With growing concerns about profitability, liquidity levels and sustainability there is currently a lot of talk in the insurance industry about the likelihood of rising premiums.
Claims costs are increasing, fuelled in part by large compensation settlements. In October 2010 a former international cyclist who had been knocked down by a car and seriously injured was awarded £14.25m. The sheer size of this settlement has highlighted the need for the right limits to be applied to policies. There have been other sporting incidents in the news recently; a mother of two who was left paralysed following a pole dancing accident and the tragic death of a young girl run over by a speedboat. Investigations in respect of both are ongoing.
Allegations of abuse are also increasing and, as claims rise, premiums will follow suit. Following the Hatfield rail crash, and more recently the banking collapse, Civil Liability claims, in particular Directors and Officers liability claims, are seeing an increase as victims look to hold someone responsible. Many sports clubs are ‘unincorporated’ and therefore do not have a separate legal identity. In other words they cannot be sued but the club committee and officers personally can be.
As the UK ‘claims culture’ gathers pace insurers are taking the hits and paying out, but because increased competition over a number of years has squeezed premiums, the number of insurers now wishing to offer cover has reduced.
Certain sectors of the insurance market have had a difficult few years. Travel insurance is a good example, where claims have exceeded premiums for many insurers. Furthermore in the UK, insurers collect premiums in pounds sterling but overseas medical claims are paid in foreign currency. In 2009 the pound fell 30% against the euro resulting in large insurer losses. And, who can forget the disruption caused by the volcanic ash cloud, which resulted in millions of pounds of unexpected claims.
All of this, together with reduced profit margins; pressure to reduce premium but maintain cover levels; the use of reserves to maintain competitiveness; increased industry fraud and increased costs of compliance has resulted in tremendous pressure to raise rates. January 2011 sees the first rise in Insurance Premium Tax (IPT) for fifteen years from 5% to 6%. The rise coincides with the increase in VAT from 17.5% to 20% and follows close on the heels of the October Government spending cuts.
Bearing all this in mind premium rises are increasingly likely. Nobody wants to see huge increases but a slow, consistent rise in premiums across the industry seems inevitable. Any gradual increases will mean customers can benefit from long term stability and continuity of cover rather than face huge hikes in the future.
How do you manage the increased costs to your organisation?
Unfortunately, the rise in premiums is set against a weak economic backdrop. The October spending review saw public spending cuts totalling £83bn.
Taking this into account, as premiums move up the independent broker will play an important role within the industry, maximising their knowledge of the market in order to achieve the most competitive rates.
Despite the bleak outlook, there is still action you can take to effectively manage your business insurance costs.
Robust risk management is absolutely crucial; organisations that can effectively identify and minimise business risks are more likely to avoid significant premium increases than those who don’t. Perkins Slade recognises that no two businesses are the same. We’ll design and implement insurance and risk management programmes with service, broking strategy and cover specific to the needs of sports clubs, their members and volunteers. We work with established insurers to provide long-term stability for our customers throughout the market cycle. We involve customers in all major discussions and negotiations with insurers. Our partnership approach delivers results by building stronger relationships and developing business understanding.
In addition, it’s important to review your portfolio and ensure you are insuring on the correct basis. With so much pressure on insurers to deliver underwriting profit, claims are being scrutinized more than ever and, if you are underinsured, your members and volunteers may suffer from additional financial loss. Conversely, if an Association reduced in size for whatever reason, over insurance is a cost members would not want to bear either.
Good risk management will insulate your sport against accidents and claims in the future and it will also help keep your insurance premiums down. Our reputation is excellent and we have the desire to get the right results for you.
Next steps
To discuss the issues raised in this article, or to talk to someone about Sports insurance, please call 0121 698 8000 and ask for the Sports team. Alternatively, you can email sports@perkins-slade.com
About Perkins Slade
Founded in 1970, Perkins Slade is one of the UK's largest independent brokers, providing expert, impartial advice for UK and international businesses, sport and recreation organisations and private individuals.
Given our experience we can offer the right support and guidance, tailoring the correct level of cover from the specific needs of the largest governing bodies to the smallest clubs. Not only will we seek out competitive premiums but we will also advise you on risk management.
We aim to provide sustainable solutions that deliver long-term value and a robust risk management programme is an integral part of this. Using risk management software, ActionPro, you can identify risks, generate a risk profile and prioritise actions. We can also help you with disaster recovery planning. Crisispro is an online tool that guides you through the process of generating and implementing a robust plan.
