It’s not just fudging the numbers, it’s fraud.
The risk manager of a large municipal rec department called me recently. He had a league’s certificate of insurance in his hands that was issued by us. He was concerned that the league using his fields had over 30 teams, but our certificate indicated that coverage was only purchased for five. He asked if the coverage would be in force in the event of an injury. I had to break the news to him that coverage may not be in force – and that we had a big problem if his facts were correct.
Sports teams or leagues purchase Accident and General Liability insurance that is typically priced on a per team basis. The authorized representative of the sports organization completes an online or paper application and reports the number of teams in each age group. Accurate reporting, which is a fundamental part of the rate structure, depends on the “honor system.” Intentional under reporting is flat out insurance fraud, and can result in claim denial, and definitely results in unwarranted rate increases.
The best way for the insurance carriers to scientifically predict the dollar amount of likely losses and needed rates is to study past loss history and assign expected losses per team. When the number of teams is intentionally under reported, the insurance carriers don’t collect the premium necessary to offset the risk of loss. When losses increase as a percentage of premiums collected, the insurance carriers must apply rate increases across the board.
Steps being taken to prevent under reporting
In an effort to maintain competitive sports insurance programs, the following steps are being taken to keep under reporting of teams in check:
- The number of teams reported on insurance applications will be cross referenced with association membership registrations.
- The number of teams reported on the insurance application will be cross referenced with the team/league website.
- At the time a claim is reported, claims adjusters may investigate the proper reporting of team figures before a claim is paid.
- Sports insurance programs may require a roster of team names.
Please do your part to make sure that all of your teams are reported and accounted for when you apply for coverage. And remember, intentional under reporting of teams hurts not only those who depend on the claims being paid, but also drive up rates for everyone.