Do you need insurance if you are going to arrange tours?

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Permalink Reply by Alex Bainbridge on May 12, 2009 at 10:21am

Thanks for your question

I presume you mean liability insurance? [for what happens if someone injures themselves - or if a decision that the leader makes injures a customer.... not quite the same thing]

Rather than financial insurance / bonding for the safe protection of the customer's money that they pay over when booking.

?

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Permalink Reply by workingNOMAD on May 12, 2009 at 10:26am

Sorry, I meant liability insurance?

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Permalink Reply by Ralph Foulds on June 1, 2009 at 3:19pm

There is a difference between clients requiring travel insurance to cover them for medical costs etc. and the company itself having liability insurance to cover negligence

Here is a quote lifted from the FAQs section of the ABTOT website...

"A point that is often overlooked and receives limited publicity is that under the 1992 Regulations travel organisers can be held liable for loss, injury or death that may be suffered by their clients. This liability may extend to the servants and agents of the travel organiser over whom the travel organiser may have limited control. Successful claims can involve awards involving hundreds of thousands of pounds, and in many cases would bankrupt a small travel organiser which had no insurance cover in place. It is also worth noting that in the situation of a 'dynamic package' it is often claimed that the provisions of the Regulations do not apply in the case of death, injury or loss suffered by the client. However this may not be accepted by the courts in the event of a dispute and there are already cases on record where the courts have ruled that a 'package' has been created. It is obviously a prudent move to protect the future of the business and combined liability cover is in most cases relatively inexpressive."

So, I'm not sure that you require it by law, but if you don't have it, you are leaving yourself open for having your company bankrupted if there is a successful claim against you. So, I'd say it is very irresponsible for a UK tour operator not to carry liability insurance, and I certainly would be wary of booking with one who didn't.
In developing countries, liability insurance for tour operators often doesn't exist, so you've got to be aware that if you book with a foreign company and if anything happens to you due to their negligence, you may not be able to claim against them.

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Permalink Reply by workingNOMAD on September 23, 2009 at 12:17pm

Thanks for the reply

What about a license for operating tours? I find the AITO costs way too much for small operators but looking around at other small operators they do not seem to be bonded to any organisation.

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Permalink Reply by Murray H on September 25, 2009 at 5:58am

It is a fine, though distinct, line. If one starts taking money for a combination of accommodation and other elements then there is a package and all sorts of regulations come in. So, Fred down the pub starts taking money off people and then books some travel and accommodation and arranges a tour all by himself - suddenly he is packaging. Now, one needs to look at individual circumstances but if people are arranging things as you suggest, they may well "get away with it" until - of course - something goes wrong. When this happens, Fred needs to find a new pub; probably a new home as well. The full weight of what is mentioned above (by Ralph) comes into play. You cannot add a disclaimer to anything if that disclaimer is contrary to the law of the land. One cannot say, for example "If the hotel I book for you is not built when you arrive I am not responsible" Those that do, are being stupid and will find out the nature of their folly the hard way. Believe me, it can be very, very hard as well!

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Permalink Reply by Sam Clark on September 28, 2009 at 12:36pm

I agree with Murray - a disclaimer means nothing at all if it is contrary to the law. Liability insurance is absolutely essential to anyone going into this kind of business. It is not expensive either - unless you are thinking about dealing with Americans... The process of getting liability insurance is also very helpful in thinking through your policy in this regard.

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Permalink Reply by Thomas Power on September 29, 2009 at 9:30am

As per posts below, you have 3 kinds of cover which come into play here.

1) Liability insurance
2) Consumer financial protection
3) Clients' personal travel insurance

You can only fob off clients with number 3, the other two are entirely the responsibility of the tour operator. A tour being defined as charging people to provide and two services combined (from a list accommodation, guiding, transport, etc). There is no grey in here, it's illegal to operate tours without liability insurance and it's illegal to do so without consumer financial protection in place.

As soon as you enter into a contract with a client to provide them a specified service (holiday) then you become liable for the performance of each and every element of that contract, doesn't matter where the services are being delivered.

Another thing to bear in mind is that disclaimers/waivers are legally valid in certain countries (notably the US and much of South America). That is to say that you could find yourself in a situation whereby clients travel as part of your tour, they take part in an activity which forms part of your tour (say a boat trip). Before getting on the boat, the owner of the boat has everyone sign a disclaimer or waiver. The boat sinks. The waiver is solid and prevents any of the affected parties going after the boat owner. You as the tour operator are left with full liablity and no means of counter claiming against the boat owner.

So, you can do it, presumably it's trading standards who have to chase these things up and they'll most likely take a long time to get round to finding who is doing what in terms of organising tours. As and when something goes wrong it has the potential to ruin you.

For anyone looking to set up an occasional tour leading type business I'd say that the smart thing to do is find an agency or specialist operator who is aligned with your brand idea and pay a facility fee to get cover. You do the leg work in terms of sales and organising, client contract is with the operator. If the operator's smart then they will want to see evidence that you have done your homework in terms of safety and auditing suppliers but that's a fairly clean way to get going without the high fixed costs.

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Permalink Reply by workingNOMAD on September 29, 2009 at 9:40am

Thanks everyone for the replies.

The way I see it liability insurance seems a must have.

Consumer finance protection? I have not come across this one before and my friend who runs a similar business has indicated that on small operations this is not necessary, especially if you are putting the whole package together yourself.

Looks like a limited company would also be useful.

As for travel insurance then for UK tours I assume you only have to worry about non-uk clients?

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Permalink Reply by Ralph Foulds on September 29, 2009 at 9:58am

Consumer financial protection is essential - your friend is wrong I'm afraid, and needs to read the Package Travel Regulations and sort out immediately what he's doing with his clients' monies.
If he is, or you will be selling a package (created out of two or more services, as Thomas explained above), then by law you must provide some way of protecting your client's money. This may be through a trust account, bond or insurance policy.
There are lots of threads on this forum about the different ways of providing financial protection, and you should go through these and point your friend to them too.
http://www.smallfishbigocean.com/forum/topic/search?q=financial+pro...

Read the 1992 Package Travel Regulations here (sections 16 to 22 relate to financial protection)
http://www.opsi.gov.uk/SI/si1992/Uksi_19923288_en_1.htm

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Permalink Reply by Thomas Power on September 29, 2009 at 10:02am

Limited company I think without a doubt, probably essential actually but there will be people better versed than I on that.

Re consumer protection, I think they've got that bit wrong too. You have to have protection in place in case of your failure. You can simply operate a trust account so that monies paid to you for the tour go into the trust account (administered by a solicitor or possibly chartered accountant). That money then stays there until the end date of the tour, i.e. the point at which your contract with the client is fulfilled, when it can be released to you.

You will find trust accounts administered by tour op membership organisations such as the AITO and TTA.

An alternative to that is to issue an insurance policy for each client to cover this consumer protection liability. I think membership of ABTA takes you down this road but not certain on that.

The above assume that the tours involve your issuing/purchasing no flights on behalf of the client. The only protection which is valid for holidays which include a flight (and that could be a puddle jumper across a lake in the middle of the holiday, doesn't have to be flights to/from destination) is an ATOL license issued by the CAA.

That's acronym-wang!

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Permalink Reply by workingNOMAD on September 29, 2009 at 10:40am

ok, well I will mention some of that to my friend, their operation has been running a number of years now and I don't think they'll listen to me!

The AITO / ABTA etc is just far too expensive for someone starting out and I would not be held to ransom but organisations like that.

Thanks for the encouraging replies. Makes a change to have some positive feedback for a change on starting up in this area.

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