Tourism businesses in Southern Africa face unique challenges that have to be taken into account when looking at insurance and risk management. Here are some of the factors to consider.
- Unique operating environment
The operating environment for tourism business in Southern Africa poses challenges, says André du Toit, Director of SATIB. He uses the example of a game lodge, which typically has a remote location in a wilderness area that is home to the Big Five. Furthermore the nature of the activities that are conducted on the site include game drives and walks and sometimes even adventure activities such as mountain biking. “Our tourism industry itself is a unique offering,” he says. “Your standard commercial policy is not going to cover the same risks that you would need to have covered.”
Paul Halley, National Head Hospitality: Zurich Insurance Company, also highlights Africa’s uniqueness as a destination, pointing out that while this is an opportunity for the industry, it comes with risks. “The risks that come with such an abundance of opportunity include geopolitical risks, security risks and risks inherent with the many outdoor and adventure activities we offer, such as exposure to the elements, road transport and water transport risks and risks associated with exposure to the outdoors, the environment and interaction with or exposure to wild animals, for example.”
Many tourism businesses also operate across different countries, complicating things further. “Legislation in countries differs quite substantially and businesses that operate across different countries have to be aware of these discrepancies and ensure that they are adequately covered in terms of this legislation,” says Juan Coetzee, Assistant MD at Hospitality & Leisure Underwriters.
- Level of exposure
On the liability side, tourism business operating in Southern Africa are exposed to a high level of risk, says Du Toit. He explains that the quantum, or amount, a business is insured for, tends to be high. “There are claims that go in excess of R100 million,” he says. “A figure of R10 million or R20 million seems like a lot to the average person out there, but it’s grossly insufficient.”
Du Toit advises businesses to ensure that their policies stipulate that any court case would fall under South Africa’s jurisdiction. However, he points out that a liability claim is likely to be made in foreign currency for international guests because their medical expenses and loss of income would be in foreign currency. As a result, the exchange rate comes into play.
- Niche business needs
Tourism businesses also need to recognise that they are niche products and need specialist advice. “Find a broker who is a specialist in the field of tourism. Make sure that they have engaged with insurers who understand the tourism industry,” Du Toit advises. He adds that businesses should also sit with their brokers and ensure they have an idea of their unique business needs. “A bush lodge has different needs to a white shark diving company.”
This sentiment is echoed by Coetzee: “The tourism sector in Africa caters for a wide variety of activities that suit specific needs of their patrons and a one-size-fits-all insurance programme does not suit the specific requirements needed for comprehensive cover for the insured’s specific activities.” He argues that specialist hospitality products created for specific sectors are more suited to these businesses.
Highlighting the specialist needs of tourism business, Halley says the tourism product is an experience – it is not tangible and is “consumed” in real time. “There is no real margin for error and problems need to be solved immediately. It requires a very responsive, adaptable attitude and mind-set in order to succeed.”
