Niche marketing with a bounce
Purchasing group serves growing market for rented inflatables
By Phil Zinkewicz
Not too many years ago, perhaps 25 or 30, a major attraction at feasts, festivals and amusement parks was the Moon Walk. This consisted of an inflatable structure, much like a small house, that children could enter into and bounce around joyously as they would on a trampoline.
Back then, there were perhaps two manufacturers of such recreational inflatable products. Today, there are inflatable slides 26-feet high, inflatable obstacle courses, bungee jumps, jousts, bouncy castles, climbing walls, Ninja jumps and much more. It is estimated that there are some 15,000 “inflatable” businesses in the marketplace. And, guess what? They all need insurance.
That’s the good news. The bad news is that many, if not most, insurers consider these businesses extremely high-risk and, therefore, high-quality, affordable liability insurance is difficult to find.
No one knows this better than John Carr, president of CSI Insurance, a Roswell, Georgia-based wholesale agency. Carr is also founder and president of Inflatable Industry PG, Inc., a Delaware-domiciled purchasing group that is set up to provide general liability for manufacturers, distributors, owners and operators involved in the inflatable amusement industry.
Carr says the reason he formed the purchasing group was to provide a way for members of the inflatable amusement industry to join forces, since there was no association that represented them. He says he was once a member of the board of the American Rental Association and that, not only did the ARA not represent members of the inflatable amusement industry, but they specifically excluded them from representation.
“When I left the ARA, I decided to do something about that. I began CSI in 1997 with an idea towards focusing on specific target markets. Those markets had to meet certain criteria,” he explains. “First, the market had to be something we could underwrite profitably. Also, the market had to be one with limited competition.
“And, most important, the market had to be one with needs that were not being met and one that we were capable of satisfying. We started up a student personal property program, a contractors’ equipment and rental program and, of course, a program for inflatable play structures,” he says.
Right off, Carr found the liability insurance marketplace difficult to penetrate. “There is very little historic statistical data available for the inflatable industry, and underwriters tend to shy away from exposures without such information,” according to Carr.
“So, I formed the purchasing group,” he continues. “In the past, insurers typically issued master policies having aggregate limits that are quickly exhausted after a few claims, and insurers limited coverage to only scheduled equipment. By contrast, the PG offers individual occurrence policies with a range of limits available from $300,000/$500,000, $500,000/$1 million, to $1 million/$2 million, covering a range of amusement inflatables, compared to many insurers who exclude most equipment except for basic bounce rides. At present, the purchasing group targets the inflatable equipment rental industry, although expansion plans to include manufacturers and distributors are in the offing.”
Carr says that the purchasing group also offers risk management and loss control advice to its members. “Loss prevention hinges on the business owner’s commitment to safety and making it the cornerstone of the business,” he points out.
Carr offers some suggestions for loss prevention:
• Select products from providers who have demonstrated they have taken all reasonable steps to ensure the safety of their products, subscribing to all applicable safety standards and best practices.
• Comply with manufacturer’s specifications for the product or component being used.
• Ensure that employees and customers receive appropriate written instructions relating to their jobs or use of the product.
• Demand professional setup and take-down of rental units.
• Use rental contracts and waiver of liability forms that place assumption of liability where it belongs.
• Maintain disciplined quality control over the things you are responsible for and document that process.
• Take reasonable steps to ensure that parties assuming or accepting liability for their roles have the financial capability of responding if necessary.
• Know the standards for the industry, in addition to standards published by the American Society for Testing & Materials (ASTM).
Carr says that the purchasing group, which was set up in 2006, has already written $3 million in premium volume and expects to top $5 million four or five years into its future. The underwriter for the group is Interstate Fire and Casualty Co., an A.M. Best “A” rated company, domiciled in Illinois, and a subsidiary of Fireman’s Fund.
“So far, claims experience has been relatively good, but then there are no historical industry statistics to compare them to,” he says. “There is really only anecdotal evidence of industry claims history in which several things stand out:
• More than 80% of incidents involve children 14 years of age or younger.
• More than 70% involve abrasions, sprains or fractures.
• More than 60% involve legs, feet, shoulder, arm or hands.
• The most notable large claims involve improper staking or weighing of the inflatable … failure to follow manufacturer’s instructions … inadequate supervision … failure to warn of hazards or product design questions.
“When we set up the purchasing group we did a tremendous amount of research. We looked for information from the Consumer Product Safety Commission. We went to manufacturers and rental companies and asked them for their claims information on a broad basis. We looked at safety laws in various states. Claims in this business can be serious, and we did everything to draw a claims profile on our own of the industry.”
Carr maintains that “inflatables” is an industry that is growing rapidly. “Not too many years ago, fixed location amusement parks or traveling carnivals offered the only alternatives for children and young adults to feel the thrill of amusement rides. Today, the amusements can come to your back yard, schoolyard, and community park of almost anywhere or at any time. Inflatable play structures make this possible.
“Progress towards a more traditional insurance underwriting approach is underway,” continues Carr. “In 2004 the ASTM introduced an initial standard for the manufacturing, operation and use of inflatable play structures. This standard has been twice updated since then and a number of states have introduced mandatory safety inspections for all or some of the products and businesses. Most inspection criteria include ASTM standards. Underwriting guidelines now incorporate all or some of these standards along with other basic risk management requirements.”
The purchasing group is marketed through various initiatives, including e-mail, campaigns directed at agents and brokers, trade shows and directly with those engaged in the inflatable amusement industry. Carr, as the PG’s program administrator, will provide day-to-day administration, including underwriting, policy issuance, risk management and marketing, with the PG’s insurer providing claims administration.
For more information:
CSI Insurance
Web site: www.csiprotection.com