Section 16 of the Tourism Industry Act 1992 states that for all outbound tour packages, the licensed tour operator shall (a) purchase insurance policy; or (b) cause a deposit in the form of cash or bank guarantee to be made to the Commissioner.
While accredited passenger sales agents must provide a bank guarantee to the International Air Transport Association under the billing and settlement plan, it is not practised in other bodies such as the Ministry of Tourism, Arts and Culture. Under the Act, its Secretary General is the Commissioner of Tourism.
It is necessary to be clear on the various types of insurance covers tour companies and holidaymakers should have as not everyone qualifies to be insured. For example, life insurance can only be bought when one is in good health, not for those with life-threatening diseases.
As for insuring a tour company, the basic covers include fire, lightning, domestic explosion, burglary, loss of money while in transit or kept in the office, fidelity guarantee, public and employer’s liability.
Fidelity guarantee covers against any direct pecuniary loss sustained through dishonest acts by employees such as forgery, embezzlement, larceny or fraudulent conversion. It also covers loss of real property and merchandise.
Public liability covers the amount the company is legally liable to pay for compensation in respect of bodily injury or illness to third parties, or loss of or damage to third party property as a result of an accident arising out of the negligence of the company or staff.
Employer’s liability covers against liability to pay compensation to employees including costs and expenses in respect of accidental bodily injury or disease arising out of and in the course of employment.
The above insurance covers are easily available and affordable as a package to most outbound tour operators. But it would be difficult to underwrite indemnity insurance for them, which is normally granted to licensed professionals such as doctors, accountants, lawyers, architects and engineers.
Professional indemnity covers legal liability to pay damages to persons who have sustained financial loss arising from professional negligence or that of his employees in the conduct of the business.
Apart from high premiums, few tour operators would be able to secure such covers, as they are more difficult to obtain than business loans from banks.
Imposing outbound tour operators to have indemnity insurance will also backfire, as additional cost of doing business would be passed down to customers.
It would be cheaper and easier for holidaymakers to buy travel insurance on their own, which covers not only from tour departure day but also for loss of deposits or full payment for travel packages should the tour company be insolvent or the directors absconded.
But it is important to read and adhere to all the terms and conditions of the insurance policy. For example, there is no cover when the service is arranged by unlicensed travel agents.
Insurance covers are usually adequate for those who exercise due care, but not for the foolhardy.
YS Chan,
Kuala Lumpur
