A little cheating here? and there on the golf? course-shaving a? stroke or two off a bad hole or discretely moving a ball from a tough spot using your foot wedge-is wrong, of course. But it usually doesn't have major consequences. The same can't be said of Kevin Kolenda's actions.
In October 2013, Kolenda pled guilty to three felony charges after Washington State Insurance Commissioner Mike Kreidler's Special Investigations Unit pursued him for selling insurance without a license and for failing to award hole-in-one winnings he was contractually obligated to disburse. In February, he was sentenced to serve 86 days in prison and ordered to pay $15,000 in restitution. In addition, he was required to contribute $550 to the Washington state Victims Assistance Fund in order to make amends for shafting golfers and deceiving tournament organizers, a round he has allegedly played for two decades.
A news release issued by Kreidler's department says "Kolenda illegally sold what he described as hole-in-one insurance policies to golf tournaments in Washington and then failed to pay the prizes when golfers scored holes in one. He defrauded Washington tournaments and golfers in 2003, 2004 and 2010 for prizes ranging from $10,000 to $50,000."
Kreidler expressed delight that Kolenda, who has a long history of cheating people through these scams, was brought to justice after years of what Kreidler calls "thumbing his nose at state regulators, golf tournaments and charities, and golfers." The release says Kolenda had been in business since 1995 and used several business names: Golf Marketing, Golf Marketing Worldwide LLC, Golf Marketing Inc., Hole-in-Won.com, and Hole-in-Won.com Worldwide. And it noted that Kolenda has been investigated or prosecuted for similar charges in nearly a dozen states-Alabama, California, Connecticut, Florida, Georgia, Hawaii, Massachusetts, Montana, New York, North Carolina and Ohio.
John Everhart, CEO of National Hole In One Association, says, "This case, along with many other fraud cases in the past that have gone unpunished, damages our industry. Arguably, Kolenda's jail time appears negligible considering the magnitude of this fraud over such a long period of time affecting so many unfortunate victims."
Stay out of the trap
Everhart points out that this type of scheme "isn't significantly different than other white-collar criminals that have chosen to use the fountain pen to steal from the public. Unfortunately, for all the victims in the public who have suffered the fraud of denying numerous legitimate hole-in-one claims since 1995, this is little comfort."
According to Everhart, the problem starts with complacent regulation in the majority of state insurance departments. "As a pioneer in the prize insurance business, we've been seriously concerned for some time about non-insurance people entering this business, without the necessity of a license. In fact, for some strange reason, some states didn't even consider prize indemnification an insurance product."
"My consistent position on this issue since 1993 has always been, 'If it isn't insurance, what is it, and how will it be regulated?'" Everhart adds. "In the early 90s, our company pursued this issue of regulation vigorously with multiple state insurance departments, with only moderate success. The question remains today, 'How can an insurance regulator enforce proper discipline over questionable competitors without the threat of license suspension?'"
Greg Esterhai, president of U.S. Hole In One, suggests that promoters or other prize promotion shoppers can take steps to avoid being defrauded. "The best way to make sure you are working with a legitimate hole-in-one coverage provider is to be certain that you're dealing with a licensed insurance producer in your state who is backed by a legitimate insurance company."
He points out that most providers are genuine businesses that maintain proper licenses and relationships with insurance companies that cover hole-in-one insurance claims "Often times, doing a simple background web search on the company will reveal whether or not any legitimate claims have gone unpaid by that company or if there are any cease and desist orders on the company," Esterhai explains. Checking out a company's Better Business Bureau rating is another good practice, he adds.
Everhart says professional agents and brokers should know what to look for when advising clients about large prize risk transfer to accredited insurance organizations. "Organizations like ours act as a licensed managing general agent with primary companies rated by A.M. Best and other rating organizations," he explains. "Every single dollar of premium we collect is properly reported to state insurance departments and taxed accordingly."
Sink more putts
Esterhai says it's important to educate prospective customers because of misconceptions that exist about hole-in-one insurance. "Many people hear horror stories of claims that go unpaid," he explains. "Oftentimes, the perception is that a hole-in-one insurance company denies a claim because the company is perpetrating fraud and never intended to pay the claim.
"Unfortunately, there are a couple of bad apples in our industry, and these give the industry a black eye," he adds. "The fact is the majority of claim denials that occur are a result of legitimate issues with clients failing to adhere to agreement terms. For example, the contract called for the prize hole to be set at 180 yards, but the course set it at 150 yards that day. Or the winner took a mulligan on a hole and then hit the hole in one on his or her second attempt, and not the first."
He says it's important that agents and brokers "inform customers that fraud does exist in this industry, like it does in any other industry. It's equally important to ease customer fears by explaining that they are connected with a legitimate operator that pays valid claims quickly."
According to Esterhai, traditional hole-in-one insurance for a specific par 3 hole continues to be the most popular type of golf-related insured contest. "In recent years, however, many tournaments have started adding other challenges and games to help spark more excitement at their events.
"We've started offering a few contests that work well at the dinner or reception portion of golf tournaments," he says. "The reception or dinner often is the main source of fundraising for these events. One very popular contest we did a lot last year was a dice-roll competition that gave four contestants an opportunity to roll four dice to spell the word 'C-A-$-H.' If they spell the word, they can win up to $10,000. Tournament organizers can raise even more money for their good cause if they choose to raffle off those four chances at rolling the dice."
Everhart says agents and brokers can use a specialty product like prize indemnification insurance as a door opener for commercial accounts. "This usually starts on the golf course where informal introductions are quite common during play.
"The mere fact that the agent or broker has direct access to a legitimate underwriter of enormous prize values in both the domestic and London markets is often a very interesting discussion topic," he explains. He points out that individuals who take part in local amateur golf tournaments generally represent a good demographic profile of business leaders.
Esterhai adds this type of insurance is a unique and exciting specialty for agents and brokers to sell. "Offering hole-in-one insurance helps agents connect with their clients on a more intimate level because this product is fun to talk about, quote and bind, especially when compared to more traditional P&C coverage."
And, he concludes, "Selling hole-in-one insurance to existing clients is easier because a relationship already exists. The agent just needs to explain the benefits of having this unique coverage. Once a client has an event with hole-in-one insurance, they often continue to purchase coverage for future events."
AMATEUR ATHLETICS AND SPORTS: EXPOSURES CREATE OPPORTUNITIES
How agents can serve-and profit ?from-this expanding market
By Dave Willis
Millions of youth and adults participating in competitive and recreational athletics are energizing activity in the amateur sports industry, driving demand for versatile facilities and compelling greater attention to athletic trauma. In an effort to cash in on active lifestyles, some communities and business owners are investing in new athletic sites. On the flipside, injured athletes are spending big bucks in hospital emergency rooms. These two scenarios illustrate opportunities for agents to develop or expand their niche in the challenging field of amateur sports.
Corey Cash, CIC, sports and entertainment program manager for Safehold Special Risk, has seen growth in the development and construction of sports-related facilities. "In the past two to three years we have seen more and more indoor soccer facilities, ice rinks and health clubs being built," he says. "There are new ones popping up every week all across the country."
Injury prevention is high priority and on the minds of those who lead amateur athletics and sports organizations as well as the insurance community. "The big issue is concussions," explains A.J. Morgan, senior vice president of RPS Bollinger, a program manager and TPA for sports insurance. "Concussion liability is a term that's really sprung up in the last couple of years."
While the issue has garnered headlines as a consequence of a $765 million settlement last year between the NFL and retired players, it's not limited to football. "Any contact sport is now under scrutiny for what they're doing about concussions," Morgan notes.
Sports-related injuries resulted in 1.35 million emergency room visits a year, according to "Game Changers," a research report released August 2013 by Safe Kids Worldwide. The study included four of the most popular sports and found that 163,000 or 12% of those treated in the ER were diagnosed with concussions. Cleared to Play, a concussion awareness and prevention organization, notes that during the 2008-2009 school year, 400,000 brain injuries reportedly occurred in high school athletics.
And legislators are taking action on the issue. "Most states are enacting laws to address concussions," Cash says. Regulations and responsibilities vary by state. "Some state laws are tied to schools and require compliance only for scholastic sports," Morgan notes. "Others are tied to all youth amateur organizations. Most of the regulations and compliance requirements are in line with concussion guidelines issued by the Centers for Disease Control and Prevention."
Associations that serve the amateur sports world are also addressing the issue. "The national associations, whether it's the National Federation of High School Athletics, the Amateur Athletics Union or some of the other more prominent athletic associations, are mandating that coaches, referees and scorekeepers have some sort of concussion training," Morgan says.
Regulations and association-based mandates often address the issue in three steps. "First, leaders need to know how to recognize signs and symptoms of possible concussions among minors," Cash explains. "Second, action is required; if a participant exhibits symptoms, he or she needs to be removed from the activity. Third, the minor needs to get a professional medical assessment and permission to resume play."
Concussion liability isn't the only issue facing sports organizations and venues these days. "Another prevalent concern is sexual abuse and molestation," he comments. "The USA Swimming scandal brought this to light nationally, and more suits are being filed."
Market trends
According to Cash, the insurance market for amateur athletics and sports venues is stable. "Premiums are holding relatively steady," he observes. Morgan adds, "Based on some uncertainty around liability issues and the effects of the broader commercial market hardening, we are seeing a very slight uptick in premiums and rates for sports programs." He expects modest increases to continue over the next few years.
"If you write this business, you should expect insurance costs to rise by a few percentage points," he remarks. "That's a change from the past 10 years, where premiums were pretty flat or decreasing, unless an organization had an undue share of losses."
Claims have been steady as well. "In terms of participant liability, incidents occur rather frequently, but we haven't seen a real rise," Cash says. "What we've seen increasing is the number of spectator liability claims. Slip and fall claims are up. These can be related to elevation changes-stairs, for example, moisture on the floors or a number of other factors. We're also seeing more and more bleacher claims-people tripping as they make their way to or from their seats."
Concussion issues haven't affected insurance costs in a big way. "There's some uncertainty around what's going to unfold," Morgan says. "Some carriers are addressing concussion liability through risk management initiatives, while others are addressing the issue in their policies. For example, one carrier has put a warranty on its policy that says, essentially, if a formal awareness and prevention plan is not in place, there will be no coverage."
Morgan notes that one carrier has stated that its "no aggregate" provision will not apply to concussions and brain trauma. Cash has seen some carriers exclude coverage altogether.
Sports organizations and venues, along with their carriers and program managers, also are addressing abuse and molestation issues. "Associations and venues have background check requirements to help protect their participants," Cash says. "We recommend that checks be conducted as part of the hiring process for anyone who might come in contact with a minor, whether that's a coach or a venue employee."
Resources available
Insurers and program managers are helping sports organizations address the risks inherent in their businesses. "The current concussion awareness has put a renewed spotlight on risk management in every area," says Morgan. "We are responding by providing tools for agents, brokers and insureds to understand the issues and head them off. We're reviewing guidelines and helping to make sure that coverage is in place to respond to issues."
He points out that many groups-larger ones in particular-have instituted organization-wide risk management reviews based on emerging issues. "We offer resources to help them carry out these reviews and make decisions based on them," Morgan says. "By devoting their own manpower, these organizations develop a greater understanding of the issues and have ownership of their response. That said, we want to make it easy for them, so we provide resources."
Cash's firm offers considerable support to the venues it serves as part of its program. "We invest in our agents and brokers by educating them through the relevant risk management tools," he says. "We also go out with them and conduct on-site seminars with them for their insureds. This is a great way to provide real-time, facility-based examples of what could happen."
Allowing customers to ask questions and learn from the seminars provides benefits to Cash's firm. "Our goal is to provide a very stable market for our insureds and brokers," he explains. "By going out and educating brokers and insureds on specific risks, risk management tools, and how to use those tools, we can help keep their losses down. That allows us to provide stability."
He sees other benefits as well. "If we provide stability, we boost customer retention-for us and, of course, for our agents and brokers," Cash says. "They view us as an important part of their team, and not just another outside vendor."
Providers help customers in other ways, too. "We try to make it easy for agents and brokers to serve their customers," Morgan says. "For instance, many agents don't have the resources to handle, say, thousands of insurance certificates or the time or staff to spend weeks putting together information for client risk management plans. We provide that back-end support, and we offer various resources that agents and brokers can use to make sure their clients are well protected and are successfully managing their specific exposures."
Serving clients
Agents and brokers who are interested in serving customers in the amateur athletics and sports arena-or in serving them better-would do well to learn more about the issues these organizations face. "Get to know the business," Cash advises. "Understand the unique challenges they face. Become a partner with the facility."
He notes that smaller venues, in particular, are good targets for agents and brokers who are interested in developing a strong agent/client partnership. "In a lot of the smaller facilities and health clubs, the owner wears five or six hats," he says. "It's tough for them to dedicate time to educating staff on risk management issues and implementation and educating their insurance agents on their industry. An agent or broker who understands their business can be a very valuable asset and resource."
Morgan encourages agents and brokers to look at sports clients like businesses. "They sometimes fail to do that," he notes. "They may view it as something fun or interesting. But it's a business. And the expertise agents have serving other companies translates well.
"That said, many times the people leading these groups may not have a business background," he adds. "They may have greater expertise on the sports side than on the management side. Agents can do a lot to help these sports-related organizations in a number of ways."
SERVING COUNTRY CLUBS IN A CHANGING MARKET
Partnering with the right intermediary is key to agent success
By Dave Willis
Revenue pressures are continuing to challenge many golf and country club operations, just as they have for the past few years. "The bottom line is, people just aren't playing as much golf as they used to," explains Brendan Fitzpatrick, underwriter at Glencar Underwriting Managers. "This translates into clubs seeing lower revenue from that part of their business."
Some clubs are facing other revenue challenges as well. "It's very expensive for facilities to host private functions such as weddings," Fitzpatrick notes. "This translates into higher costs for customers, so members are taking their events elsewhere. In the end, the clubs may not be generating adequate revenue from these operations."
According to Rob Mulhern, senior vice president of Venture Programs and program manager for its Preferred Club program, smaller to mid-sized private clubs in particular are feeling the pinch. "Memberships are down," he remarks. "People either are doing away with their membership or they're downgrading from full membership to, say, a social or pool membership."
The market for available guest dollars is competitive. "A number of years ago, we saw a boom in new golf club development," Mulhern explains. "Now everybody is trying to keep those facilities operating at a certain level. At the same time, they know they need to do renovations and facility upgrades, and they need to offer additional amenities to keep members satisfied and coming back for more. These renovations and upgrades put more financial strain on clubs."
Some amenities are designed to make clubs more family friendly. "We're seeing child care perks, such as babysitting services that let parents make use of various club facilities like tennis or golf or dining, as well as summer camps," Mulhern notes. "We're also seeing splash pads being installed. Often clubs think about the amenity and the cost to install it, but they don't really consider the liability that comes along with it."
Added amenities and services create new exposures. "Offering child care services brings with it sexual abuse and molestation risks," he explains. "This requires background checks for counselors and other staff, of course, but it also requires extra premium-something clubs are pushing back on." The same holds true for other amenities. "For example, splash pads carry added slip and fall risks," he comments.
As clubs try to boost revenue, they face other risks. "Smaller and middle-sized private clubs are opening up golf and other events to the public," Mulhern explains. "This helps with cash flow, but it increases the potential for lawsuits. For example, with a slip and fall, a member won't normally sue the club. They'll get treatment, often with their own insurance, and that will be it. The same doesn't always hold true for outside guests."
Tightening market
According to Mulhern, club insurance rates are on the rise. "Carriers have paid out losses from catastrophic weather events in many parts of the country," he explains. "From Sandy on the East Coast to tornadoes in the Midwest and Southwest to deep freezes in the Southeast, the impact has been widespread. Rate increases in the club business are trending a little higher than other businesses because of that."
Fitzpatrick concurs. "Outdoor property coverage has really consumed the golf industry," he comments. "Trees, plants and shrubs can eat up a book of business very quickly. Some insurance companies offer very high, and often unlimited, coverage on trees, plants and shrubs, with no sub-limit per item. Without these sub-limits, any convective storm that's strong enough can blow through and max out the whole limit for this coverage."
Observes Jaclyn Pahura, Glencar Underwriting Managers assistant vice president and program manager, "We've seen a few carriers pulling out of the market altogether; Hurricane Sandy had a huge effect on the golf business. Even some tried and true companies have pulled out of this segment entirely."
The storm led to changes in the market and in how her firm underwrites these exposures. "We started adding wind and hail deductibles and exclusions, and taking other underwriting actions where we deemed necessary, not only in coastal areas but also in the Midwest where other weather-related exposures can cause serious issues," she explains. "We've found that many of our insureds are willing to put a little skin in the game in order to keep cost-effective coverage. Some that cannot afford the deductible options left and went to nonadmitted paper."
Fitzpatrick says, "We've found we've been able to keep the pricing competitive by adding these deductible options. Carriers that could be on the fringe of exiting the golf course segment added these deductibles as well, but they also are showing 20%-plus increases in premiums."
"Another coverage we have seen companies offering that can put a book of this business in jeopardy is damage from errant golf balls," Pahura says. Adds Fitzpatrick, "We looked at a risk recently that had 40 errant golf ball claims in the last year, and the course is only open five months out of the year. The market that covered the club before is no longer writing this business. You have to be really careful how you underwrite for these types of exposures if you're going to cover them."
"We took our entire book of business, identified problem areas by loss type, region, current claims history, CAT modeling, and historical weather reports, and we took action," Pahura explains. "When you do that, you end up losing some business, but we feel confident we've taken all of the right steps to ensure we will be in this segment for a very long time."
Serving clubs
As underwriting managers, Pahura's company relies on its program administrator to deliver service to and through agents and brokers. "Our job is to work with the administrator and make sure we are on the same page in terms of underwriting these risks not only correctly but fairly," she explains. "We go through semi-annual stewardship meetings to ensure everyone is aware of the marketplace conditions like pricing, claims and concerns, and also to keep the administrator engaged by going over trends, results, losses and audit results in detail.
"During these meetings, we collectively address any steps that need to be taken to proactively shape the future of the book," she continues. "The program administrator is also responsible for maintaining and managing relationships with brokers, agents, and insureds, which is vital not only to our success but to theirs as well. We rely heavily on our administrator to provide us with quality submissions, so that our book is well rounded and profitable. A knowledgeable, trusting, and cooperative partner with like-minded business acumen is really the best way to guarantee that insureds are receiving the highest quality of service."
As a program administrator, Mulhern's firm helps insureds with loss control, risk management and a number of other customer-facing services. "We try to focus on the areas that are driving claims," he explains. "One important area involves storage of carts and maintenance equipment. For example, a club may store these in a large barn that's older and not valued very high. We ask clubs to install central station smoke and heat detectors in these buildings because of the value of what's inside. It's something many clubs don't think about.
"We also work with clubs to implement best practices like background checks on camp counselors, golf and tennis pros and directors," Mulhern adds. "We want clubs to make sure they're not putting any of the members' children in jeopardy."
Cart safety is another focus area. "We show clubs how to deliver live, in-person orientation for cart operation," Mulhern says. "Someone actually goes out with the driver and shows how the cart works and how to operate it safely. It's a good way to get the users acclimated and to reduce the likelihood of user error, which can lead to a claim."
Such orientations, Mulhern says, can be documented with a waiver the operator signs. His company encourages the use of waivers for other activities, such as skeet shooting, child care services and more. These and other resources are part of an online library the company hosts for agents, brokers and their insureds.
Business success
To do well in the golf business, Pahura says, "Knowledge is key. Retail agents and brokers write many different lines of business, and they might not have as much knowledge about a niche product like this. It is crucial to either learn the business and all of the nuances it brings, or work with an MGA or similar specialist who can educate the agent or broker, thus ensuring the best guidance for the insured.
"It's also important to ask clients and prospects the right questions," she adds. "We don't ask specific underwriting questions to pry or make the process more difficult. We need the correct information so we can underwrite the account properly and make certain to address any special nuances so the insured has everything it needs from a coverage standpoint. Never be afraid to ask questions and gather information so you can serve your customers better."
Mulhern encourages agents and brokers to look for what he calls "longevity in a space. You don't want to move an account or write a piece of business with a newer program, only to have to move it again the next year."
He stresses the importance of working with a provider that can customize coverages for individual insureds. "Make the decision that's best for your club," he says. "Don't just consider standard coverage, but also appropriate limits, loss control, risk management resources and how a provider handles claims."
Given the financial strain many clubs are feeling, temptation exists to cut corners. "Don't give up coverages just to save a few bucks," Mulhern advises. "That's something we really drive home to our agents. A new carrier or program may come into the business, but it may not provide the breadth of product or service the customer needs.
"Don't treat this business like a commodity," he adds. "If you have questions about competing policies, ask your program administrator or carrier to conduct a coverage analysis." He also encourages agents and brokers to use industry and best practices information available in his firm's online resource library to better understand club issues, coverage needs and risk management strategies.
The author
Dave Willis is a New Hampshire-based freelance insurance writer and regular Rough Notes magazine contributor.
