Hotel association urges FM to restore insurance premium rates to FY2019 levels
Expressing concern over the sharp rise in insurance premiums for hotel properties over the past few years, the Hotel Association of India (HAI) has urged Finance Minister Nirmala Sitharaman to restore rates to observed levels during the 2018-19 financial year.
In a recommendation to the government, the hospitality industry body pointed out that the General Insurance Corporation of India Ltd (GIC Re) and other reinsurers have raised premium rates by more than two and a half times compared to the pre-FY2018- 19 levels.
Insurance premiums hotels must pay include fire, lightning, explosion, aircraft damage; natural disaster loss (earthquake and storm, flood flood); loss of profit/operating loss and coverage of damage linked to terrorism.
The body further added that the increase in premium rates has put all hotels on the same level and does not distinguish between the quality of the risk taken, as no flexibility is offered to insurance companies to rate depending on the risk category of the insured.
For this reason, better managed hotel properties that have invested more in security and preventive measures in the face of various risk exposures are charged the same premium rates as others.
MP Bezbaruah, Secretary General of HAI, said: “The tourism and hospitality sector has been through a lot in the past two years. There has been a significant drop in revenue collection due to the economic hit taken by the hospitality industry due to covid. Now is the time to incentivize the industry to revive and grow, but the current very high insurance premium rates compared to pre-Fiscal Year 2018-2019 are a major impediment. Their two-and-a-half-fold increase puts additional pressure on hotel chains, especially those that have invested heavily in safety and prevention protocols. At a time when the industry is showing signs of recovery, such premium rates imposed on the sector are a setback for the entire industry.”
The Indian tourism sector has a lot of potential and has been recognized by the government as a key pillar for Indian economic growth and development. The travel and tourism sector accounted for 40.1 million jobs in 2019. Due to the pandemic, more than 8.5 million jobs were affected. The sector is now on the road to recovery and tourism is expected to generate 53 million or 9.5% of total employment by 2029.