Clubs’ new nature and a changing insurance climate make it more important than ever to properly assess, and correct, exposures throughout the property.
SUMMING IT UP
|
A golf course in an arid region that must usually operate under water restrictions is suddenly swamped by a 50-year flood. A member of a high school golf team gets injured during locker room horseplay, and the club that has allowed the team to practice on its course is sued by the injured player’s parents. A staff member working for a youth camp that is held on club grounds and under club sponsorship is accused of improper contact with children—and found, upon investigation, to have a prior record of similar offenses, even though the club had outsourced camp staffing to a firm that said it had conducted background checks on all of the workers it was sending to the job.
These are all examples of the types of unfortunate surprises that can befall poorly prepared and protected club properties—and that can result in serious financial consequences. The most unfortunate thing about these instances is that the consequences could be minimized, or avoided entirely, with better upfront attention to not only the coverages that are in place to protect against the property and casualty (P/C) exposures involved with club operations, but also better scrutiny of the insurance carriers that provide it. Taking full advantage of risk-prevention services that some (but not all) insurance carriers provide can also go a long way towards not only avoiding costly consequences from claims, but also keeping premium costs down as well.
“Insurance is the only industry where [the seller] truly doesn’t know what the cost of providing the product will be until years down the road,” one insurance executive points out. “What a product or policy will ultimately end up costing the carrier all depends on claims history, and that has to be projected X years in advance—both for industries like the club market as a whole, and also for the individual properties within that market. Then all of that gets factored into the pricing to provide coverage against the projected risk.
“The more clubs can do collectively to minimize their exposures and claims as an industry, and that an individual property can then do on top of that to be diligent about reducing exposures and avoiding claims, the lower the projected cost, and price of the product, will be,” the executive adds.
Getting What You Paid For
Fact is, the club industry as a whole had been doing a pretty good job in these areas historically, which attracted a lot of new insurance carriers into the market to provide club-related P/C coverage in the first part of the new millennium. Unfortunately, many of these new entrants proved to be much better at quoting low rates just to get new business than at providing any service, either to help club properties assess the risks tied to their operations, or to make good on any claims that did occur.
As the club industry worked through a few premium-renewal cycles as the decade progressed, many properties that had jumped on board with the new cut-rate entrants decided the savings to be had weren’t worth the extra worries or hassles they were experiencing when trying to get risk-assessment assistance or claims service. That in turn led some of the new carriers to leave the market, which is now once again largely dominated by companies with good track records of serving the club industry.
With the discount competition now mostly out of the picture, however, that is bringing about a stabilization in pricing. “We’ve hit rock bottom for premiums,” one insurance executive asserts. “At best they’ll hold steady, but more likely, they’re going to start creeping up again.” Another factor playing into the outlook for rising prices is the extreme weather patterns that have affected much wider swaths of the country for much longer periods of time over the past few years.
This new wave of unpredictability and volatility is also why many insurance carriers are cautioning their club clients to not be penny-wise and pound-foolish about securing adequate coverage for worst-case, unexpected scenarios. “I’ve seen too many cases, because of all of this crazy weather recently, where [club properties] insist they can pass on flood insurance because they’re ‘not in a flood zone,’ and then they need to clean up damage that runs in the millions, which they could have prevented entirely by spending a few thousand more on their policy,” one insurance executive says.
Executives also are issuing more cautions, based on their observations of real-life, painful experiences, about the dangers of cutting corners on coverage for expanded pool facilities, especially those with water slides and other popular “splash park” features. And they are concerned that too many clubs are still too casual and not demonstrating 100% diligence with regard to background checks and instructor certifications, especially when third-party outsourcing arrangements are involved for fitness, spa or youth camp operations.
“There’s never a reason, that I can see, not to spend the $30 for a background check on one of your own employees,” one executive says. “And if you’re outsourcing to a company that isn’t providing complete clearance information on all of the people it’s sending to your property, and then providing updates whenever new people are involved, you need to find another source.”
In general, insurance carriers feel, many properties are still significantly undervalued in terms of their coverage, and need to have regular reassessments made of their facilities and operations, to ensure they’re not dangerously underexposed. The good news is that to help in this regard, the carriers have many services they want to provide for free—and are actually frustrated that more properties don’t take them up on their offers.
“It’s actually beyond ‘free’—you’ve already paid for it with your premiums, ” says one executive. “All of the established carriers are happy to have our experts come and walk through your property and buildings with you and identify a lot of areas that not only will reduce your exposure, but can improve your daily operating efficiencies. Too many [managers] still don’t take us up on this, though, because they think it’s all about us ‘finding something wrong’ that we’ll then use to sell you more coverage. I can assure you, more often than not, it’s the other way around—we ‘find a lot of things right,’ and it often actually leads to better or less-expensive coverage.”
Another executive confirms that the carriers who’ve shown they’re in the club market for the long haul are doing so because club managers have shown they can do their jobs pretty well. “Most clubs that have survived and made it to this point are generally pretty solid from a protection and risk standpoint,” he notes. “But [proper coverage] is not something you ever want to take for granted, especially in today’s world.”
Tell Us What You Think!
You must be logged in to post a comment.