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April 21, 2009. Taking the Risk Out of Risk Management. Janice L. Schnabel Global Hospitality & Gaming Practice Leader Portland, Oregon. State of the Hospitality Insurance Market. Rates – Year End 2008. Insurance Marketplace Drivers. Increased Competition

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April 21 2009 l.jpg

April 21, 2009

Taking the Risk Out of Risk Management

Janice L. Schnabel

Global Hospitality & Gaming Practice Leader

Portland, Oregon


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State of the Hospitality Insurance Market



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Insurance Marketplace Drivers

  • Increased Competition

    • Increased demand for complete and detailed specifications prior to releasing quotations.

  • Need to Maintain Premium Volumes

    • More aggressive on pricing

    • Increased Appetite for Risk

      • In some cases…business they have no experience in writing.

  • Change in Behavior in Admitted Insurance Markets

    • Writing coverages that were previously only written by surplus lines companies.


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Emerging Trends & Developments

  • Increase in the Creation of New Coverage Options

    • Example: New endorsement for extra expense from communicable disease.

  • Attempts to Differentiate Themselves on Service Rather than Price and Product

  • Acquisition Activity Among Insurers has Increased

    • Standard insurance markets are making money and want to add diversification to their portfolios.

      • Making it difficult for MGA’s to meet growth objectives.

  • Change in Behavior in Admitted Insurance Markets

    • Writing coverages that were previously only written by surplus lines companies.


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Emerging Trends by Line of Coverage

  • The property insurance market were extremely competitive in 2008

    • Catastrophe limits have increased and capacity is plentiful

    • Rate reductions will not continue in 2009 as they did in 2008

  • TRIA renewal lifted terrorism market uncertainty—rates decline in 2008

    • Approx. 67% of Marsh Hospitality clients purchase terrorism coverage

      • Pricing and limit restrictions still driven largely by geography

      • Standalone coverage still the only option for international locations

  • Significant rate reductions in 2008 in primary and excess casualty lines

    • Liquor and auto remain generally flat with decreases for clients who are proactively managing these risks

    • WC rates are still under pressure from ongoing medical pricing increases

  • Crime rates are expected to remain flat but may experience some negative impact from a higher frequency of theft during these difficult economic times


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Looking Ahead…2009 and Beyond

  • Softening of the hospitality insurance market is beginning to slow

    • Greater scrutiny will be placed on financial risk.

      • Rating plans that may require collateral such as letters of credit

      • Underwriters will increase their focus on an insured’s financial condition—already seeing foreclosures and distressed properties.

  • Risk Appetite

    • Throughout 2008, there were more insurers pursuing hospitality business than is normally the case, forcing an increase in capacity

  • Financial Ratings

    • Seek insurers that have longstanding and financially strong history of writing hospitality business.

      • Insurers that lack industry expertise and commitment tend to stop writing this business once the market hardens and they realize their underwriting results.


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What Can You Do To Improve Your Position in the Insurance Marketplace?

  • Submit Renewal Information As Early As Possible

    • 90 – 120 days is not unusual…it is advisable.

  • The Impact of a Favorable Loss History is Priceless

    • Companies with a commitment to loss-control efforts will be in the best position to benefit from falling rates.

      • “Safety” Hiring

      • Training

        • Across all lines of insurance

      • Preventive Maintenance and Inspection Programs

      • Vendor and Sales Contract Review

      • Certificates of Insurance Program Management

      • Pre- and Post-Claim Management



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The Four Options for Handling Risk

  • Terminate/Avoid

  • Treating/Training

  • Tolerate

  • Transfer


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Terminate/Avoid

  • Reactive:

    • The most effective way of handling an identified risk is to terminate or eliminate it from the program, building or process.

      • Example: Rid the property of a hazardous chemical.

  • Proactive:

    • Avoid the risk altogether.

      • Example: Procure a copy of the MSDS prior to bringing the chemical on property.


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Treating/Training

  • One of the most effective and important ways in which to treat a risk is through training.

    • Consistency in following safe work practices minimize the likelihood of injury.

  • Use of Personal Protective Equipment (PPE)

  • Machine Guarding

  • Chemical Testing

  • Note: An overall Risk Management Program targets much of its attention on the treatment of risk.


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Tolerate

  • Active Tolerance:

    • You have done everything you can do to reduce the exposure but a significant risk remains.

      • Example: Using a hazardous chemical for which there is no safer substitute, that is necessary to accomplish the cleaning or treatment task at hand.

  • Passive Tolerance:

    • Passively tolerating risk suggests that you don’t even know the risk exists.

      • This option is totally unacceptable and can be construed as negligence in certain situations.


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Transfer

Two Options for Risk Transfer:

  • Through Insurance

    • The most common way of transferring risk and one that we will always need to use to some extent.

      • The more effective your risk management efforts, the less you will need to depend on insurance.

  • Through Contract

    • Sales

    • Vendors

    • Valet Parking



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Key Terms

  • Who are “Guests”?

  • Complaint v. Incident v. Claim

  • Bodily Injury

  • Property Damage or Loss

  • Reasonable Care (Foreseeability)

  • Liability Issues

    • Who is at fault and who decides?

  • The Claim Process

    • Responding & Reporting

    • Investigation Techniques

    • Settlement & Trial Process


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Guest Incident Training and Tracking

  • Train Employees (MOD’s) in “Handling Guest Incidents”

  • Track Number/Cost of Guest Incidents by Type in Order to Develop Programs to Minimize or Eliminate Them

    • Slips & Falls

      • Inside and Outside

    • Trips & Falls

    • Cuts & Scrapes

    • Auto Accidents

    • Missing Property

    • Auto Incidents/Accidents

    • Food Related Incidents

      • Food Injury and Food Illness


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Who Responds/Handles?

  • First Employee on Scene

    • What do they say?

    • What do they do?

  • Employee in Charge of Handling Incident

    • Security

    • MOD

    • General Manager

    • Risk Manager

  • Claims Adjuster

  • Defense Attorney


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Tips: Responding, Investigating and Reporting

  • First and Foremost: Take Care of the Guest!

  • Secure Names of Witnesses

  • Inspect the Accident Scene

  • Complete the Initial Report

    • Do Not Document Opinion

  • Follow Procedures for Reporting the Incident

    • Your Company

    • Insurance Broker

    • Insurance Carrier


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Who Pays?

  • Insurance Carrier

    • The Hotel’s Insurance Company

  • Direct Property Costs

  • Hidden Costs


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“Comping” the Room

  • “Comped” Rooms Are Not Considered Payments, Settlements or Admissions of Guilt

    • Considered the act of a good host

      • Decisions should only be made by the GM

  • Do Not Make Payments Directly to the Guest

  • Do Not Settle Claims with the Guest


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Would You Pay?

  • A restaurant server spills salsa on the guest’s suit jacket…

  • The guest tells you that he strained his arm trying to open his patio door. He wants to see a doctor right now…

  • The guest reports that her purse is missing. She had left it with the Front Desk clerk an hour ago…

  • Three guests report to you that they were sick all night after eating in the hotel dining room…

  • A VIP guest’s camera is missing from the banquet room where he had briefly left it during a meeting set up…

  • You observe a guest services attendant run over a guest’s foot with a bell cart. The guest suffers a minor cut on his toe, and wants treatment to avoid infection…


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Points to Remember

  • DON’T

    • Offer to Pay Medical Expenses

    • Transport Injured Guests

    • Admit Responsibility

    • Say the Insurance Company Will Pay

    • Argue or Debate the Cause of the Incident

    • Reprimand Employees at the Scene

    • Make References to Prior Similar Incidents

    • Discuss with Strangers, EVER


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Summary

  • React A.S.A.P.

  • Assess the Situation

  • Use Common Sense

  • Don’t Go Out on a Limb Alone

    • Take Someone With You

      • M.O.D. - Your Insurance Broker/Adjuster

  • Get the Facts

  • Identify Witnesses

  • Report Everything Immediately