HAI has urged the government to restore the insurance premium rates for hotel properties to the level of FY 2018-19
Hotel Association of India (HAI), an integrated platform of the Indian hospitality industry has submitted a recommendation to Nirmala Sitharaman, Hon. Minister of Finance highlighting the steep rise in insurance premiums for hotel properties in the last few years. In its recommendation, HAI has urged the government to restore the insurance premium rates for hotel properties to the level of FY 2018-19. The industry body pointed out that the General Insurance Corporate of India Ltd (GIC Re) and other Re-insurers have increased the premium rates substantially by more than two-and-half times from the pre-FY 2018-19 levels.
The insurance premium rates for property insurance comprise of parameters like Fire, Lightning, Explosion, Aircraft Damage (FLEXA); Natural Catastrophe Loss (Earthquake & Storm Tempest, Flood Inundation); Loss of Profit/Business Interruption (LOP), and Terrorism damage cover.
Indian Tourism sector has a lot of potential and has been recognized by the Prime Minister as one of the key pillars of Indian economic growth and development
HAI further added that the increased premium rates put all hotels at par and don’t differentiate between the quality of risk undertaken, as no flexibility is offered to insurance companies to quote according to the risk category of the insured. Due to this, better-managed hotel properties that have invested more towards safety & preventive measures towards various risk exposures are charged the same premium rates as others. The apex body of Indian hospitality sector also stressed that till FY 2018-19, the insurance companies in India were permitted to offer discounts for FLEXA based on their respective underwriting parameters. As a result, the insured which were considered at better risk were able to benefit from extremely competitive premium rates which are not applicable now.
Adding to the recommendation, M P Bezbaruah, Secretary-General, HAI said, “The Tourism and Hospitality sector has been through a lot in the past two years. There has been a major decline in the revenue collection due to the economic hit taken by the hospitality industry due to covid. It is a time for providing incentives to the sector to revive and grow but the current very high insurance premium rates as compared to pre-FY 2018-19 is a major disincentive. Their two-and-half times increase is putting additional pressure on hotel chains, especially those who have invested a lot in safety and preventive protocols. During the time when the industry is showing signs of recovery, such premium rates imposed on the sector is a setback for the entire industry.”
The Indian Tourism sector has a lot of potential and has been recognized by the Prime Minister as one of the key pillars of Indian economic growth and development. The Travel and Tourism sector accounted for 40.1 million jobs in 2019. Due to the pandemic, over 8.5 Million jobs were impacted. The sector is now on its road to recovery, it is projected that Tourism would generate 53 million or 9.5% of total employment by 2029.
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