Covering all the bases

Amateur and recreational sports are big business for Philadelphia Insurance

By Elisabeth Boone, CPCU

From baseball to bass fishing, from whitewater rafting to Wallyball, Americans love sports and recreation. Whether the aim is fitness, fun, competition, or camaraderie, whether the action is indoors or out, people are passionate about participating in their particular pastime.

Sports and recreational activities are supposed to be fun, and they are. They’re also risky, and even the most experienced and careful participant can suddenly be facing danger. Insuring the myriad exposures involved in amateur sports and recreation presents its own set of challenges, and a key player in that endeavor is the Philadelphia Insurance Companies.

In addition to underwriting and risk management expertise and a Best’s rating of A+, Philadelphia Insurance brings something extra to the table: a top-down commitment to health and fitness. Chief Executive Officer James J. Maguire, Jr., is a dedicated triathlete who has inspired other members of the executive team to train for the Ironman Triathlon. Maguire, whose father founded the company, has finished five Ironman events.

What’s more, the Philadelphia Insurance home office boasts its own gym, and the company’s 1,100 employees are encouraged to pursue fitness with subsidized health club memberships, as well as to participate in local runs to benefit charities.

Last year Philadelphia Insurance acquired Fitness and Wellness Insurance Agency of Solana Beach, California (see “Insuring Fitness” in the June 2007 issue of Rough Notes), and in the spring of 2008 it bought Gillingham & Associates, Inc., of Westminster, Colorado, a program manager that specializes in commercial property and casualty insurance for the outdoor recreation and hospitality industries. (See “Insuring the Great Outdoors” in the September 2007 issue of Rough Notes.)

Wide world of sports

For an overview of Philadelphia’s approach to the amateur sports market, we spoke with John Glomb, senior vice president-underwriting; John Doyle, vice president-underwriting; and Bob Battaglia, underwriting manager for amateur sports.

“We developed our amateur sports products in 2002, and we formally launched them in 2003,” Doyle says. “For the most part, these products were a natural extension of our health and fitness product, which we’ve been offering since 1994. At year-end 2007, we had written premium of approximately $30 million in amateur sports business, out of our company’s total written premium of $1.7 billion. It’s one of the fastest growing segments of our business,” Doyle says.

“We write a broad range of account types,” Battaglia explains, “running the gamut from small camps to athletic departments of major universities, Olympic governing bodies, national governing bodies for various sports, and state athletic associations.” In addition to insuring amateur sports facilities, Philadelphia Insurance offers companion products for leagues, sports camps, and clinics held at the facility.

In the amateur sports arena, the major exposure is injury to a participant, Battaglia says. “We require that the insured have accident and health coverage in place, and every participant has to sign a waiver,” he notes. Philadelphia Insurance itself does not write accident and health insurance, Doyle says, adding, however, “We have strategic alliances in place so we can offer that coverage to the customer.”

On the general liability side, Philadelphia Insurance offers limits up to $3 million aggregate and also writes premises liability, personal injury liability, directors and officers liability, employment practices liability, special events coverage, liquor liability, and abuse and molestation liability. The general liability policy can be endorsed to provide professional liability coverage for physical training, fitness counseling, nutritional counseling, and officiating.

Although liability is the key exposure in amateur sports, many facilities also need insurance to protect their property. Philadelphia Insurance provides a full range of property coverages to amateur sports facilities, Doyle says. “If we have a multi-sport indoor facility, we’ll insure the building as well as write liability coverage for the leagues that use the facility. If the facility is an ice hockey arena, for example, we can also write the boiler and machinery coverage, which is very complex for this class.”

Property insurance can be written with blanket limits, and all-risk coverage is provided for building, contents, and business income and extra expense. Coverage is available for outdoor pools and court surfaces and for pro shops. Inland marine coverage can be written for sports equipment as well as for trophies and collectibles. Philadelphia Insurance also offers equipment breakdown, commercial auto, pollutant cleanup and removal, and crime and fidelity coverage.

“We try to differentiate ourselves by offering an all-inclusive coverage package so the agent doesn’t have to go to multiple markets,” Doyle says.

Eye on the market

What does the current market for amateur sports insurance look like to the seasoned underwriters at Philadelphia Insurance?

“This has been a very consistent market, in the sense that the major players have not changed markedly over the last several years,” Glomb observes. “While capacity hasn’t changed dramatically within this niche, increased capacity industrywide coupled with competitors’ focus on top-line growth has led to pricing pressures in amateur sports, especially on the larger risks.”

In a soft market, cash-hungry carriers often hunt for business in niche markets where they may lack the expertise to underwrite profitably. That’s definitely the case for amateur sports, Doyle asserts. “Usually the entrants into this niche in a soft market are smaller regional players. The large players in the marketplace for the most part haven’t changed over the last five years.”

Amateur sports, Doyle points out, “isn’t a commodity-type business. Amateur sports requires underwriting discipline, and that’s one of the reasons you don’t see a lot of carriers jumping into this niche in a soft market.”

Gaining an edge

“We find that there’s been a flight to quality, and we think we’ve done a great job of positioning ourselves,” Doyle says. “Risks want their coverage with a carrier that’s stable. A lot of MGAs that handle amateur sports have switched carriers over the years, and insureds really don’t want that kind of disruption,” he points out. “They want their insurance program with a carrier that’s going to stay the course, and they don’t want to have to go out and remarket their account every year.”

Doyle points to another factor that he believes sets his company apart from competitors. “We provide the most pristine risk pool in the industry,” he asserts. “Because our loss experience is so low in this class of business compared to our peer group, we are able to hold the line on pricing when the market firms up, whereas other carriers may take that opportunity to make up for the price cuts that they took during the soft market. We can offer stability in pricing, so we consider ourselves a safe haven in a hard market. Our policyholders in this niche stay with us for an average of 15 years,” Doyle says.

“We live by the mantra ‘Know your niche, understand your competition, and provide superior service,’” Doyle continues. “We operate on the cutting edge of technology, and we’re able to e-mail our policies and endorsements to our customers within an average of less than 10 days. When you’re an amateur sports league, typically insurance is one of the last things you think about, so often we get submissions very close to the effective date,” Doyle explains. “Our ability to service that business through our technological efficiencies enhances our ability to capture this business.”

Another competitive advantage, Doyle notes, is that Philadelphia Insurance has 47 field offices around the country. This allows the company to provide service close to the sale and also gives field representatives the opportunity to attend regional conventions of amateur sports associations. “Where there’s a gathering of an association, it’s likely that we have a field office that’s close to that location,” Doyle says, “so we’re able to attend a lot of the functions that generate business.”

As a major writer of amateur sports business, Philadelphia is the endorsed insurance provider for numerous associations, including the country’s top amateur athletic association. “We also are the endorsed carrier for many state athletic and soccer associations, baseball leagues, and other amateur sports groups,” Doyle says. “We have the capacity and the underwriting expertise to write a large national governing body, and at the same time we can consider the local league that generates $300 in premium.”

Heads up for agents

What should independent agents know about the amateur sports market from the perspective of the underwriting executives at Philadelphia Insurance?

“Two factors come to mind relative to this class of business,” Battaglia says, “especially with respect to smaller leagues and camps. Agents who are not familiar with this class should be aware of the seasonality of the business. For example, baseball starts in the early spring and runs to August; football starts in August and runs through November. The time to contact your client and gather information varies depending on the sport,” Battaglia says.

“Another thing the agent needs to be aware of is that in smaller leagues, the contact person is likely to change from year to year,” he explains. “This year it’s one kid’s dad, and next year it’ll be someone else’s dad, so the agent needs to be attuned to who is now running the organization.”

Among the insurer’s agency force, Glomb comments, there’s a fairly even split between agents who handle a large volume of amateur sports business and those who may be less familiar with the class. “We have a marketing force of more than 250 licensed agents around the country who are employees of the company,” Doyle notes. “They are all well versed in our amateur sports offerings, so they can assist an agent who doesn’t specialize in this area.”

Focus on loss control

A key to profitably managing any class of business is a strong risk management and loss control department, and Philadelphia Insurance brings that capability to the table for amateur sports business.

“We have a dedicated loss control department and claims, and, as with our marketing force, we have used our field offices to build a nationwide network of loss control and claims specialists,” Glomb says. “We’re trying to put both disciplines close to where the account is located. We offer risk management and loss control surveys that focus on operations, premises, property, and all the exposures that are inherent in the particular sport or the venue if we’re insuring a physical facility. Our claims staff is knowledgeable about the necessary defenses, including assumption of risk and waiver implementation,” he says.

“Through our dedicated Web site, www.losscontrol.com, our clients have access to sample programs such as emergency planning, property conservation, exposure checklists, and waivers, as well as procedures for screening staff and volunteers who work with children,” Doyle adds. “We’ve also formed a strategic alliance with a partner called IntelliCorp that offers our clients access to a very low-cost background check system. For our amateur sports camps, in addition to the on-site risk management surveys, we offer a sample camp directors handbook and other resources.

“For our large national governing bodies,” Doyle continues, “we have a proprietary risk management system called the Peril Assessment Scoring System, or PASS. It allows either the insured or the broker to become the risk manager for the account. Through a series of questions, it evaluates the account’s risk awareness and gives it a score at the end of the report. So, for example, if I’m a national governing body with 250 clubs under me, I can administer the PASS survey to those 250 members and then keep track of their scores on an annual basis. I can use that as a method to improve their risk awareness from year to year.”

With an impressive mix of underwriting expertise, field strength, and risk management tools, Philadelphia Insurance is well prepared to help its agents be sure that when it comes to insurance, their amateur sports clients truly do cover all the bases. *

For more information:
Philadelphia Insurance Companies
Web site: www.phly.com