From 2004 to 2011, there was a steady decline in commercial insurance premiums in the overall markets. However, in the last year or so, the property and casualty insurance market has seen premium increases or rates that have remained flat. While the insurance industry as a whole has seen moderate increases in premium rates, the golf and club industry is beginning to see rates increase at a higher percentage.
The golf and club industry has unique risks, and the club underwriting community is limited to a handful or so of quality markets. Recent storms throughout the country have brought a fair amount of claim activity in the last few years related to wind and water/flood damage. This increased claims activity is directly affecting club insurance buyers, resulting in increased premiums, more restricted coverage, and in some rare situations, difficulty in effective placement of coverage. Of course, insurance perils tend to intensify on outdoor exposures, especially trees, ranges, netting, golf courses and other outdoor property associated with many golf and country clubs, and clubs have seen their rates increasing accordingly. As such, a significant number of clubs may view their upcoming renewal proposal as less palatable than in years past.
How can club management better prepare for insurance renewals? Clubs should begin the renewal process as early as possible, and should follow the tips below for developing an effective buying process.
The Decision Making Process
Who will be involved in reviewing and evaluating the proposals, to ensure that the club purchases the right coverage? The club may have the expertise in-house to make informed decisions, such as an experienced club manager or controller or an unbiased board member. If the club has in-house experts who have worked successfully in the past, the club should certainly take advantage of the in-house knowledge. A club may also have an insurance committee that reviews all insurance coverage and proposals. If the club does not have the required expertise in house, the club can hire an insurance risk management consultant to guide it through the process.
Selecting a Broker or Multiple Brokers
Clubs should ask for an interview with each broker to identify their knowledge of the club industry. Obviously, if the incumbent broker is involved in the process, the club will have first-hand knowledge of their competency, but clubs should be sure to check references for any new brokers. If more than one broker will be considered, there are two ways to go about selecting the professional broker:
- Start with three or more brokers, go through an interview process, then select the broker who is the best fit for the club to access the marketplace exclusively on the club’s behalf.
- Have multiple brokers access the market. In this instance, it is best to have two or three brokers involved. If the club identifies two brokers who have the industry knowledge and willingness to work diligently on the club’s behalf, keep it to two brokers. If the club is not satisfied that the two brokers can effectively navigate the marketplace, then it may be prudent to add a third.
As previously mentioned though, there is a limited number of quality markets that can provide quality coverage for a club. If there are too many brokers involved, their ability to leverage the market on behalf of the club becomes diluted. Since the property/casualty markets only provide one proposal on an account (as opposed to health insurance where the carrier will quote the account to multiple brokers), the best plan of action when more than one broker is involved is to go through a market-selection process. The brokers can be asked to list their recommended carriers in order of importance to them, and the club can then decide which broker will access which market.
Developing a Timeline
If the club plans to interview brokers, it is wise to start the interview process about 120 days before the expiration date. Utilizing that timeframe, the club should finalize broker selection approximately 90 days from the expiration date, which is a reasonable time to begin the renewal underwriting process.
The broker or brokers can provide clubs with a renewal checklist. This document will list the information the club must provide to the underwriters: loss runs, financials, equipment list, vehicle and driver list, building updates, and more. Of course, there can be a lot of back and forth communication with additional questions and applications, but it is best if the underwriters have the information they need at least 45 days in advance.
If the underwriters have all the requisite information, it is reasonable to request a proposal date roughly three weeks prior to the club’s expiration date, which would hopefully provide ample time to make an informed decision. In reality, the process rarely works this smoothly, but getting out in front of it helps to avoid frustration.
Making Final Decision
Though price is an important part of the buying process, if it is the primary focus, the club may not actually select the most valuable insurance program. Insurance companies issue proposals that run anywhere from 4 to 40 pages. Is it prudent for insurance buyers to be expected to read through multiple lengthy proposals and come to an informed decision? The club might consider sharing its existing policy (in redacted form, if required) with its brokers and request that, at proposal time, the brokers provide a document which includes a spreadsheet highlighting and comparing 80 lines of coverage or more, the responses they received from other markets, and recommendations on coverage enhancements. If this document is crafted properly, it will be an excellent tool to help the club understand exactly how the programs compare and will help the club select the best program to meet its needs.
Bill Dalton is president of Bridgepoint Insurance Group, a specialty property & casualty insurance brokerage located in Wayne, Penn., with a focus on the golf and club industry. Their services include retail brokerage, expert witness consulting, club risk management consulting and association program administration. You can reach Bill at email@example.com or 888-687-5712 x223. See their website at www.bridgepointins.com.