Navigating the Sports Insurance Market

The problem with the traditional insurance bidding process

Many administrators of sports and recreation sanctioning and governing body associations make the common mistake of allowing multiple insurance agents to bid on their insurance program. After all, the more opinions and quotes, the better, right? And doesn’t competition between insurance agents result in the lowest price?

It’s my opinion that these commonly-held beliefs could be counterproductive in the sports and recreation insurance marketplace.

The problem

The sports/recreation insurance marketplace has a limited number of insurance carriers that are capable of providing quality General Liability coverage. It doesn’t make sense to cut loose multiple insurance agents who are in mad rush to be the first to approach the same handful of carriers, bombarding each underwriter with multiple applications. Worse, many of the applications may contain contradictory information, raising raise red flags about the truthfulness of any single application. And the carrier underwriters may believe that too many insurance agents chasing an account is an indication that the account is a price shopper who isn’t interested in a long term relationship.

The likely result is that the application will be moved to the bottom of the stack where it won’t receive priority treatment by the underwriters.

Additionally, the various insurance agents who are quoting may get frustrated when they find that other agents have blocked their markets with prior application submissions. They will usually request a “broker of record” letter from you to alter this outcome. Typically, carriers will only work with the first agent to submit an application. However, if a subsequent agent can convince the sports organization to sign a “broker of record letter,” he or she can then take over the rights to represent the insurance carrier. Carriers who receive a broker of record letter must inform the first submitting agent and offer a period of time to receive a countermanding broker of record letter to offset the effect of the first one. The end result is stressful and time consuming communications bouncing among insurance agents, carriers and the sports organization administrator who is overseeing the bid process.

The solution

The better way to handle the process is to choose the most qualified insurance agent based on a predetermined set of criteria, and allow him or her to obtain proposals from various insurance carriers. This approach offers the best of both worlds: the sports organization will benefit from working with the most qualified insurance agent and still gain access to all the insurance carriers in a setting less likely to cause underwriter mistrust. This process should produce the best combination of insurance and risk management advice and service for the lowest possible cost.

Sports risks create unique exposures to loss that must be anticipated and then addressed by negotiating specialized coverage modifications. It takes many years of experience in the sports niche for any insurance agent to become familiar with these unique exposures to loss and the special coverage modifications. Such experience is acquired after reviewing dozens of actual claims and lawsuits in specific areas and noting the carrier responses to these claims under various coverage forms. A sports organization definitely does not want to hire an insurance agent who lacks this specialized experience.