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Hotel Risk Analysis:
The reduction of various kinds of physical and liability risks associated with the hotel business is one of the most significant aspects of managing and operating a hotel. This process of risk management requires risk analysis, which is the process of examining the hotel's risk exposure and developing appropriate strategies for lessening and preventing those risks. This risk management and analysis process also involves developing a program for minimizing the business' exposure to risks through supplementing insurance protection in case the incident takes place. A hotel manager would enhance the effectiveness and profitability of the business by eliminating every possibility of incidents occurring on the property. However, this is not always possible since the hotel manager does not have control over certain incidents (Rushmore, 2010, p.18). This paper discusses the appropriate insurance for a hotel through examining importance of property insurance, difference between independent agency and exclusive agency systems, and insurance policy by Delta insurance. Consequently, adequate insurance protection offers a suitable means of reducing exposure to financial losses when an incident occurs.
Self-insurance vs. Property Insurance:
As part of determining the most appropriate insurance strategy for a hotel, it is important to understand all the probable areas of exposure. This is followed by an understanding on how insurance policies are configured to address the unfortunate risks that are likely to occur (Rushmore, 2010, p.18). Some of the primary areas of concern for hotel insurance include the property itself, automobile liability, premises liability, and employee compensation. These primary areas are the foundation with which insurance companies structure different insurance policies and strategies for unfortunate risks.
The other important measure in this process is to lessen the business' insurance cost in order to achieve an effective risk management strategy. The ability of a hotel manager to save the hotel's insurance costs requires a good insurance broker who totally understands the exclusive risk exposure of the hotel. The insurance broker should also be able to offer advice on an effective...
These two major aspects are important in identifying and adopting the most suitable and effective insurance policy and strategy for the hotel.
As the hotel manager of a six story hotel in the business district in a major city with a population of approximately 100,000 people, I self-insured the hotel for property risk for one year. While no losses occurred during this period, property risk insurance was purchased the following year to address the risk. The hotel's exposure to property risk is basically attributed to the high combustibility of contents and numerous sources of ignition that exist in the business (Rushmore, 2010, p.180). Therefore, property insurance is important in lessening the potential for a fire loss in light of the hotel's increased vulnerability to such incidents.
The decision to purchase property insurance even though no losses were incurred under the self-insurance policy was due to the numerous benefits of property insurance over self-insurance. One of the most important benefits offered by property insurance is monetary value since the insurance company will cater for damages or losses incurred in case of fire or theft. Secondly, the property insurance caters for replacement cost and business interruption exposure due to costs or rebuilding or repair and lack of backup facilities respectively.
Independent Agency System v. Exclusive Agency System:
Generally, property and casualty insurance can be marketed through various marketing systems including the independent agency system and the exclusive agency system. The independent agency system and exclusive agency system are different in various aspects including the number of insurers represented by the agent, ownership of policy expirations, and differences in commissions' payment. While the independent agent is an autonomous contractor though he/she represents products of different competing insurers, exclusive agents are independent entities that contractually are bound to represent a single insurer. As a result, exclusive agents are commonly referred to as direct underwriters because the system mainly involves direct underwriting.
In relation to their…
References:
Hoyt, R.E., Dumm, R.E. & Carson, J.M. (2006, May). An Examination of the Role of Insurance Producers and Compensation in the Insurance Industry. Retrieved March 2, 2013, from http://www.aiia.org/flat/contigencyreport.doc
Rushmore, S. (2010, March). Managing Risks Part of Managing Hotels. Retrieved March, 2, 2013, from http://www.hvs.com/Content/2989.pdf
"Types of Reinsurance and Reinsurance Program Design." (n.d.). Chapter 2. Retrieved March 2, 2013, from http://www.aicpcu.org/comet/programs/are/assets/docs/ARe144.pdf
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