Hoteliers count cost as insurance premiums soar
Hospitality is not the only industry to be hit by soaring insurance premiums. But some hoteliers are having to pay increases of up to 400%, and are angry at the short notice they have received of the massive increases and the reasons given for them.
Peter Crome, managing director of 59-bedroom Chewton Glen country house hotel in the New Forest, Hampshire, said the premiums on his policy with HSBC bank, brokered through Marsh UK, had jumped from £26,000 to £90,000 a year. The standard policy covers public and employee liability, fixtures and fittings, fire and theft.
Crome said country house hotels had suddenly become the least desirable properties to insure. His broker cited wooden floorboards, and the long distance from the nearest fire station as among the reasons.
Crome was given only 48 hours' notice of the increase and ran the risk of being uninsured if he didn't accept. He said: "The maddening thing is that you would expect a company to come to you in advance to tell you of such an increase. We're furious."
By contrast, London's 74-bedroom Goring hotel's policy with Avon, brokered by Dawney Day, has experienced a more modest - though still substantial - rise from £26,500 to £36,200.
Not all hotels pay such start-ling amounts, but most have seen sharp increases.
At the 10-bedroom Royal Oak hotel in Braithwaite, near Keswick, Cumbria, proprietor Terry Franks said his Norwich Union insurance policy had jumped from £250 last year to £700. "Insurance is dead money, but you've got to have it, especially these days with the rise of personal injury claims," he added. "Seven hundred pounds is a lot of money and there will be some people out there who won't pay, leaving themselves open to risks which don't bear thinking about."
A recent survey by the British Hospitality Association (BHA) of nearly 1,000 hotel businesses found 86% had experienced premium hikes this year. The BHA is about to issue advice on ways to minimise the risks of fire, injury and public liability in a bid to push premiums down.
But Franks does not feel insurance companies take much notice: "In 11 years we've never had an insurer come to inspect the hotel. We should be rewarded for having everything in the right place," he said. A Norwich Union spokesman said steps taken to reduce risk levels would reduce the likelihood of claims which impacted on premium levels.
Shop around
When his policy came up for renewal, Franks decided to shop around, but unlike a few years ago when various rates existed, he could not find a better deal. "It looks like the insurance industry has closed ranks to recoup its losses," he said.
Price-fixing is an infringement of the 1998 Competition Act, with guilty companies facing fines of up to 10% of three years' UK turnover. A spokesman at the Association of British Insurers (ABI) denied there was a cartel. He said that a number of factors had pushed premiums up uniformly across the industry. The costs of 11 September had been passed from underwriters to insurance companies and in turn to policyholders.
Bad weather and the collapse of the Independent Insurance Group last June have contributed. In autumn 2000, insurers paid out £1b to flood- damaged businesses. In addition, society has become increasingly litigious. The amount paid out for personal-injury awards has risen by 9% in the last year. The ABI's spokesman said the majority of insurers were making a loss from commercial insurance.
Martin Couchman, deputy chief executive of the BHA, concluded there was no short-term fix. The options were to use your broker effectively, look at areas of risk management, and cover more loss yourself by increasing your excess.
