Today, the hospitality business is increasingly gaining momentum and occupies an important place in the modern economy. In Uzbekistan this industry is the most dynamically developing and very profitable, successfully growing annually by 15–20%.
Modern hospitality business is a multifunctional system, a diverse business structure, constantly changing in unforeseen situations, various risks constantly accompany the business. As a result of economic development, there is already one answer to the growing unpredictability of the business environment – insurance as an effective method of risk management. The practice of insurance came to Uzbekistan from Western insurance companies. In most cases, policyholders in the Uzbek market attract hotel chains that do not want to risk their image and reputation and do not skimp on insurance services. Today, hotels such as HYATT REGENCY TASHKENT, HILTON TASHKENT, hotel chains RADISSON BLU HOTEL TASHKENT, INTERCONTINENTAL TASHKENT, WYNDHAM TASHKENT, etc. are an indicator of this effective tool for business protection.
The hospitality business is one of the most dangerous industries in terms of insurance risks. Recognition of a high-risk object from an insurance point of view is associated with a large number of changing guests, which increases the likelihood of insurance risks occurring. In those countries where the hospitality industry is the leading industry of the country, the situation even more sensitive, the risks for hotel owners amounts to hundreds of millions of dollars, and insurance is part of their business.
Nowadays, insurance for hotels is important not only during its operation, but also during construction. In this case, the insurance policy for hotels/guest houses consists of two categories:
1. Hotel insurance during construction.
For these purposes, a “Construction and Erection Risk Insurance” (CERI) policy is required. It consists of three parts:
– Protection of property and building materials from risks such as fire, flooding, theft, etc. The consequences of improperly performed work by the contractor, which led to insured events, are also insured here.
– General liability insurance (GL) to a third party. For example, construction materials may accidentally damage a car parked nearby, etc. All activities related to construction and installation work are insured, and an insurance case can occur not only on the construction place, but also outside it. Another common example is causing damage near standing buildings, especially if the facility is being built within a city with dense buildings. It also insures against environmental damage, which is more abroad.
– Losses as a result of delay in commissioning of the facility. Losses can come into effect, in particular, as a result of an insured event (fire, flood, etc.). In this case, during forced downtime, the scenario is to make a profit.
In the insurance market of Uzbekistan, the most popular policies are those covering the first two parts of the product. Meanwhile, the West prefer to insure themselves in all three sections. For example, if the commissioning of the facility occurs as a result of a fire, when all three sections of the policy were purchased, the insurance company pay the customer for the consequences of the damage caused, as well as lost profit. The final payment is not possible if only two sections are purchased. Construction and Erection Risk Insurance (CERI) quickly gained a special place in Europe and the USA.
2. Insurance after commissioning of hotel facility for service.
It is extremely important to purchase two policies: “General Liability Insurance to Third Parties” and “Property Insurance”.
Third party liability insurance is an extremely important component of hotel business insurance. This type is the most traumatic in the service sector. Examples include thievery money and jewelry out of your room, damage to clothes in the laundry or dry cleaning, personal injury (for example, a guest slipping on a wet floor and breaking his arm). etc. This policy is especially important for those hotels where a large number of foreign tourists stay. For example, citizens of Europe or the USA can request significantly higher compensation in case of personal injury, this was the case when an Italian citizen slipped on the wet floor near the pool at the SHERATON TASHKENT hotel. At the result, his injury was not serious, he sued several thousand dollars in his homeland. I can say that chain hotels purchase this policy without fail; foreign hotel chains have developed special insurance standards, without which the hotel cannot enter the chain.
The next policy you should consider to purchase is Property Insurance. This policy consists of three sections:
– Insurance of the business property where operations helps (buildings, equipment, furniture, etc.). Insurance policy cover the risk of fire, explosion, lightning, catastrophic risks, flooding, illegal actions of third parties and other unforeseen events that are not insurance exclusions.
– Insurance of losses from business interruption (Business Interruption Risk). In this case, even if the hotel is temporarily not operated, the owner ensures salaries for employees, utility bills, taxes, etc.
– Terrorism risk insurance. Sometimes this risk is insured as part of a property policy, sometimes as a separate policy. This risk is quite expensive, and its cost is approximately half of the amount of the property policy.
Today, representatives of the hospitality sector, in particular, hoteliers in Uzbekistan, do business without insurance. Large and chain hotels manage their risks, which harm clients and their image, and purchase insurance programs with 100% comprehensive insurance programs to protect their protect clients, and reputation. They have already reached the point that insurance is a natural part of the business process. And every competent manager will always choose insurance as a reliable financial instrument to operate in risk management.
JSC “Mosaic Insurance Group” offers products that protect business owners from unexpected expenses, thus allowing you to preserve the investments made in your business.
It is impossible to be completely confident in the safety of your property, but you can protect it as much as possible from possible risks.
Asal Temirkhodzhaeva
Director of Commercial Lines
JSC “MIG”
