Specialty Lines Markets

Getting active in amateur sports

Despite the economy, this is still a high-energy market

By Dave Willis

Even as many other markets deal with significantly reduced revenues, the amateur sports industry has held its own during a down economy. "We are seeing growth, due to a more active and healthy lifestyle being promoted from early on," says Nora Stransky, CIC, CPIW, president of Special Markets Insurance Consultants, which focuses on both the amateur sports and school sportsarenas. This growth spells opportunity for retail agents and brokers.

Lorena Hatfield, marketing resources manager for K&K Insurance Group, which provides specialty programs for a wide range of youth and adult amateur sports, also sees a flourishing market. "While families may have reduced spending in other areas," she says, "participation in amateur sports and recreational activities continues to grow." She cites the physical and social benefits gained from group sports participation as key drivers, along with media focus on childhood obesity and the importance of exercise.

"The niche didn't take a major hit with the economic downturn, like other segments did," notes John Sadler, CIC, president of Sadler & Company, which serves youth and adult amateur teams and leagues as well as sports camps and clinics. "Because of the value of the experience, parents don't want to cut sports out of their budgets." Still, he notes, some leagues are reporting fewer player registrations.

In addition, there are some instances of increased competition among various organizations—national associations, travel teams, high school and town teams, for example. "Everybody is competing for the same kids," says James Decker, CPCU, ARM, ASLI, AINS, AIM, assistant vice president of sports and recreation for Philadelphia Insurance Companies, which insures most amateur athletic groups and facilities— exceptions being boxing and martial arts. This may put downward pressure on registration fees and pricing for certain organizations.

Still, he calls the business "almost recession proof. To save money, people pare back on vacations, but not on their kids' activities." While he's seen growth in sport-focused camps, he says more young people are concentrating on one sport all year long.

"Sports can be a way to pay for an education down the road," he explains. "And the sports community supports that. There are training programs specifically tailored towards improving certain things, like 40-yard dash times, strength, position skill sets and more." He's also seen increased interest in offshoot sports, such as triathlon.

There also have been pockets of increased activity in adult amateur athletics. "We've seen some modest growth in adult social leagues, especially in major metropolitan areas," Decker observes. "It's not so much the beer leagues, but rather leagues for active singles who want to support a healthy lifestyle."

Business is good at many health clubs, too. "Those that are doing well in this economy are the ones that are expanding their offerings of family-oriented activities," says Jennifer Lowe, national account manager for Sports & Fitness Insurance Corp., which primarily insures amateur athletics related to health clubs and fitness centers. "To remain strong, clubs need to control costs while keeping their programming fresh and appealing to youth and parents. On a positive note, the economy has made it very easy for health club operators to find qualified staff."

Across the board, amateur sports organizations are finding expenses rising in nearly all areas, notes Stransky, whose firm covers youth and adult recreational leagues, as well as students participating in any athletic or extracurricular activity. "For instance, equipment manufacturers are charging more because of lawsuits brought against them," she says. "Also, fuel costs have risen dramatically, which causes problems for groups with traveling teams. In addition, fund-raising activities held to help offset some of these higher costs may end up creating new hazards for participants and organizations."

One challenge amateur sports groups face in an economic downturn is theft. "We've seen a 300% increase in volunteer theft and embezzlement claims over prior year levels," explains Sadler. "Volunteers can be quite creative in the schemes they come up with to steal money." He references a situation addressed in his company blog in which several league administrators colluded to control a league for many years and skim cash from gate receipts and concessions. Unfortunately, he notes, the league did not carry the inexpensive insurance that could have protected it.

Insuring sports

The insurance marketplace for these organizations continues to be fairly competitive. "We are seeing more competition at the amateur level," says Stransky. "More carriers are developing plans and entering the market. Unfortunately, some lack solid underwriting experience. Without appropriate safeguards or underwriting guidelines that accurately reflect potential risk levels, they can get hit with high losses early on."

She's seen this happen in adult soccer programs. "Some carriers included soccer within traditional sport categories, but found that losses far exceeded premiums charged," she notes. Stransky says carriers should build flexibility into plan design so they can work with individual insureds to provide adequate coverage at appropriate, but affordable, prices. "If they don't," she says, "they'll be gone within a year or two."

Rates are inching upwards in some parts of the business. In others, increases may be imminent. "K&K's pricing in this segment has generally held steady in recent years, but some rate increases are starting to be seen in the market," Hatfield remarks.

Stransky notes that, while insurance costs for recreational sports remain stable, rates for school sports have seen an uptick. "More parents have lost their jobs, which means sports medical policies pay on a primary basis," she explains. "Of course, medical costs are skyrocketing, especially in the hospital miscellaneous, physical therapy and durable medical equipment areas, so that plays a role."

Lowe, whose company covers adult and youth teams that operate within or in conjunction with health and fitness facilities, adds, "Economic issues have boosted claims frequency in many segments, including amateur sports." Decker says claims inflation in general liability exposures, as well as more accident and health claims, could be contributing factors. "Greater participation in amateur athletics, by adults and by youth taking part in contact sports, will naturally lead to increased incidences of injury," he notes.

Two issues—the impact of the Sandusky allegations at Penn State and publicity and research on concussions—may have far-reaching effects. "General liability carriers are concerned that increased focus on the Sandusky situation could open the floodgates for sex abuse and molestation claims," Sadler notes. "As a result, many mandate criminal background checks and written risk management controls that include prevention and response planning in order to qualify for coverage." His firm offers resources to help clients find the appropriate criminal background check vendor, as well as written risk management plans that include provisions to address carrier concerns.

K&K has responded to an increased marketplace call for sexual abuse and molestation coverage with a new product due out this spring within its e-commerce programs. "It includes sexual abuse or sexual molestation liability coverage with limits of $1 million for each occurrence and $1 million aggregate," explains Hatfield.

Adds Sadler, "Regarding concussions, general liability carriers are concerned about the long-term impact of repeated concussions and the impact of repeated less-than-concussion events, taking into account that the statute of limitations for youth does not begin until they reach the age of majority."

The agent's role

According to Stransky, the amateur athletics market offers tremendous opportunities for independent agents and brokers. "There are activities, teams, leagues and schools participating in athletics all around any city, municipality or rural area," she says. "Agents should familiarize themselves with a solid market and available products, and then meet with organizations and schools involved."

Agents should advocate for sound risk management practices, she adds, as well as appropriate coverages. "Most organizations don't know where to go for coverage," she explains, "so be there up front to show them and then work with them. Provide them information on how their account is performing." She says retention in the class is good, "as long as you're there for them with information, help with claims or other issues, and get them their renewal before anyone else calls on them."

According to Hatfield, sports activities represent a "virtually limitless market. Local youth teams, adult sports, park and recreation leagues, and other youth activities, such as martial arts, gymnastics and dance, can be found everywhere, from major cities to small towns."

"Agents can really add value by knowing the sports, the participants and what coverages they need," says Decker. "With the Penn State and Syracuse situations, abuse is an incredibly hot topic right now. Understanding coverages and how to build in abuse components and loss control measures to prevent abuse instances are really important."

Lowe encourages agents and brokers to have clients review their entire insurance program and consider all of the following coverages: general liability, accident medical, sexual abuse and molestation, employment practices liability, workers comp, and any applicable professional liability.

"Many organizations do not have thorough coverage," Lowe notes. She says agents should make sure that insureds get signed contracts and certificates of insurance from other leagues or entities that use their facilities.

The use of waivers also is important. "They are our last line of defense from a liability standpoint," explains Decker. "Agents should be more involved in the waiver process—reviewing waivers and offering resources to ensure waiver validity—because waivers vary by state." In some states, waivers don't hold up, he adds; other states regard them highly.

"We would really like the insured to seek outside legal counsel," he adds. "Agents can provide a value-added service by identifying the best-in-class waivers and identifying partners to review the waivers and make sure they meet updated state and local requirements."

Hatfield stresses the importance of appropriate limits. "The correct amount of insurance will protect organizers and volunteers against claims that could be financially devastating," she says, "particularly when inexperienced coaches and parents are working with young athletes."

Efficiency is also important. "Most amateur team, league, and camp and clinic clients are under $1,000 in premium," notes Sadler. "As a result, retail agents must be highly efficient." His firm's automation platform offers agents 24/7 access for proposals, enrollment, payments, proof-of-coverage documents and certificates of insurance.

Decker concurs. "Ease of use is probably more important for many buyers," he says. "When people are looking for this insurance, they often search online and go with the provider that can turn the submission around as quickly as possible." His company is building an online platform to help boost business.

Risk management advice can help agents and brokers retain business. "Clients want access to simple risk management services that are effective and that don't require too much work or customization on their part," Sadler explains. His and other Web sites offer a range of relevant content.

As rates increase, carriers look for ways to add plan features that set them apart, Stransky remarks. "For school accounts, for instance, working with the district's local risk management team can be a very effective way to control costs," she notes. This requires that the carrier be willing to provide claims data in numerous categories, while at the same time maintaining compliance with all privacy regulations.

"By knowing where charges are coming from and which activities have the most claim activity," she adds, "programs can be established for coaches and school personnel that will help the school curb claims. This, in turn, can keep prices more reasonable."

In the end, though, it's all about the kids. "They are our greatest resource," Stransky says, "and they deserve programs and activities that let them expand and grow in all aspects of their lives. They also deserve protection so that, should something happen, there will be funds to assist with medical bills."

Adds Decker, "Agents need to be able to speak the language of the amateur athletics community. It is an industry that changes by the day, and knowing the exposures and how to address them on behalf of insureds will be the agent's greatest asset."