Avoiding the rough with golf & country clubs

Property damage continues to present a challenge, as do exposures
resulting from increased amenities

By Dave Willis

Everyone knows things can get pretty competitive on the links. What they may not know is, competition is taking place inside of golf and country club offices and boardrooms. Clubs are competing for dollars.

"Over the past several years, a number of clubs—particularly private and semi-private clubs that were family- or partnership-owned—have sold," explains Rob Mulhern, senior vice president, Preferred Club, at Venture Programs. In some cases, they sold to avoid going under. "The larger, more established—those with long-term memberships, the really high-end clubs—are doing all right," he adds, "but others are trying to keep members active and spending money at the club. That can be tough in today's economy."

According to David Hatlem, senior executive vice president, Club Programs, at Bollinger, "Clubs continue to look for ways to deliver additional events and facilities to their membership, in order to compete with other entertainment and social options." These include enhanced exercise facilities and spa facilities, along with kids' activities and amenities. In addition, he says, clubs are actively reaching out to boost membership by lowering up-front costs to join and adding other new member enhancements.

Clubs are finding other ways to bolster the bottom line, as well. "They are looking to use their owned resources in any way possible to bring in more revenue," explains Brian Himmer, Golf & Country Clubs product manager for Philadelphia Insurance Companies. "One way they're doing that is by opening up their own golf cart repair shop to other courses that might not have an on-site repair facility."  Another avenue, he says, is using the club-owned landscaping equipment to provide grounds maintenance services at other commercial locations.

"Some are opening up to public play," adds Mulhern. "We are seeing private clubs go to semi-private and then semi-private clubs may be giving better deals to members or to draw new members. Some clubs have backed off on initiation fees and many have opened up for outside play, from Monday charity tournaments they never used to hold to offering weekday golf for non-members."

This drive to maximize club resources and participation has been underway for a couple of years, he notes. "It's kind of plateauing now. The push for people to come to the club for family events, dinners, wine tastings—even offering things like babysitting or summer camps or even sliding boards and splash pads—has picked up the financials of a lot of these clubs, which has helped them survive."

Even as clubs are seeing improved results, they're dealing with another challenge: Mother Nature. "Depending on where the clubs are located, they've faced severe weather losses," Mulhern says. "Storms have affected clubs all around the country."

Club insurance

"Carriers have paid out a lot in losses, and are rethinking or revamping their modeling," he adds. "An account we didn't consider coastal or CAT-prone is now being modeled for reinsurance from a perspective that it may be hit by a storm, if it hasn't encountered one yet. Clubs that never had wind deductibles or sub-limiting of trees or a sub-limit for debris removal now are seeing that in the marketplace."

According to Himmer, property coverage continues to be a challenge because the exposure not only includes the buildings and contents, but also the surrounding trees, shrubs, greens, fairways and tee-boxes. "Many golf and country clubs are located near the coastlines, which creates an even higher property exposure," he explains.

"Convective storms are also occurring at a higher frequency on inland property, and locations in areas susceptible to drought have seen their brushfire and wildfire exposure increase," Himmer says, noting that 2012 was one of the most damaging years on record for wildfire loss. Add to that increased inland flooding from hurricanes and other storms, snow in the Midwest, tornadoes across the South, hail in central states, and even derechos in the mid-Atlantic states, and it seems like no one is immune, Mulhern adds.

Hatlem says these factors are leading to higher prices and lower coverage. "Because weather has generated significant losses at clubs across the country, carriers have had to increase rates—often in the 10%-25% range—and reduce coverage," he explains. "Some carriers have withdrawn from the segment altogether."

Coverage restrictions focus largely around property. "For example, trees and outdoor property—a club's awnings, porch furniture, signage, the things that can blow away in a storm—are being affected," Mulhern says, "And the tee-to-green cover, the actual golf course grounds cover, is being pulled back a bit, as well."

Some carriers are becoming more restrictive in aggregates or limits on other lines, including D&O and EPLI. "For nonprofit D&O, for instance, carriers won't put out ten or twenty million dollars of limit anymore, even if a club is willing to pay for it," Mulhern explains. "They don't want that capacity being out there."

As restrictions take hold, some clubs are expanding coverage in other areas. "Identity theft and cyber liability is certainly an area that brokers should consider offering to clubs," explains Hatlem. "Clubs should become more cognizant of potential exposures with their members' information and how it is being managed, internally and electronically."

Avoiding mistakes and building a book

Retail agents and brokers can learn from others' missteps in the golf and country club insurance arena. "One of the things we see is a tendency to not explain in sufficient detail the coverage differences that exist from carrier to carrier," says Hatlem. "A multitude of companies will insure golf courses. However, a wide field of carriers doesn't mean there is a deep field of product offering."

He encourages agents and brokers to analyze the coverage differences during the renewal period and at stewardship meetings. "Offer some potential claim scenarios to show how two different products might respond due to coverage, definition and/or limit differences," Hatlem says.

Some agents and brokers fail to zero in on what's most important. "Tee-to-green coverage should be the agents' focus," notes Himmer. "Many of the losses in the golf and country club class of business are property-driven and involve damage to the course itself.  Agents need to take a close look at limits and restrictions on the limits per green or per hole."

Some miss important extra coverages. "Coverage extension for tree removal is something agents and brokers should not ignore because clubs often lose trees on the course," Himmer adds. "Don't forget EPLI coverage. Third-party EPLI is critically important for a private club that will be selecting, and possibly rejecting, people for membership."

Mulhern sees certain agents and brokers stumble around renewal time. "Too many agents fail to reach out to their carriers early in the process to see what's going on in the industry, what the carriers are thinking, and what changes might be in store," he explains. "It can be tough to talk with clients about rate increases and coverage restrictions, but in a firming market, that's important."

By addressing issues early on, agents can make sure clubs budget properly and, more important, do what they can to ensure adequate coverage and minimize risk. "Prepping clients for changes—being as detailed as possible and having honest and open communication early in the process—avoids surprises and can boost retention," he adds.

Himmer encourages agents and brokers to focus on coverage. "Price is important, but coverage is more so," he explains. "While a number of carriers hop into the golf and country club segment, there are a limited number of players dedicated to the industry with detailed and complete coverage forms. Saving 5% is great. What's not great is having every club member talking about the damaged green on number 6 because the club lacked coverage to repair it properly."

He also says agents and brokers should be aware of how much clients are performing outside and non-golf services. "A new legal liability exposure might exist if a club is taking in other clubs' golf carts and equipment to perform maintenance or service on the property," he explains. "Also, a higher auto exposure exists for clubs taking trucks or equipment off-site to perform maintenance services at non-owned locations."

"Have a good understanding of new exposures, events and activities taking place at the club, and how the club will manage these exposures," Hatlem says.

Himmer reminds agents and brokers to look for the silver lining if problems occur. "If an agent is looking for growth in the golf and country club business, they will definitely get good referrals when a club has a claim and it is handled properly," he says. "That approach will help maximize agent profits and lead to growth.  If you are running around trying to undercut every account on price alone, you will be short lived in the industry."

Be aware of what Hatlem calls the "highly 'political'" nature of clubs. "In general, changes occur at the board and management levels with a greater frequency than in most industries," he explains. "Identify those clubs with strong management and membership structures in place. Target ones that have a sense of risk management and believe in product/service as opposed to a 'price shopper.' An account that switches markets every other year isn't looking for continuity of coverage."

It's also important, he says, to "understand how a club's management operates and identify the decision-making tree for all vendors. A club that works with member vendors always will be a challenge. Plus, it opens the club to fiduciary and governance issues."

Beyond understanding client and prospect issues, agents and brokers need to know the insurance marketplace. "There are a number of regional players, but there are really only a few national providers," explains Mulhern. "Agents need to really know the marketplace and understand what each provider brings to the table in terms of coverages, enhancements and limitations."

He encourages teaming up with club trade groups to help fuel growth. "Get involved with associations, whether it's the Club Managers Association of America, the controllers association, the golf course owners association or other groups," he explains. "These associations and their chapters are looking for assistance, not only from monetary sponsorships, but also from an education standpoint. Agents can discuss what to look for in a proposal, how deductibles work, what the claim trends are, or any of a number of other topics." With a chuckle, Himmer offers one bit of parting advice directed at agents and brokers who hold club membership: "Be careful when looking to insure your own club. It might become difficult to relax and play a round, since the club is also your client."