Beyond natural disasters & cyber risks
The pandemic has reshaped liability insurance needs for the hospitality industry. Increased sanitation standards, vaccination policies, and evolving guest expectations have all influenced new types of liabilities. According to the Canadian Federation of Independent Business (CFIB), nearly 65 per cent of businesses, including hotels, have had to implement more stringent cleaning protocols and vaccination requirements for staff and guests to minimize the risk of disease transmission. These changes necessitate adjustments in liability coverage to protect against potential health-related lawsuits or claims. Hoteliers now consider additional endorsements for communicable disease liability coverage, which can cover legal fees and settlements in case of outbreaks or health-related incidents.
Key Insurance Coverages for the Hospitality Sector
Stefura highlights several key insurance coverages that are vital for the hospitality sector:
Commercial General Liability(CGL) Insurance
This coverage is crucial for protecting hotel owners against claims of bodily injury, property damage, and personal injury. According to IBC data, water damage, frozen pipes, and slip-and-fall incidents remain the most common claims in the hotel industry, leading to substantial financial losses for hotel operators.
Property and business interruption insurance
Property insurance covers the cost of repairing or replacing damaged buildings, furniture, fixtures, and equipment. Business interruption insurance is vital for hotels to recover from operational disruptions caused by natural disasters. Zurich Canada points out that approximately 40 per cent of small businesses, including hotels, do not reopen after a disaster due to inadequate business interruption coverage.
Cyber risk insurance
As hotels increasingly rely on technology for operations, cyber insurance has become essential. This coverage protects against data breaches, cyberattacks, and the associated costs of managing such incidents. The Canadian Centre for Cyber Security reported that the hospitality industry is among the top five sectors targeted by cybercriminals.
Specialized coverages
Host Liquor Liability and Special Events Coverage protects against claims arising from serving alcohol at events. Employment Practices Liability (EPL) insurance is also crucial for hotels, offering coverage for legal expenses and settlements related to employee claims.
Equipment Breakdown Insurance(EBI)
EBI covers the financial loss resulting from the sudden and accidental breakdown of essential equipment, such as HVAC systems, boilers, and elevators, which are critical to hotel operations.
Using Data for Risk Prediction & Better Negotiation with Insurers
Canadian hoteliers can leverage data analytics to predict potential risks and negotiate better terms with insurers. Advanced data analytics tools can analyze patterns in weather events, guest behaviour, and operational vulnerabilities, providing hoteliers with predictive insights into potential future risks. For example, by using historical weather data and predictive modelling, a hotel in Alberta could better understand its exposure to hailstorms and negotiate more favourable terms for hail damage coverage. Similarly, analyzing guest data for behaviour that could indicate potential security risks can help hotels assess their cybersecurity needs more accurately and negotiate comprehensive cyber risk insurance policies at competitive rates.