5-Step Insurance Process for Sports/Recreation Organizations

For those risks that are to be insured under the risk management decision-making process for sports and recreation organizations such as sanctioning/governing body associations, the following considerations should be taken into account:

1. Determine Types Of Policies Needed – Determine the different types of insurance policies that are required to address the potential causes of loss such as General Liability, Accident, Workers’ Compensation, Business Auto, Directors & Officers Liability, Cyber Liability, Property, Crime, etc.

2. Customize Coverages And Avoid Unacceptable Exclusions – Checklists should be used to carefully analyze each policy with an eye towards eliminating unacceptable policy exclusions and negotiating special coverage enhancements. General property & casualty checklists from reputable industry sources should be combined with customized checklists that are specific to the sports industry.

3. Carry Adequate Policy Limits – Carry policy limits that are high enough to cover worst-case scenario. The decision over how high a General Liability, Business Auto Liability, or Umbrella / Excess Liability limit to carry is as much art as science. Factors to be considered include value of assets at risk, exposure units creating the risk (ex: the greater the number of participants, the greater the chance of a catastrophic injury and resulting claim), recent court cases, limits carried by peer organizations of similar size, affordability, and the particular severity risks that are faced by a sports organization (ex: transportation of participants, sex abuse / molestation).

4. Choose Carriers With Adequate Financial Strength – Only do business with insurance carriers that have at least an A- rating by A.M. Best Company for financial strength. However, keep in mind that an A- rating is by no means a guarantee of long-term financial strength as carrier financials can deteriorate rapidly. It’s important to pay attention to any adverse media reports about your carrier and to consult other financial rating organizations such as Standard & Poor’s and Moody’s when in doubt.

5. Loss Analysis And Rate Justification – Perform quarterly, semi annual, or annual audits of property & casualty insurance loss data to assess the effectiveness of the risk control and risk financing program. The audit should include a review of carrier generated loss runs paying special attention to frequency problems and individual large losses with open reserves. Problem claims should be analyzed with an eye towards the implementation of risk control techniques for prevention and reduction.

Loss analysis and rate justification is a very important topic that will be addressed in a future blog posting.