to be in line with these changes. There are four particular changes that are important:
· Outdoor tourism is growing and further segmenting to cater for the demand for new adrenaline-pumping adventures that attract tourists. Thus, insurance products must be flexible with expert risk management programmes to support these adventures and risky activities.
· Sport tourism is becoming very popular, and our weather, affordability, expertise, medical care and excellent infrastructure are competitive attractions.
· South Africa is also becoming a global player to host big outdoor events and trade shows which are now separately regulated. Insurance wordings and products need to cater for this segment individually and effectively.
· Niche tourism is also slowly segmenting; for example, House Boat holidays require us to look at small craft/marine wordings and industry demand to cater for the short-fall in cover in this area.
It is vital that our industry takes note of changing needs and adjusts its focus to accommodate current market trends. We need to bring changes in cover and risk management to the tourist industry that fit needs regarding financial protection and affordability. Knowledgeable brokers in touch with changes can be a vital channel of valuable advice to their tourism clients because this growing market needs well-informed guidance. The demand will be for specialist brokers focusing on certain segments of the market or to become a specialist broker for this industry alone. Buyers of insurance need personal eye-to-eye service only the broker fraternity can provide. Tourism is a hands-on business. As the industry grows in complexity, Etana offers specialist backup which delivers individualised protection which will always be in line with changes … whatever they are.
General insurers will find themselves in unfamiliar territory if they try to play in this increasingly complex market because of the diversity, regulations, ever-changing environment, different demands and expertise needed from an insurer. The insurance support structure for tourism cannot be focused in urban areas only, as a large portion of tourist activity happens in and around our famous bush and animal reserves. Etana’s teams in 18 branches are specifically trained to deliver individually designed tourist cover and expertise and not fall back on heavily endorsed generic and hard-to-read policies which are ineffective, but still very widely used, unfortunately. Tourists are bungee jumping, mountaineering, sky diving and adventuring in many new ways and these activities need special risk management and wording. Etana has also created niche products to cater for the wide spectrum of occupations and different segments within the hospitality industry. The penetration into the tourism industry needs to be more focused and industry-specific.
One of the big challenges going forward is to inform the operator and broker not to use normal commercial policies, but rather the new generation cover specifically for this industry. New operators are often uninformed if they do not join an organisation like SATSA to guide them and to set minimum standards. Brokers can add great value by converting generic policies to niche products. This will ensure their clients have value-added benefits as normal features and free risk management support. Our insurance industry needs to compete at a global level so there is no room for short-fall in cover. A one-size-fits-all approach absolutely does not suit the tourism industry, and expert flexibility is the key that ensures cover suits tourism’s many individualistic needs.
If a broker understands the industry – and the specific segment needing insurance – he will know how to accommodate his smaller client and offer invaluable advice and not rely on generic products which will not deliver tailored value.
For many years, the insurance market was used to a specific policy wording which was handy for brokers who focused on general insurance. New generation policies are multi-peril cover and structured differently and this seems to be a major obstacle for brokers who are resistant to change.
The diversity of most tourism – and other specialist risks – does not allow short cuts and generic wording. An experienced needs analysis and knowledgeable underwriting are required. The days of one-liner quotes and a total sum insured are long gone! Powerful policies rely on risk management and it is imperative that the placement of the risk is done correctly from day one. This supports fast track claims and protects the client’s cash flow.
The need for travel insurance
Caroline Olwagen, Product Manager for Travel at Absa Insurance
When tourists or holiday-makers arrange their trips, they often neglect to consider the possible pitfalls – lost luggage, accidents and flight cancellations being just some.
They also may take for granted that their medical aid or the travel insurance on their credit cards will fully cover any incidents that may occur when they travel abroad. However, that is very often not the case!
It is important that travellers conduct a thorough investigation of the travel insurance options that are available. These are policies sold via travel agents, insurance advisors or travel insurance call centres.
There is a range of insurance products available on the market today. Comprehensive travel insurance cover will provide the widest range of cover from emergency medical expenses and medical repatriation to lost valuables and trip delays or cancellations of international trips. Travel insurers may have exclusions relating to adventure sports and high risk activities. Rather find out beforehand what is excluded than have the client find out from a hospital bed that the activity he or she participated in is not covered!
The cost of cover
A major factor stopping people from taking comprehensive travel insurance cover is the perceived additional cost that they feel may stretch an already stretched holiday budget. They need to find the cover option that suits their pocket and check for excesses and specific exclusions that may cost them in the long term. Price is generally determined by the duration of the trip, destination, number and ages of the travellers and level of cover required. For the most part, travel insurance premiums are extremely cheap. When weighed up against a potential claim cost with no option of recovery from another source, this is certainly wise budgeting. Different providers offer a range of tailor-made travel insurance solutions; for example, Absa has options such as:
- Automatic Basic Cover – This cover is for travellers under 75 years of age who purchase their air tickets with their Absa credit card, and is valid for trips of up to 90 days. The benefits include emergency medical expenses and associated expenses, personal accident cover and Absa Travel Assistant.
- Optional Top-Up Cover – This cover consists of three comprehensive travel insurance packages to suit the traveller’s needs and is valid for trips of up to 90 days. These options include additional cover for emergency medical and associated expenses, personal accident insurance as well as trip cancellation/curtailment, baggage loss/theft, legal expenses, hi-jack and wrongful detention and personal loss of money or passport. The cover can be purchased for trips of up to 180 days.
- Seniors Cover – This is for travellers between 75 and 85 and is valid for up to 90 days and offers senior travellers comprehensive travel insurance cover for emergency medical and associated expenses, personal accident insurance, trip cancellation/curtailment, baggage loss/theft, legal expenses, wrongful detention, personal loss of money or passport as well as a hijacking incident. The cover can be purchased for trips of up to 180 days
Planning ahead …
In the planning stages of the trip, the client must ensure that he/she includes the amount likely to be paid on insurance in his/her initial travel budget. Do not leave it as a last minute item in the to-do list. This means that the client should shop around for insurance cover as he/she would shop around for the best priced accommodation and tickets. This gives them the chance to find the cover that suits the type of trip they have planned as well.
In the event of a travel claim, they should contact their travel assistance provider immediately. This information will be issued with their policy documents. This will allow for the most effective case management and monitoring of claims costs and give them the value they have wisely selected.
A very good investment
Angela McClure, Equistar Underwriting Managers
There has been dramatic increase in wildlife numbers in South Africa over the last few years, partly owing to the increase in tourism. With this, we see the individual animal value increasing steadily, to the point that many regard this type of business as a very good investment. Towards the end of last year, a single Buffalo fetched R11 million at an auction.
Simarly, the Equine and Livestock markets are growing; people are often surprised at the values of individual animals. Recently, a top show jumping horse sold to Belgium for 1 million euros.
Brokers have the opportunity to penetrate this market, which is growing at a rapid rate. Although this class of business is technical, EquiStar, a specialized niche UMA, with many years of experience in the fields of Wildlife, Livestock and Equine Insurance, regularly hosts workshops, and often handles all technicalities on behalf of brokers. Commissions are 20%.
Covers include: All Risk Mortality, Capture, Transit, Boma, Accidental External Injury only, Green Hunt, Fire & Lightning.
South African aviation insurance industry well positioned to service African market
Alison Penderis, Senior Aviation Broker, Alexander Forbes Risk Services
Any consideration of the potential of the South African aviation insurance market should take into account the realities and risks of African aviation, the underdeveloped nature of the African aviation market, and the relatively favourable positioning of the South African aviation insurance industry to place and cover African risk.
The South African aviation insurance market
There are six major aviation insurers in South Africa and a large pool of well-connected aviation brokers able to insure aircraft and fleets across the globe. As such, South African brokers offer owners of aircraft and airlines access to established local insurers as well as international insurers both in the London and other developed markets.
Traditionally, all six of the major aviation insurers, through approximately 15 brokers, provide very similar products, all, in essence, selling the same cover to the South African market. In the past, this has often been very confusing for clients. More recently, however, South African insurers have elected to provide cover to brokers in the South African market on a first-come, first-served basis. This means that each insurer’s offering is only provided to one broker, with other brokers only being able to provide the same terms if they are able to provide insurers with a brokers’ letter of appointment.
This has tidied up the market and made purchasing aviation insurance much easier for the buyer in the South African market. It has, however, introduced an element of complexity in that the broker or the buyer of the cover now needs to understand the types of risk that different underwriters specialise in. As such, it is imperative that the broker or buyer of the cover has a full understanding of the risk in question and a good relationship with the relevant underwriter if they are to negotiate the best cover and premium for the client.
The African aviation insurance market
In sharp contrast to South Africa, there are very few insurers capable of placing aviation risk locally in the rest of Africa. While local African aviation cover does exist, it is of limited capacity, is pricey and is not always guaranteed to deliver if called upon.
Since a large portion of aviation insurance is US dollar based and, as most African economies are poorly supplied with foreign currency, the capacity for local African insurers to underwrite aviation risk is limited. Usually, local African underwriters can only write a small portion of the US dollar-based risk, say 5 to 20 percent, with the balance being insured either in the South African or global markets.
Since the South African aviation insurance market is able to cover the full range of risks faced in Africa at competitive terms, Africa certainly represents a growth opportunity for the somewhat saturated South African aviation market. That said, while placing African aviation cover abroad is certainly possible, it remains expensive due to the larger risks involved in flying, operating and maintaining a plane in Africa. This is especially the case if planes are underwritten on a plane-by-plane, as opposed to a fleet, basis.
While placing African aviation risk is generally more expensive, risk in Namibia, Botswana, Lesotho, Zimbabwe, Swaziland and Mozambique is treated the same by South African insurers as local South African aviation risk. This means that aviation risk in South Africa’s neighbouring countries can be placed at South Africa’s relatively cheaper domestic rates, another advantage for the local market in the region.
That said aviation risk in counties like Sudan, Libya, Democratic Republic of Congo and Egypt remains difficult to place in conventional insurance markets due to war and ongoing civil unrest. Furthermore, aviation risk in countries like the Democratic Republic of Congo and Kenya are also extremely difficult and expensive to place abroad due to the hazardous operating conditions of the former and the high accident rate of the latter.
Despite these generalizations, the trick in Africa, no matter how difficult the country, is to understand the specifics of the risk on a case-by-case basis.
Truly understanding the different conditions and circumstances that aircraft operate in enables an accurate identification of the risks that each aircraft faces on a case by case basis. This ensures that only the risks that each individual aircraft is facing are covered and the costs of covering aircraft in Africa are kept to a minimum.
Catering to the needs of the hospitality industry
The Hospitality industry plays a major role in reflecting what South Africa has to offer. It is a high intensity industry that deals directly with clients on a daily basis. The Hospitality industry also has very specific needs when it comes to insurance and Momentum Short-term Insurance has designed just such a product.
Momentum Short-term Insurance recently launched a tailor-made package that caters for the specific needs of businesses in the hospitality industry. After thorough research of what the UMA market has to offer, and focus groups with various intermediaries, Momentum Short-term Insurance decided to create its own hospitality product.
The tailor-made package includes great new covers that are focused specifically on Game Lodges, Guest Houses, Hotels and Function Venues. Some of the covers include: Bilking cover for when your guests leave without paying their bill. The “visible signs of forced entry” condition is waived where most hospitality establishments are concerned, due to the fact that as an owner you have little control over your guests locking their doors.
Game Lodges have gained quite a few advantages with Momentum Short-term Insurance’s tailor-made package for the Hospitality industry. Cover is available for the liability arising from animals breaking out of the perimeter fencing on the premises and the recovery and relocation of these animals. The liability associated with hunting activities on the premises can also be covered under the public liability section.
Owners in the Hotel industry will now enjoy covers such as tourist attraction loss, in the case that your hotel loses business as a result of a food poisoning or a bomb scare. It further covers loss of business caused by beach pollution or an outbreak of infectious diseases occurring within a 50km radius of your business, as well as abnormal noise caused by construction within 500m of your business.
Covers across the board for the Hospitality industry include Machinery breakdown, which covers the loss or damage caused by mechanical, electrical or electronic breakdown of your machines. Business Interruption, Electronic Equipment and Stock are also available to suit your specific insurance needs.
And … if you also see travelling between Pretoria and Johannesburg as an adventurous journey.
The launch of the Gautrain has created much hype and excitement among South African’s in the past year, and with the final leg of the route now open between Johannesburg and Pretoria, the Gautrain will surely start being used to its full potential.
Momentum Short-term Insurance has started to monitor whether the Gautrain will start to affect premiums in the foreseeable future. Travelers using the train will most likely park their vehicles in the enclosed and safe parking lots surrounding the various train stations, which by design will be close to their home, and will therefore spend less time travelling on the road which means that there will be less risk involved.
It is further expected that the implementation of the Gautrain will reduce the cost of insurance because of lower annual mileage and lower traffic density. Individual clients who will be making use of the Gautrain on a daily basis instead of commuting with their vehicles have been invited to contact Momentum Short-term Insurance and update their daytime storage information on their vehicle, which will most likely result in a premium adjustment.
Game insurance in South Africa
Donald Munro, AnimalSure
The wildlife industry has grown significantly over the past years and has shown an explosion in prices achieved at auctions. This has resulted in a more focused approached to wildlife insurance and arranging of additional capacity to accommodate the higher values.
Wildlife owners invest millions in trophy and breeding game, and therefore need comprehensive protection for their investment. Owners use their top animals as attractions to their reserves or in the main trophy hunt advertising. Imagine the consequences should one of these animals die. Owners of breeding programmes normally have more than R50 million in animal stock, and a large investment in management and infrastructure.
South Africa is also one of the biggest exporters of wildlife around the world, and exports thousands of stud and breeding livestock to Africa every month; examples are giraffe going to Moscow, Lions and Cheetah to Dubai and Rhino to the UK.
Last year also showed record prices of as much as R9,2 million for one Buffalo, with R5 million plus for an animal not being the exception anymore. A number of variants have become very popular, and exotic species are still achieving record prices at auctions. The colour variant on species, for example, black impala and golden wildebeest and gemsbok are getting top prices at the moment, with Golden Wildebeest easily selling for more than a million rand each.
The new species bring new challenges to the market, with animals having to adapt in an environment they are not used to. The stress associated with the new environment is the main reason for losses, and the exposure to new weather elements and different diseases contribute mainly to the mortality rate. New owners also need education on how to manage the new breeds, which can also lead to an increase in losses.
Rhino poaching has also increased the demand for wildlife insurance, as the owners are now exposed to a higher chance of mortality on their farms.
The government’s declaration of including wildlife farming as an official agricultural activity, will also open the market to a number of new players, and therefore will sustain the demand for exotic and high value species.
As a result of the high values and number of new players, the market requires a local insurer with in-depth knowledge of the industry and focus on wildlife insurance, as it is no longer just accommodating business.
AnimalSure is a recognised brand in the wildlife insurance niche and have created tailor-made policies to address the new changes and have the ability to accommodate the higher values.