John J. Gaskill is marketing director, wholesale brokerage, of K&K Insurance Group.
Roller coasters ... in-line skating ... amusement parks ... snowboarding ... paintball games.
What do all these activities have in common? Simply put, they're fun. In the United States and around the world, there's a big boom in all kinds of sports, leisure, and entertainment pursuits. They're exciting, challenging--and in many cases, extremely risky.
That's where K&K Insurance Group, Inc., comes in. Now a subsidiary of Aon Corporation, K&K has, since 1952, been offering a wide range of programs tailored to meet the needs of the spectrum of sports, leisure, and entertainment (SLE) risks. With some 350 employees, the brokerage is organized into five major divisions: events and attractions, leisure and recreation, sports, motorsports, and venues & gaming. In this article we'll talk with John Gaskill, marketing director of K&K's wholesale brokerage operation, about its ProductsPac Plus program for the product liability and professional liability exposures of the SLE industry.
Throughout his more than 30 years in the insurance business, Gaskill has been involved in the marketing and underwriting of MGA niche program business. He worked for K&K from 1968 to 1992, then rejoined the company last year, bringing with him a products liability program for amusement-related risks that he developed during his tenure with another broker. Although K&K arranges insurance for virtually every aspect of risks related to sports, leisure, and entertainment, it had not been offering products liability coverage.
"I went to K&K with a turnkey opportunity," Gaskill says, "and they were very interested because of the synergy between my program and the other kinds of insurance they provide." K&K is the program's exclusive distributor for amusement ride-related risks through General Star Indemnity Company, which carries an A++ rating from Best's. Through nonexclusive arrangements with other insurers, K&K also provides wraparound coverages, including workers compensation, automobile, and property insurance.
From arcades to Zambonis
As developed by Gaskill, the original ProductsPac Plus program was designed for amusement-related risks. Since he rejoined K&K, Gaskill says, "We've taken the program across the board and are now offering it throughout the sports, leisure and entertainment industry." He mentions some of the risks for which ProductsPac Plus is appropriate: manufacturers of amusement rides, concession games, and trailers; recreational vehicles; watercraft and marine equipment; collector cars, kit cars, street rods, and go-karts; motorsports; firearms; playground equipment; safety helmets; health clubs, spas, saunas, Jacuzzis, and tanning beds; in-line skates and equipment; gymnastics and fitness equipment; martial arts equipment; hockey equipment and safety gear; ski resorts, ski lifts and trams, and snowboards; climbing equipment; rock walls; laser tag devices; paintball games; simulators and virtual reality games; video arcade games; mall rides; computer chips in both games and rides--and the list goes on.
"Our prospects are nontraditional in terms of products liability," Gaskill explains. "For instance, we are in the process of arranging coverage for a computer chip that powers a bingo game for casinos. This entails a blending of commercial general liability, professional liability, and products liability. In many cases, we're dealing with unknowns. We usually have at least one competitor on any given risk, but in many cases we are the only brokerage that can meet the insured's needs." Competition from standard carriers is almost unknown, Gaskill says, commenting, "We like to hear people say, 'I can't find a market for this risk.' " Other one-of-a-kind risks for which K&K handles the insurance are a firm in Columbus, Ohio, that makes wooden roller coasters, the maker of Corvette bodies for dragsters, and the Detroit-based manufacturer of Mercedes racing engines. (See photographs on page 46.)
Julie Bernard, manager of administration and finance of Ilmor Engineering, demonstrates equipment at Ilmor's production facility to SecurityFirst agents Jim Boyer (left) and Jeffrey K. Searles.
ProductsPac features
Specialized forms are available for both standard products coverage and professional liability coverage. ProductsPac Plus is available to most support industries, including suppliers, installers, operators, fabricators, designers, parts manufacturers, contractors, and consultants.
Coverages and options available under ProductsPac Plus are:
* General liability: automatic additional insureds coverage; blanket vendors coverage; defense coverage for ADA complaints and litigation (amusement rides); E&O for designers and installers; employee benefits liability; operators liability; waiver of subrogation coverage; and international coverage
* Property: boiler and machinery endorsement; building law ordinance coverages A and B; contingent business interruption; equipment breakdown endorsement; and off-premises power failure
Also offered are commercial auto and workers compensation coverage, as well as completion bonds and Y2K coverage (on a buy-back basis). Limits are available up to $100 million, and K&K will arrange premium financing and flexible payment terms, some of which are interest free. Such plans, Gaskill points out, are particularly helpful for clients with seasonal cash flow. K&K manages and distributes ProductsPac Plus through a select group of insurers with Best's ratings of A or better. Among these are General Star Indemnity Company, Agricultural Excess and Surplus Insurance Company and TIG Insurance Group.
K&K writes products liability predominantly on an occurrence form, Gaskill says, and also can provide claims-made coverage. The policy usually carries a low deductible. "We stay away from lower self-insured retentions so the insured doesn't have to retain a third-party administrator," Gaskill notes. An especially competitive feature of ProductsPac Plus, he says, is its international endorsement, which is added to about 50% of K&K's policies. The endorsement provides coverage for domestic risks with overseas operations.
Racing engines are part of the wide spectrum of risks handled by K&K. John Gaskill of K&K (left) and Jim Boyer (center) of SecurityFirst Insurance of Flint, Michigan, visit Ilmor Engineering--a SecurityFirst client in Plymouth, Michigan where Mercedes Benz engines are produced for CART races. At right is Paul Ray, vice president of Ilmor Engineering.
Open door for retail agents
Given K&K's highly specialized operations, how accessible are its programs to independent agents? Very accessible, Gaskill says. "It's easy to do business with us. You do not have to be appointed, just approved." In fact, he notes, "Most of our business is coming from agents who have never done business with K&K before." A new agent must complete a questionnaire and provide an E&O certificate.
Here's more good news for independent agents: Unlike many of its competitors, K&K has a strong appetite for smaller SLE risks. "Many companies don't like smaller accounts, and their minimum premium starts at $25,000," Gaskill observes, adding that most markets in many instances will provide only products liability. "Our benchmark is $10,000, and we've quoted as low as $3,500," he says, adding, "We can usually put together a complete package in one or two markets: products liability tied in with CGL, property, automobile, umbrella, and workers compensation. In most cases the insured doesn't need to purchase a BOP."
Also unlike many other brokers, K&K doesn't shy away from small start-up risks. "We recently received a call from a woman whose husband had invented a musical baby bottle," Gaskill says. "They needed a
$1 million certificate of insurance in order to distribute the product through a national discount chain. We provided it--at well below our usual minimum premium." What's the rationale for accepting such small accounts? "Insureds like this are ideal for us," Gaskill responds. "They're just getting started now, but they have the potential to become a big account for us." K&K--which insures all the major sports franchises, plus top casinos and world-class events and festivals--will even arrange coverage for a client who wants to sell soap or candles at a flea market. The premium? "Just $200 can buy insurance for this kind of concessionaire," Gaskill observes.
Underwriting and loss control
Given the kinds of risks for which K&K arranges insurance, Gaskill says, it's essential that underwriting be painstaking and thorough. "Our products liability application is very extensive. We require a complete loss history and detailed product information, and we also submit product brochures to the underwriters." It's because of this rigorous approach to underwriting, as well as a strong risk management and loss control effort, Gaskill observes, that K&K was able to obtain an exclusive with GenStar for its amusement ride and related risks. "As other insurers achieve this high comfort level with us, I'm sure we will be arranging other exclusives," he says.
To streamline and simplify claims handling and loss control, K&K designed an incident report for sports, leisure, and entertainment risks that is uniform and simplified. The brokerage employs a full-service in-house claims staff whose members specialize in the investigation, analysis, and disposition of SLE risks.
Industry forum aids communication
Brokers and insurers that deal with sports, leisure, and entertainment risks face issues and concerns that are unique to their highly specialized target markets. Last fall, K&K Insurance, along with General Star Management Company, sponsored an insurance forum in Cleveland in which several industry leaders participated. The attendees discussed the insurance-related issues, challenges, and opportunities that confront companies involved in the SLE marketplace, with a special focus on the amusement ride industry.
"The forum was a tremendous success in that we received a good deal of interaction and feedback on a wide range of topics," says Gaskill. "It was a fairly open agenda that was designed to bring to the table the major issues of the industry today."
Among those issues are cost and coverage concerns, how to disseminate insurance information more effectively to prospective customers, claims handling, insurance trends abroad, and the insurance needs of smaller start-up operations and support industries.
"This was also a good opportunity to talk about industry support and standards, partnership capabilities, education, international concerns, and even obscure topics like patent design protection," Gaskill comments. "Everyone seemed to bring an insightful perspective to each issue that made us realize we need to keep communicating in order to bring better products and services to the market."
If there's a better way to serve the vast and growing market for sports, leisure, and entertainment insurance, chances are it's already on the drawing board at K&K Insurance. *
©COPYRIGHT: The Rough Notes Magazine, 1999