With new challenges emerging nearly every day, managing risk and insurance policies for hotels has become more challenging than ever. At the same time, hoteliers have more ways to mitigate the risks and reduce the cost of policies than ever before.
“Hoteliers and management companies often do not realize just how much their experience affects their rates when it comes time to renew their policies,” said Sam Logan, VP of risk management for Island Hospitality. “Insurance company underwriters will examine the frequency and severity of claims when they are considering whether to provide coverage and what the rates will be to renew.” The underwriters also will consider market conditions, the relationship a company has with its carrier’s claim account manager and especially the adjusters handling the claims, he added. “The adjusters handling your claims often have a caseload of 125 claims or more. If an adjuster is looking at two claims at a given time and one is with a company that complains and harasses them and one is with a company where the contact is pleasant and understanding, you can be sure the claims will be worked differently.”
When businesses implement policies and procedures that reduce risk, they can reduce policy premiums as well, Logan said. “There are many strategies that have proven effective in risk reduction, several of which involve little in the way of cost to implement and are currently hot-button issues with insurance company underwriters."
Best Practices
When it comes to managing risk, the best practices have some “fundamental philosophical commitments,” said Michael Schultz, co-founder of Aclaimant. For example, an organization should have a culture that reinforces transparency. “The ability to see something, say something and more importantly do something is critical to an insurance underwriter recognizing that [a business is] behaving responsibly,” he said. Technology can also be a competitive advantage: Files should be in an organized and prioritized single connected solution. “Make sure that you can take what is a fragmented and disjointed information supply chain and then simplify it in a way that everybody knows the who, what, where, when, how—and most importantly—why," Schultz said. "This information needs to be distributed as efficiently and effectively as possible.”
Logan recommends each property form safety committees “comprised primarily of line-level employees and to a lesser extent, managers” that meet monthly to discuss incidents that have occurred at the property, what to do to prevent similar incidents in the future, discuss hazardous issues identified by team members or guests and how to address same, and what targeted training is needed that will benefit both associates and guests. “Management should conduct property walks frequently to look for hazardous conditions,” he added. “The walks should be documented and followed up on to ensure that noted conditions were addressed.”
At the same time, corporate leadership should monitor and be proactive about any issues that could have a negative effect at the property. Rather than expect that a property to read over hurricane procedures, Island Hospitality has prestorm daily conference calls with property management, corporate risk, corporate engineering, purchasing and human relations.
“If you can then demonstrate these things from an insurance perspective, underwriters will recognize this type of behavior and hopefully reward you as such, both financially and with respect to coverage terms and mitigate ... the number of exclusions that could be offered,” Schultz said.
Cybersecurity
As contactless guest experiences become more mainstream, lobby kiosks are changing how data is being transferred and stored, said Mark Lee, VP and risk services manager at Hub International—another change the industry may not have anticipated. “A lot of the hotels I've dealt with … may not be thinking of cyber as a big exposure to them because they're not understanding how much data they're actually handling,” he said. “A lot of people assume that they have firewalls or they have certain IP protocols in place but they're receiving more data and they're receiving it in different ways.”
Firewalls and third-party network monitoring will come at a cost, Lee acknowledged, “but it's better when you have it on the front end and you know you're going to be protected.”