Insure the Game You Love to Play

Like most other industries, clubs have been impacted a great deal by the hardening market. While recent pricing has improved slightly, clubs still face pricing, stability and consistency issues with respect to their insurance.

I’m sure we’ve all received the “Let’s hit the links” call from clients, vendors and business associates. For years, golf has been the #1 business sport in the U.S. The benefit is simple—a captive audience for four relaxing hours.

Most insurance agency owners maintain a club membership with a minimum of one private golf or country club for entertaining purposes. As part of their networking efforts within the club, they may be sought to assist with the club’s insurance needs. As a result, it is rare to find insurance agents handling more than a handful of club accounts.

There are exceptions, but typically a club will utilize their in-house expertise in addition to an outside agent or broker to verify that their club is protected properly. For most agents, understanding the many nuances of insuring a club is not so easy. For the sake of their reputation within the club-and with the board specifically-agents will typically work harder for their club as they have a personal stake in the success of their efforts.

Many of you may be in this position or simply want to elevate your position in your own club by providing the necessary advice to impress the board. This article is for you.

Primary issues
Like most other industries, clubs have been impacted a great deal by the hardening market. While recent pricing has improved slightly, clubs still face pricing, stability and consistency issues with respect to their insurance.

From a pricing standpoint, most of the better-run clubs faced increases of roughly 25 percent and 15 percent each of the past two years. Those with more volatile losses or exposures saw upwards of 80 percent and 40 percent, respectively. As a result of these increases, club executives and boards are requiring competitive quotes from multiple agencies. Often times, this involves a club member agent leading the charge.

Club boards will typically make conservative decisions. They follow the by-laws of the club and serve a set period of time. As a result, the board will place a great deal of weight on the financial stability of the proposed carrier. Finding an “A+” or “A++” carrier is not always easy. Finding a quality club that will settle for a lower rated carrier is next to impossible. Price may be a driver in most business classes but financial stability is king with quality clubs.

The consistency of carriers has been a real problem in the club industry. Many carriers have reduced coverage and limits, raised their rates substantially, or pulled out of the club industry all together. This has given way to many highly rated, regional carriers capitalizing on the club industry’s higher premium levels. These regional carriers can be priced competitively for a period of time but typically lack the coverage options needed by the club industry.

Adequate capacity
Underwriting capacity in the club industry has not been a problem. The risks are typically located outside urban areas and are disperse enough with respect to property and workers’ compensation to attract the better reinsurance companies.

The bigger issue is that the increased pricing has forced clubs to reduce coverage limits for the near-term. This can be detrimental in the future if the club decides to maintain the reduced coverage even when pricing becomes favorable.

An incumbent agent needs to stress the short-term aspect of lower limits or reduced coverage. Most are comfortable doing so. After all, they are typically a member of the club and are serving the club’s best interest—whether the board likes what they hear or not. In the end, agents earn the respect of the board by being direct and explaining the cyclical nature of insurance to incoming board members.

Focus on claims
Most clubs—especially private and country clubs—will continually try to exceed the expectations of their membership through quality renovations, food service and course maintenance. As a result, they expect the same type of service from their insurance. If there is a claim, they expect that it will be taken care of quickly. As a result, the claims paying ability of the issuing carrier becomes as important as the financial stability.

Competition
As an incumbent agent, you should not fear competitive pricing. Typically, over 75 percent of clubs remain with their current insurance program. Those clubs stress the experience of their agent, the loss control services of the program administrator, and the professional claims handling of the carrier as their reason for staying.

The club may be speaking with someone not yet experienced with club accounts. Be sure to provide them with a list of the clubs that you, your program manager and the carrier insure-both historically and currently. Provide an overview of the risk management services available to the club and the long-term financial impact of those services. While most carriers provide loss control services, often times these services focus on those losses over and above the deductible and not the smaller, “nuisance” claims. The program manager should provide additional risk management services that focus on these first-dollar claims.

Inquire as to how committed a carrier has been to a market. Are they a newcomer? And do they really understand club risks? Or do they have at least 10 years of underwriting data and have shown both hard and soft market commitment?

Find out who will be responsible for claims. This will leave the greatest impression—positively or negatively—on your club client. This will require a bit of research. Visit the Web sites of the major carriers and look for claim satisfaction studies. These should be performed by an independent firm such as J.D. Power or Goldman Sachs and provide a customer’s perspective. The IIABA conducts surveys of its members which provide the agent’s perspective as well. Share the expectation with your club client so they can compare the services they have had in the past with what they can anticipate in the future.

Most importantly, you should stress the uniqueness of coverage available to clubs. You will rarely be comparing “apples to apples” as each club insurance program differs from one another. The better insurance programs will include:

Property
The most important physical asset of the club is the clubhouse and protecting it should be paramount. Be sure that the property limit meets or exceeds the club’s most recent appraisal. Included with the Package should be a Business Interruption policy with an Unlimited Extended Period of Indemnity. In a survey of clubs conducted by the public accounting firm of Hilger Flick, over 80 percent of clubs were underinsured for Business Interruption, specifically Business Income and Extra Expense. In the event of a fire or catastrophic event to the clubhouse, the club’s membership or course owner may be at financial risk. Ask to speak with the internal accounting manager and make sure that the appraisals you are working from are current and accurate.

Be sure to cover the replacement cost on carts & maintenance equipment. Most of a club’s maintenance equipment will be older and the replacement cost option will lessen the financial impact of depreciation. Be sure that the equipment storage is secure to minimize potential damage caused by potential late night “joy-riders”

Ordinance or law
The more proactive clubs have updated their sprinkler systems, HVAC and wheelchair accessibility. But many have not. Given the age of many clubhouses as well as the surrounding buildings, Ordinance or Law coverage may be necessary to cover the added expense associated with meeting state building codes after a certain amount of damage is sustained to the property.

Course coverage
You will see the term, “tee-to-green” from most every carrier, but its meaning varies by carrier. The key phrase you are looking for is “all playing surfaces” which extends to such things as cart paths as well. You will want $1,000,000 in coverage with no per-hole limitation.

As for perils, the biggest issue a club faces is wind. Many coastal clubs will have difficulty obtaining coverage-especially Peril of Wind. For such issues, be sure your club has Debris Removal and Business Interruption to deal with such trees sooner rather than later.

The board
The most significant liability exposures faced by a club is related to its board. In order to maintain an effective board, a club requires quality D&O & EPL insurance. We recommend separate limits with the addition of an umbrella, especially over the D&O coverage. Discrimination and slander are primary causes of loss, related primarily with denial of membership to a prospective candidate. Due to the potential for numerous claims, boards tend to look for the lowest deductible available among the highest-rated carriers.

Liability
Other liability exposures include Errant Ball coverage which covers damage caused to others’ property or person as a result of a poorly hit ball. While some clubs post signs that state such liability is the responsibility of the golfer, courts tend to favor the individual over the club.

Liquor Liability is a must if a club wants to host banquets, weddings and special events. Be sure that full Umbrella Liability limits extend to Liquor Liability.

Additionally, given all the landscaping and greens keeping needed by clubs, be sure to obtain Herbicide & Pesticide coverage including full Pollution options. This covers the club in the event that their chemicals cause a potential hazard to individuals inside or outside of the club.

Special events
As a golf course generates a bulk of its revenue from outdoor activities, a course runs the risk of losing revenue due to circumstances beyond their control. This may involve adverse weather but can also include perils such as terrorist attacks, earthquakes, forest fires, floods and more. These risks are best handled through Event Cancellation Coverage and Weather Insurance Coverage.

Weather Insurance can be used by public course owners to protect against an abnormally high number of rainy course days in which play on the course is impossible or significantly reduced.

“Take a look at the May and June we just had on the East Coast. It hit golf courses pretty bad because a bulk of the rain fell on the weekends keeping people away from the courses. Weather Insurance helps the course owners absorb the financial hit they take from a season like that,” said Steven Perlini, assistant vice president of ASU International, a Massachusetts-based specialty underwriter.

In addition to Weather Insurance, Event Cancellation Insurance is used by courses and tournament organizers to protect the revenue a particular tournament is expected to generate if it needs to be cancelled for reasons beyond the organizer’s control.

“Event Cancellation coverage has become increasingly popular among tournament organizers who generate a significant amount of revenue from one or two big tournaments a year” according to Perlini. “In this day and age, clubs are concerned about things like terrorism-in addition to the typical weather wash-outs-and realize it would be devastating to the club’s budget to lose the revenue from their tournament should it be cancelled” Perlini added.

Even if the exposure of the cancellation is not on the course itself, many courses will recommend groups that put a tournament on at their course to purchase this coverage or even offer to arrange coverage for them as an added level of customer service.

Summary
Third-party liability claims provide the most severe coverage concerns for a club. This includes Liquor Liability, Pollution, D&O, EPL and General Liability. Catastrophic events to the clubhouse such as a fire or natural disaster pose the most financial devastation to the club.

But recurring issues such as theft of members’ personal property will gain the most attention within the club.

Be sure the carrier and program manager provide the experience, quality and responsiveness needed to meet the expectation of your club’s board – analogous to how they would treat their own
members.

Bill Dalton is the national sales director of Venture Programs-program administrator of the Preferred Club Program. For more information, log onto www.VenturePrograms.com.

Topics Carriers Profit Loss Agencies Property