Insurance Programs, the State of the Market and the Alberta Gymnastics Insurance Program
With the recent changes made to the trampoline coverage, AGF and Toole Peet would like to provide some further information regarding the insurance marketplace and our current position.
During the life cycle of an insurance program, all insured members experience rates/premiums and levels of protection not otherwise available in the marketplace. This is especially true when the program’s “loss ratio” (premiums charged versus losses) stays positive and healthy.
All members of the program are insulated from the negative effects of claims and market conditions as they don’t feel the full effect to both increased premiums and/or coverage reductions on renewal when compared to being an individual based, non-program insurance client. In some cases, if these members were on their own, especially if they’ve had losses, it would be even more difficult to find coverage if coverage could be found at all.
|Benefits of an Insurance Program||Drawbacks of an Insurance Program|
|Collective bargaining power - in general, the greater the membership, the greater the buying power||The effects of members’ losses are shared amongst the group|
|Broader levels of coverage when compared to the standard marketplace||Any changes to the program policy wording effects all members|
|Lower rates/premiums when compared to the standard marketplace||Lower individual assessment of each member’s risk profile; the risk of the group is viewed collectively|
|Program members are insulated from the effects of their individual insurance claims|
|Consistent coverage across the membership|
Things, however, change when the program’s profitability worsens over time. When larger claims occur and result in payouts that are in excess of the earned premium, the insurance carrier starts to review the program.
If this profitability continues to worsen and/or if the risk is perceived to increase (either via the member’s operations, losses paid for similar type claims elsewhere or if the courts make changes that negatively impact the operations), rates can increase and coverage can be reduced or limited.
In some cases, these programs have been discontinued.
Rising litigation + Decreased Profit = Insurance Market Place Instability
When we look at the AGF program, the profitability has drastically worsened over the years predominantly due to significant trampoline injuries. There have also been claims in other trampoline-related sectors. As a result, the AGF, as well as these other sectors, have been affected by both rate increase as well as coverage limitations.
To add to all this, the insurance marketplace is also in a cycle of stricter underwriting requirements and a lack of willingness to insure certain liability exposures. Both the frequency and severity of liability based claims has soared over the past number of years and all insurance carriers, from home and auto to commercial and organizational general liability exposures are being scrutinized like never before.
When it comes to trampoline operations, these market conditions affect all clubs; no one is immune.
Although there has been some success with recreational only clubs (that have had no losses etc.) the marketplace takes a harder stance when it comes to the competitive thread. There has been no success in finding coverage for clubs that have competitive programs except for that under the AGF/ a provincial program.
With that being said, even these recreational only clubs that stand on their own will in all likelihood lose their protection should any of them have significant injury claims; they would not have the insulating benefit of a program such as the AGF’s.
From a reference perspective, one element that should also be mentioned is that coverage limitation scenarios are not unique to the insurance industry.
Over the years, many industries have gone through transitions brought on by the insurance marketplace via restrictions of coverage or becoming unaffordable.
In fact, when one looks at the larger concept of risk finance (of which insurance is but one) almost all of the other techniques (self- insured retention programs, captives, reinsurance, reciprocals and many capital market products etc.) were all developed out of need; the need to find an alternate solution to an insurance marketplace that had become unavailable, ineffective or too expensive.
The situation that we currently find ourselves in is not just isolated to gym clubs or trampolines but simply a function of the insurance marketplace where losses and/or the perceived probability of further losses out ways the premiums gathered.
We understand that this has been a difficult process for some clubs. Rest assured that Toole Peet and the AGF are continuing to look at and exhaust different strategies and solutions to ensure we can continue to provide superior value to the AGF membership.
Neil H. Hogg and Adam D. Thomson
Toole Peet and Co. Limited
For more information regarding the recent changes to AGF insurance, including all pertinent documents, click here.
To view a recording of the 2018 - 2019 Registration and Changes to Insurance webinar, click here.
Additional post-webinar FAQ's can be viewed here.