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COTA aims to reduce insurance costs for tour operators

Risk management plans key but rates unlikely to drop to pre-9/11 levels

B.C. based tourism operators that have seen their insurance premiums and deductibles soar after Sept. 11, 2001 may be eligible for some relief from a new program offered through The Council of Tourism Associations of B.C. (COTA).

The program was introduced at a press conference on Friday, Feb. 25, and will be released to tour operators on March 15 with an online component and a guide for nature-based tour operators. Only 11 out of 50 identified nature-based activities will be covered in the first phase, and operators offering those activities will have to commit to creating a detailed risk management plan for their business.

"We have to crawl before we can walk with this," explained Will Harding, the media relations director for COTA. "We decided to focus on 11 activities to start with, based on our discussions with the industry. And because each business within those 11 activities has to be focussed on an individual basis, the savings are really going to depend on the operator, and how far into the risk management process they’re willing to go.

"Other savings are going to come from the insurers when they have a better understanding of their clients."

According to Harding, some nature-based tour operators in B.C. have seen their insurance premiums jump by as much as 500 per cent in recent years as a result of the 9/11 terrorist attacks, the stock market downturn in 2002, and other global events that impacted the insurance industry. In addition to rising rates, deductibles have also increased while the overall availability of insurance for tourism has declined – very few companies offer policies to tourism companies, and many operators are struggling to find a company that can provide the kind of coverage they require.

While Harding says it will likely be impossible to bring rates back down to pre-9/11 levels, he estimates that operators that follow the program, adopt risk management programs, and haven’t had any claims could benefit from up to a 20 per cent reduction in rates.

In a survey of 450 tourism operators, COTA found that rising insurance rates were hitting businesses more than any other factor. Nature-based tourism businesses were the hardest hit of the group, with 96 per cent of respondents reporting that liability insurance was insufficiently available.

COTA enlisted the assistance of its members, the provincial government, and insurance partners Shaw Sabey & Associates and Adventureinsurance.ca to develop the new insurance program for that sector. Eventually all 50 identified activities in nature-based tourism will be able to take advantage of the plan, but the 11 activities COTA is starting with represent a significant share of the market – especially for Whistler. The list of activities includes whitewater kayaking, whitewater rafting, canoeing, sea kayaking, ski touring, wildlife viewing, backpacking, hiking, bicycle touring, mountain biking and snowmobiling. All activities have to be guided to qualify for the program, and all companies have to be members of COTA.

Operators in these 11 businesses will be able to receive or download a package from COTA that includes a description of steps to follow as well as a risk management handbook that businesses can refer to when developing their own safety plans. There are also samples of risk management plans in the handbook for different types of operators.

Every application will be reviewed by consultants in the risk management industry that have been retained by COTA, before going to the insurance companies for consideration.

Doug Washer, co-owner of Canadian Snowmobile Adventures, attended the rollout of the new program, and said the company would most likely commit to the program. Whether that means lower rates or not, he says that has yet to be seen.

"What goes on presently in the industry is that any one company gets assessed partly on their gross sales… somehow that gets translated into risk by the insurance company. The other issue that comes into it is the (insurance) industry’s broad-based perception of your type of business," said Washer.

Because the insurers look at gross sales without taking into account the cost of doing business in an expensive market like Whistler, Washer says CSA pays more for insurance than other snowmobile/ATV tour companies across the country, even though the risk is similar.

"What’s changed in this process is, ultimately, (the insurers) will look more specifically at each and every operation, how it operates, its risk management plans and strategies, and will focus less on things like gross company sales," he said.

The benefit of going into greater detail – including information like guide certification, industry certification, experience of guides, in-house training programs and the types of products offered to customers – is that insurance companies will have a deeper understanding of how each company works.

"What that hopefully translates to for us is savings, but the question right now is what will that mean? At the end of the day we, and every tour operator out there, want to be sure our level of coverage is sufficient, that the rates we’re paying are not cost-prohibitive to our operation, that our deductibles are reasonable," said Washer.

"If you look back in the past, when companies were assessed based on risk management and a dollar figure, and at the current situation – and your volume of business didn’t change, your operations didn’t change – we still saw our insurance rates going up two, three, four times. What we would like to see is those rates coming back down, more in line with previous risk assessment values."

Although the company already has a risk management plan in place, Washer says it will be valuable to go through the process with COTA. It may mean changing insurance companies if they can offer a lower rate, but in the end he says you have to do what’s best for your company.

COTA will be publishing details of the plan online at www.cotabc.com starting on March 15.