Why do Travel Agents need Professional Indemnity Insurance?
Travel agents perform a wide range of duties for their customers, any of which could result in a financial loss for that customer if not performed correctly.
Services typically performed
Among other things, travel agents:
- Collect payments from customers towards transport and accommodation
- Talk with customers and offer advice on travel destinations and dates and accommodation requirements
- Calculate travel and accommodation costs and quote package tour prices
- Make bookings on customers’ behalf for transportation and hotel reservations
- Arrange and sell tour packages and promotional travel incentives from travel carriers
- Provide customers with travel information, including places of interest, local customs and foreign regulations
- Print or request tickets using computer systems linked to various travel carriers
- Investigate complaints in relation to safety violations
- Read and understand carrier operating rules and training and testing procedures to ensure compliance with regulations and safety standards.
Key risks
As a result of performing these kinds of services, travel agents face exposures to claims of negligence, error or omission. Key exposures include:
- Failing to collect customer payments for transport and accommodation
- Failing to advise customers about visa or entry requirements
- Failing to make carrier and hotel reservations
- Failing to read and understand carrier rules and procedures.
Everyone is human, so regardless of how thorough and professional you are, mistakes are bound to happen from time to time, either by you or by one of your employees. Having professional indemnity insurance gives you peace of mind, knowing your business and financial assets are protected in the event of a claim.
What does Professional Indemnity Insurance Cover?
A typical professional indemnity insurance policy will cover you for a range of things including:
- Costs associated with court attendance and legal advice
- Loss of monies for which you are legally liable
- Negligence claims from errors or incorrect advice
- Civil liability claims resulting from your business activities
- Intellectual property rights infringements such as copyright or trademark breaches
- Loss of documents for which you are legally responsible
- Run-off cover to cover claims arising at a later date from a previous business or practice
- Public relations expenses incurred in protecting your reputation, if damaged by a claim
- Costs associated with official investigations and enquiries.
A wide range of professionals take out Pl Insurance including doctors, lawyers, consultants, engineers, builders, IT professionals and also travel agents, whose particular needs are the focus of this article.
Why would anyone make claims against a travel agent?
As a travel agent, you provide a professional service to your clients, advising them on travel itineraries, accommodation packages, travel insurance and more.
What claims? Any claim of negligence, error or omission that causes your client to suffer a financial loss. It might be unsubstantiated, but you still have to defend yourself in court and professional indemnity insurance pays your legal costs plus any damages that might be awarded to the claimant.
How do I compare indemnity cover for travel agents?
The best way to find the right professional indemnity insurance is to compare a number of policies from different insurers. Some of the things you should look for when comparing include:
- The amount of excess you must pay and whether it includes or excludes costs (legal fees)
- Whether the policy includes run-off cover (cover for work you performed in the past)
- Whether there are adequate reinstatements of the insured amount, in case you have more than one claim in a year
- Whether the policy provides cover worldwide or only within Australia
- Whether the policy is specific to travel agents and clearly defines the exposures that are covered
- What exclusions apply and whether they overly diminish your cover
- The cost of the premiums and whether they reflect the cover provided
- Whether the premiums are CPI-indexed to keep pace with inflation.
Professional indemnity insurance policies vary widely with insurers, so given that you will be seeking protection from claims that could run into the hundreds of thousands of dollars, it would be wise to seek advice from an insurance broker or your industry association, if you are at all unsure about what a policy contains.
Will I need public liability cover?
Public liability insurance is usually offered at the time of taking out professional indemnity insurance. Why would a travel agent need it? The same reason as any professional who deals with the public, to protect themselves from claims of personal injury or property damage.
As a travel agent, you undoubtedly have a place of business and when clients visit you there, you are exposed to the possibility of them slipping, falling, tripping or any manner of accidents that could occur on your premises.
It will usually cover your business, including subsidiary companies and your employees, provided they are performing their normal duties at the time of an incident.
What is doesn't cover
It will not cover any unlawful activity on your part or deliberate acts of damage or injury. Public liability insurance is usually very affordable and is a must-have for any business that has dealings with the general public, including travel agents.
Find out more about public liability insurance
Can I get income protection for myself or for my employees?
Yes you can. Income protection is a seperate type of cover to indemnity. This type of insurance provides you with income replacement in the event of an injury or serious illness that leaves you unable to work.
Frequently Asked Questions about Professional Indemnity Insurance
Q: Why do I need PI insurance?
- A: Because if a claim of negligence, error or omission is made against you, you will have to defend yourself in court, whether there are grounds to the claim or not and legal fees are not cheap.
Q: What is a professional?
- A: A professional is anyone who provides advice or services in a professional capacity in accordance with an established discipline.
Q: What is the definition of negligence?
- A: A failure to fulfil your duty of care towards another, with the result that they suffer a loss.
Q: How much cover do I need?
- A: Normally at least $1 million, but a lot of businesses choose cover for between $5 million and $10 million.
Q: How do I apply for PI insurance?
- A: The application process can be relatively easy these days. You can usually fill out an application form online, give any necessary additional information over the telephone and have cover within 24 hours.
Q: What does Civil Liability Indemnity mean?
- A: It indemnifies you for claims that arise from strict liability, where negligence is not an issue.
Q: What is a costs-inclusive excess and a costs-exclusive excess?
- A: A costs-inclusive excess means the excess you pay goes towards the legal costs, while a costs-exclusive excess lets you pay it towards the settlement instead, giving you a breathing space before it must be paid.
Q. What is the retroactive date?
- A: The retroactive date is the date from which you are covered by the policy for any act of negligence, error or omission.
Q: At what point should I notify my insurer about a circumstance that could possibly lead to a claim?
- A: As soon as you become aware of it, otherwise your cover could be denied due to a ‘known circumstance’.
What is the Travel Compensation Fund (TCF)?
The Travel Compensation Fund (TCF) was a regulatory framework for travel agents introduced back in 1986 to compensate customers who suffered losses when travel agents went bankrupt and failed to provide refunds or equivalent travel arrangements.
It was replaced in 2013 by the Travel Industry Transition Plan, which aimed to phase out by July 2014 both the Travel Compensation Fund and compulsory licensing for travel agents.
The growth in online travel agents and direct bookings was seen to have reduced the relevance of the TCF and was unfairly disadvantaging local travel agents, whose online competitors were not subject to the same regulations.
The old system has now been replaced with a voluntary industry-operated and accredited system for travel agents and a consumer advocacy body to deal with consumer issues.
Given that the TCF no longer exists, professional indemnity insurance has never been more important for travel agents, as clients who suffer financial losses will now be seeking compensation through any means at their disposal.
Apply for Professional Indemnity Insurance for Travel Agents
As can be seen, travel agents provide a wide range of services to their clients and in doing so, expose themselves to a variety of different risks. Therefore, professional indemnity insurance should be a key part of any travel agent’s insurance portfolio, particularly now that the industry has been largely deregulated.
Compare Quotes for Professional Indemnity Insurance for Travel Agents with an adviser
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