The International Events and Conference Industry - Literature review Example

INSURANCE POLICY FOR CONFERENCE AND EVENTS INDUSTRY: A COMPARISON BETWEEN THE UNITED KINGDOM AND GREECE by 23 June Insurance Policy for Conference and Events Industry: A Comparison between the United Kingdom and Greece Introduction In recent years, the international events and conference industry has become a dynamic place, where the development of new ideas and concepts follows globalization trends. The international events industry is ever-changing, but while some countries excel as the major international events and conference providers, others are just at the beginning of their journey to the events and conference industry success. Millions of people attend public events and conferences, to expand their knowledge and establish personal and professional contacts. The events industry contributes to economic growth and GDP of many countries. It goes without saying that public events and conferences are associated with numerous risks, including life risk, property damage risks, event cancellation possibilities, and even terrorism threats. Therefore, event and conference insurance is becoming a fundamental driver of growth in the events and conference industry. The United Kingdom has a well-developed network of event and conference insurance options and can serve a role model for Greek conference and event organizers to follow. The Greek insurance market must provide event and conference industry providers with specialized insurance schemes, which will meet the specific needs and requirements of event organizers. Crisis and Risk Management In contemporary organizations, crises are not uncommon. A broad range of crises impacts organizations and affects their performance. Although crises differ substantially across organizations, they display a number of common elements (Pearson & Clair 1998). Organizational crises are extremely ambiguous (Pearson & Clair 1998). They are characterized by low probability of occurring; nevertheless, even a single organizational crisis may pose a serious risk to the future performance within the organization (Pearson & Clair 1998). Organizational crises are leave little time for reaction and response and often come as a surprise to organizations and stakeholders (Pearson & Clair 1998). Finally, any organizational crisis always presents a dilemma of what will help to improve the situation and what will make the situation even worse (Pearson & Clair 1998). In light of these characteristics, an organizational crisis can be defined as an event, which has a low probability of occurrence, heavily impacts organizational performance and stakeholders, threatens the future of the organization’s survival, and generally occurs in the atmosphere of ambiguity in terms of the cause, consequence, and instruments of resolution (Pearson & Clair 1998). In this situation, crisis management offers ample opportunities to manage organizational crises correctly. Crisis management is a complex process comprising numerous elements and stages. In general terms, crisis management in organizations presupposes a complex policy/ attempt to either avert crises or manage those, which eventually occur (Pearson & Clair 1998). The effectiveness of crisis management is judged by the number of potential crises that were averted and the ability of organizational stakeholders to reduce the costs and effects of the organizational crises that occur (Quarantelli 1988). In this situation, prevention is the dominant component of crisis management, and organizations are encouraged to employ a number of initiatives to guarantee that all crisis possibilities are dealt with and averted. With the emphasis of crisis management on prevention, insurance is widely regarded as the fundamental ingredient of most crisis management initiatives. Organizations, including those in the event and conference industry, must engage systematically “and comprehensively in acts of prevention or preparation for undetected crises” (Mitroff, Pauchant & Shrivastava 1988). Here, insurance is not the instrument of prevention but an instrument of protecting organizations from the major costs of crises that cannot be averted. The importance of insurance in crisis management cannot be overestimated. Insurance lays the foundation for the development of relevant crisis management initiatives and gives organizations in the event and conference industry ‘a peace of mind’, as they are dealing with the major organizational complexities. Importance of insurance in the event and conference industry An understanding of the insurance role in the events and conference industry is extremely helpful in appreciating the place and role of crisis management in organizations working in this industry. Generally, “insurance policies are contingent claim contracts that rely on pricing inversion, meaning that the product is priced before actual production costs are known” (Skipper & Kwon 2007, p.500). Simply stated, consumers pay insurance premiums to insurance companies, with a promise that, once the defined events and conditions occur, they will receive financial compensation. Certainly, insurance by itself is not without controversy: no customer can be confident that, by the time the defined events occur the insurance company in question will have sufficient capital to meet its financial obligations. Therefore, insurance in many instances resembles a lottery and remains one of the main objects of international accountants’ concern. Criticism aside, insurance remains a fundamental component of crisis management in organizations in all parts of the world. Apart from the fact that insurance companies contribute significantly to national economic growth, insurance is the major aspect of successful crisis management, as it helps companies to reduce the costs of possible crisis events and gives them confidence that, once such events occur, they will be able to respond quickly and effectively. More often than not, the ‘peace of mind’ argument is the most important justification of insurance in organizations. However, insurance is associated with numerous tangible benefits (Skipper & Kwon 2007). The main benefits of insurance include but are not limited to financial stability, effective support to government crisis management programs, savings mobilization, improved trade and commerce, efficient risk management and excellent mitigation of risks (Skipper & Kwon 2007). Countries with the most advanced insurance markets give their citizens ample opportunities to mitigate their organizational risks. The importance of insurance is justified by a popular assumption that insurance identifies those at the highest risk of crisis or loss (Skipper & Kwon 2007). Many crises in events and conference industry organizations are long incubation processes that eventually manifest as a result of a precipitating event (Roux-Dufort 2007). Insurance is a good way to identify these processes and anticipate/ averse their adverse effects on organizational performance. The role of insurance in the events and conference industry is well-documented (Tyrrell & Johnston 2001). Any event is necessarily associated with a large number of people gathering in one place to observe the process or achieve the desired personal/ professional outcome (Tosun 2002). The main risks of events and conference include life risks, property damage risks, and even terrorist threats. The case of the 2001 HIDA Conference and Expo is very demonstrative: following the tragic attacks of 9/11, the Health Industry Distributors Associations took a difficult decision to postpone the event because of increased terrorist threats (Werner 2001). HIDA followed a difficult path leading to the pivotal decision of whether or not the event had to be postponed (Werner 2001). The organization arranged a stream of teleconferences, meetings, e-mails, and phone calls to reschedule the show for the beginning of December, 2001 (Werner 2011). The decision itself reflected the dilemmas and difficulties, which trade show and event organizers face whenever they have to change their plans. Such changes and unexpected risks affect huge numbers of people, who are going or planning to participate in the event. Any decision to reschedule an event as big as the EXPO involves numerous procedures, like rescheduling flights and travel itineraries, hotel bookings and corporate meeting plans. Event cancellation insurance is a useful but the last resort instrument. Simultaneously, insurance gives stability and security in any rescheduling decisions; as a result, almost 100% of those who are going to participate in the event appreciate the decision (Werner 2001). Event and conference industry: Recent trends The events and conference industry is one of the most vibrant and ever-changing sectors of business performance. Recent years witnessed a rapid increase in the number of events and conferences organized in all parts of the world. From large-scale weddings to corporate parties and family events, the event and conference industry is becoming the main provider of business knowledge and entertainment. Organizations devise sophisticated strategies and unusual products to outperform their industry competitors (Lee 2006). In 2007, chocolate fountains in the United Kingdom used to be the hit of the season (Party Offers 2009). Given the growing popularity of chocolate fountains, the list of event options in the U.K. event and conference industry rapidly expanded (Party Offers 2009). This type of entertainment keeps people coming to the event organizers, as they are looking for something unusual and different (Party Offers 2009). However, sophistication and unusualness are not the only trends in contemporary events and conference industry. Themes remain a popular concept within event organizing; event organizers use themes to tie separated elements into one single event (Party Offers 2009). In 2007, for example, the most popular were ice-related themes, which brought thousands of consumers to London, as they were searching for unique impressions (Party Offers 2009). Dinner cabarets and business conferences remain at the forefront of the event industry (Party Offers 2009). It goes without saying that all these conferences and events require complex insurance, to mitigate the risks of life, property damage, and even event cancellation. Technologies are replacing humans: interactive floors and dance floors are becoming extremely popular (Party Offers 2009). In light of these trends, the event and conference industry continues to cause profound influences on organizations and national economies. Event management has experienced unprecedented growth over the last decade. The number and diversity of available event and conference options has increased dramatically over this period (Arcodia & Reid 2008). The rapid expansion of the event and conference industry in the United Kingdom led to the growing number of professional associations, which exemplify an important industry trend and cause profound influences on how events and conferences are organized. The rise in the number of professional associations in the event and conference industry is justified by the need to develop a coherent set of ethical and risk management principles to govern business practices, enhance business reputation, and manage personal conduct (Arcodia & Reid 2008). The events and conference industry demonstrates a remarkable risk management potential, which is currently underutilized. Insurance companies in the U.K. and Greece must cooperate with event and conference organizers, to achieve a productive business consensus. It should be noted, that the United Kingdom has one of the most developed insurance markets. Three of the world’s ten largest insurance companies are located in the United Kingdom (Skipper & Kwon 2007). Recent financial crisis might have changed the balance of forces in the international insurance industry, but events and conference remain unchangeably popular among international consumers. As event and industry organizers are striving to become more sophisticated, the need for complex insurance packages is getting more urgent. Chocolate fountains and interactive dance floors may become a serious threat to life, health, and property during the event. Productive cooperation and complex insurance policies for the event and conference industry can speed up the growth of new markets and make event and conference organizers more competitive. These policies and packages must necessarily include (1) life insurance; (2) property insurance; (3) travel insurance; and (4) event cancellation insurance. Event and conference insurance: a comparison between U.K. and Greece The discussed case of the HIDA and Expo, which was rescheduled in 2001 because of the tragic events of 9/11 is a bright example that justifies the development of complex insurance packages for the event and insurance industry. Actually, terrorism insurance is gradually becoming a distinctive feature of contemporary insurance markets. In the context of insurance, terrorism is the source of numerous challenges, as long as it is associated with large potential losses, whereas insurers have a difficult time trying to choose the most reasonable price for terrorism insurance (Kunreuther & Michel-Kerjan 2004). Political instability adds to the uncertainty of terrorism threats: recent political events in Greece challenge the established principles of event and conference insurance in this country. In the meantime, the costs of event and conference insurance vary across providers. For example, Event Insurance Services located in the U.K., provide a detailed coverage of insurance costs for various types of events – Christmas Lights will require paying £202 in premiums, with public liability of £1mln (Event Insurance Services 2011). A complex exhibitor package, including public liability, equipment cover, and cancellation cover requires paying £142 in premiums, with the £5mln in public liability and £2,000 cancellation cover (Event Insurance Services 2011). A UK-based Clarity Event Insurance offers other insurance options, including bad weather cover that has to be paid within fourteen days before the event (Clarity Event Insurance 2011). The UK seems to be at the forefront of the event insurance industry, whereas Greece lags behind its British competitors. Given the absence of information about Greek event insurers, it is possible to assume that Greek insurance companies are still at the beginning of their way to effective cooperation with event and conference providers. A comprehensive policy/ package for event and conference organizers must include life insurance, property risk insurance, and event cancellation insurance options. Travel insurance must serve an effective supplemental element for those, who cross thousands of miles to attend the desired event (Kemp 2009). Business and cultural events add to countries’ positive image (Ivkov-Dzigurski 2010). Simultaneously, insurance adds value to events and conferences. As the number of people attending conferences and events constantly increases, travelers constantly expose themselves to numerous risks and suffer losses (Hristovska & Mirceska 2010). Public gatherings are associated with the major life risks. Property suffers, too. Terrorism makes it difficult to hold events and conferences smoothly. Eventually, those who pay to attend the desired event, as well as those who organize it, must be secured from the risks of event cancellation. All these aspects of event insurance policies are actively used in the U.K. British insurance companies have already realized the profitability potential of public events. How the Greek insurance market reacts to changes in the national event and conference industry is difficult to define, but it is clear that complex insurance models are needed to move Greece to the forefront of the European event and conference industry. The principal question is what model of ratemaking to use, to meet the unique demands of the event industry. Target underwriting profit margin, Capital asset pricing model, and Discounted Cash Flow Model have been used extensively to improve the quality and efficiency of ratemaking in the insurance industry (D’Arcy & Garven 1990). However, not all models of ratemaking fit in the unique conditions of the event and conference industry performance. In light of the growing demand for events and conferences, special insurance packages and ratemaking models have to be developed, to give event organizers a ‘peace of mind’. Moreover, strategic delivery must become a top priority in events crisis management and risk mitigation (Kemp 2009). The event process the disaster-recovery-business-continuity element is often separated from the event itself, leading to resource inefficiency and wasting of money (Kemp 2009). Insurance can become the element which links event management and disaster recovery into a single, coherent process and enhances the efficiency of the events and conference industry in the U.K. and Greece. The success in the development of event and conference insurance in Britain can serve the role model for Greek insurers to follow. Tourism in the Greek Islands is becoming the main source of profits for the country’s budget. Greece has a long tradition of hospitality and tourism, due to its geographical position and rich history (Buhalis 1999; Tsartas 1992). Structural difficulties and territorial dispersion of the tourist sites does not prevent thousands of tourists from visiting Greece every year. As a result, there is a strong potential that Greek event and conference industry will keep growing. Moreover, there is a strong potential for Greek insurers, which need to develop better and more productive ties with event and conference organizers. Conclusion The international events and conference industry has become a dynamic place, where the development of new ideas and concepts follows globalization trends. Public events and conferences are associated with numerous risks, including life risk, property damage risks, event cancellation possibilities, and even terrorism threats. Therefore, event and conference insurance is becoming a fundamental driver of growth in the events and conference industry. Productive cooperation and complex insurance policies for the event and conference industry can speed up the growth of new markets and make event and conference organizers more competitive. These policies and packages must necessarily include (1) life insurance; (2) property insurance; (3) travel insurance; and (4) event cancellation insurance. In light of the growing demand for events and conferences, special insurance packages and ratemaking models have to be developed, to give event organizers a ‘peace of mind’. Moreover, strategic delivery must become a top priority in events crisis management and risk mitigation. The success in the development of event and conference insurance in Britain can serve the role model for Greek insurers to follow. There is a strong potential for Greek insurers, which need to develop better and more productive ties with event and conference organizers. References Arcodia, C & Reid, S 2008, ‘Professional standards: The current state of event management associations’, Journal of Convention & Event Tourism, vol.9, no.1, pp.60-81. Buhalis, D 1999, ‘Tourism on the Greek Islands: issues of peripherality, competitiveness and development’, International Journal of Tourism Research, vol.1, pp.341-358. Clarity Event Insurance 2011, ‘Event insurance’, Clarity Event Insurance, [online], http://www.clarityeventinsurance.com/eventinsurance.asp, accessed 22 June 2011. D’Arcy, SP & Garven, JR 1990, ‘Property-liability insurance pricing models: An empirical evaluation’, The Journal of Risk & Insurance, vol.LVII, no.3, pp.391-430. Event Insurance Services 2011, ‘Christmas Lights’, Event Insurance Services, [online], http://www.events-insurance.co.uk/pages/christmas-lights-insurance/, accessed 22 June 2011. Hristovska, M & Mirceska, I 2010, ‘Travel insurance as a significant element of supporting tourist travelling’, Tourism & Hospitality Management 2010, Conference Proceedings, pp.910-916. Ivkov-Dzigurski, A 2010, ‘Multi-stakeholder co-operation in the process of event organization on the international tourist cruises in Corridor 7’, Tourism & Hospitality Management 2010, Conference Proceedings, pp.1445-1456. Kemp, C 2009, ‘Event tourism: A strategic methodology for emergency management’, Journal of Business Continuity & Emergency Planning, vol.3, no.3, pp.227-240. Kunreuther, H & Michel-Kerjan, E 2004, ‘Challenges for terrorism risk insurance in the United States’, Journal of Economic Perspectives, vol.18, no.4, pp.201-214. Lee, MJ 2006, ‘Analytical reflections on the economic impact assessment of conventions and special events’, Journal of Convention & Event Tourism, vol.8, no.3, pp.71-86. Mitroff, II, Pauchant, TC & Shrivastava, P 1988, ‘The structure of man-made organizational crises: Conceptual and empirical issues in the development of a general theory’, Technological Forecasting and Social Change, vol.33, pp.83-107. Party Offers 2009, ‘Trends in the events industry’, Party Offers, [online], http://www.partyoffers.co.uk/articles/trends_in_the_events_industry.html, accessed 22 June 2011. Pearson, CM & Clair, JA 1998, ‘Reframing crisis management’, Academy of Management Review, vol.23, no.1, pp.59-76. Quarantelli, EL 1988, ‘Disaster crisis management: A summary of research findings’, Journal of Management Studies, vol.25, no.4, pp.373-385. Roux-Dufort, C 2007, ‘Is crisis management (only) a management of exceptions?’, Journal of Contingencies and Crisis Management, vol.15, no.2, pp.105-114. Skipper, HD & Kwon, WJ 2007, Risk management and insurance: Perspectives in global economy, Wiley-Blackwell. Tosun, C 2002, ‘Host perceptions of impacts: A comparative tourism study’, Annals of Tourism Research, vol.29, no.1, pp.231-253. Tsartas, P 1992, ‘Socio-economic impacts of tourism on two Greek isles’, Annals of Tourism Research, vol.19, pp.516-533. Tyrrell, T & Johnston, R 2001, ‘A framework for assessing direct economic impacts of tourist events: Distinguishing origins, destinations, and causes of expenditures’, Journal of Travel Research, vol.40, no.1, pp.94-100. Werner, C 2001, ‘Medical trade groups weigh security, safety issues following terrorist attacks’, Healthcare Purchasing News, p.4. Read More