Event insurance - The show must go on

Last summer proved problematic for events organisers across the UK as unprecedented bad weather forced many events to be cancelled. While this has served to highlight the need for events insurance, the sector is still dogged by a significant lack of awareness.

A recent survey of event organisers, carried out by Hiscox UK's event insurance division, found widespread uncertainty among them regarding what event insurance is in place and what risks that the policy can cover.

There is a view that the problem is more pronounced for smaller events, as Lucy Scurlock-Jones, managing director at Event Insurance Services, explains: "The lack of awareness of event insurance lies primarily within the small and medium sector; the larger events are well organised and aware of their legal obligations. The smaller event organising firms seem unaware of their insurance requirements unless they are obligatory. This is a niche market and so most people are unaware of its existence."

Last on the list

Elizabeth Seeger, contingency underwriter at Hiscox, points out that occasions such as major sporting events or big exhibitions tend to be planned with an up-front budget for insurance. "They are used to buying it year on year and it becomes a natural part of the event organisation," she explains, adding: "Where smaller to medium-sized events are concerned, it does tend to be left to last on the list."

In fact, the problem of leaving event insurance purchase to the last minute is one that brokers encounter regularly; industry experts report that it is still common for organisers of community events in particular to contact their broker or underwriter just two days before they happen. As Brian Kirsch, managing director at broker and Lloyd's coverholders Event Assured, observes: "This does not inspire confidence in the underwriter, because if insurance is the last thing that you have thought about then risk is probably the last thing on your mind, too."

Another inherent problem with late requests for insurance is that event organisers may find the availability of cover is severely restricted. "You can't insure a cause of loss that already exists," points out Kirsch, who estimates the market to be worth up to £10m. He adds: "You also get best value by buying event insurance as early as possible once you have an insurable interest, which is generally when the venue is booked."

Seeger agrees with Kirsch and highlights the recent problems caused by infectious diseases: "By the time a disease has emerged or there's a restriction zone because of foot and mouth, the cover may not be available or is available at a higher price. Part of the education process has to be that you have to buy this cover early, when you start to organise the event, because then you can be insured for all these things. The key message is buy early to benefit from the broadest cover."

What can the insurance industry do to raise awareness about events insurance cover? Scurlock-Jones believes that the onus is on the venue, local council and suppliers to advise their clients that the cover is required in the first place. "Then the onus is on the brokers to ensure that the correct cover is applied," she adds.

Kirsch observes that all of the sector specialists have a responsibility to put the message across; some of the established players attend conferences for event organisers, sit on relevant trade associations and carry out a significant amount of marketing.

Evaluation

There is some good news on the risk management front in that many event organisers appear to be aware of the need for risk assessments. However, the Hiscox survey found that 36% of event organisers do not actually conduct formal risk assessments. Again, there is a clear split between larger and smaller events, as Scurlock-Jones observes: "The larger event organisers are very risk management aware. However, going down the scale to the medium and small events, I don't think that some have even considered it, judging by some of the claims which we encounter."

On a more optimistic note, Scurlock-Jones adds that some small events are organised meticulously, with highly professional risk assessments. There is also some awareness of the need to manage potential legal liabilities; Kirsch points out that corporate manslaughter in the context of events is an issue that is high on the agenda, particularly for event organisation companies.

Another challenge for this sector is the tendency of premiums to increase in size. There has been some adverse publicity also, particularly around events such as fireworks parties that were cancelled because of prohibitive insurance costs. Kirsch explains: "There aren't many events that are actually uninsurable, though some events have become uneconomic to insure. The cost of buying liability insurance for a firework display has certainly gone up and, since a lot of firework displays tend to be low-budget events, the insurance premium can appear as out of proportion compared to the rest of the budget."

The good news for the specialists in this sector is that, despite the inherent problems around a lack of awareness of the relevant issues, there is also a growing need for cover. "Event insurance is an ever-increasing market," reports Scurlock-Jones, who points to the popularity of events such as paranormal investigations, open gardens and summer schemes. Weddings provide a constant source of business, though many observe that this has become a saturated market.

Seeger says that the take-up of events insurance is slowly on the rise; her message for the insurance industry is that it must continue to step up efforts to raise awareness. It is also important to bear in mind that a sudden surge in enquiries may not be a long-lasting phenomenon, as Seeger concludes: "Any newsworthy item, whether it's storms, terrorism threats or outbreaks of infectious diseases, will raise awareness but only in the short term. As soon as these items fall off the front pages of the newspaper, the number of enquiries for events insurance drops."

LACK OF AWARENESS

Below are some key facts from a survey carried out by Hiscox UK's event insurance division this year:

- 62% of event organisers do not buy cancellation insurance for their event.

- 33% of event organisers were unaware of what insurance protection was in place for their event and many were unaware as to the specific risks that can be covered.

- 90% of event organisers see risk management as integral to planning a successful event, though 36% do not conduct the legally required formal risk assessments.

- 78% of organisers are unaware that event cancellation losses can be insured against should an unexpected national event, such as a state funeral, happen to fall on the same day.

- 59% did not know of the availability of insurance against cancellation costs or for loss of profits in the event of industrial action stopping visitors arriving at your event.

- 52% did not realise that you can insure against the non-appearance of a key speaker or celebrity.

OVERVIEW: PREMIUM AND CLAIMS TRENDS

Premium trends have increased over the past few years. Lucy Scurlock-Jones, managing director at Event Insurance Services, reports: "Historically, we noted a 25% increase, however over the past couple of years this has extended to 33%. Typically, this is a result of higher limits being sought; with liability cover for instance, £1m was sufficient, however most local councils will now accept only £5m or even £10m."

As far as claims trends are concerned, Brian Kirsch, managing director at Event Assured, explains that in terms of sheer numbers, slip-and-trip claims still cause the most problems but the biggest claims in terms of size tend to be cancelled events. Scurlock-Jones adds: "We have more claims from people falling down holes in fields where they have parked their cars or slipping on wet surfaces than any other type of risk."