Sports clubs - Powering ahead in sport

We Brits are not very good at sport. Despite our passion for rugby, football, cricket, tennis, and relatively new-found passions for Formula One and boxing, as a nation we have failed to come out on top in any sport since the Ashes in 2005.

We are very good at insurance however, so it makes sense that sports club insurance is one of the most saturated markets operating today. One of the main attractions of insuring sports clubs is the sheer size of the market; no organisation has a definitive figure for the number of sports clubs in Britain, not least because the term can mean anything from a church boules organisation to a Premier League football club. One broker estimates that there are 160,000 sports clubs in the UK. With the minimum premium starting at £100, the potential market could therefore be worth over £16m.

Most insurers offer standard policies that cover the basics for sports clubs, however it pays to check the wordings of the policies as some reveal startling gaps that result in the broker offering a sub-standard service to its clients. For instance, one broker offers a sports club policy that includes an exclusion for spectator stands, which would suit a small village badminton club but not a non-league football club. Without comprehensive underwriting skills brokers could leave customers in troublesome situations like battling with the financial consequences of a team's relegation.

In fact, the fate of a sport could be decided on the back of a few bad claims. Chris Nash, deputy underwriter at sports insurance-only Syndicate 3334 and director of Sportscover Europe, explains that equestrian sports in Australia were unable to find cover in early 2003 after a number of expensive claims. This became one of the triggers for the Australian Tort Reform in April 2003 that, thanks to changes in how negligence should be perceived by insurers and the law, recovered the situation. Nash warns brokers to be wary of sports club policies that imply that the risks for all sports are homogenous. He stresses: "There has to be a huge variance (among risks in different sports) and anyone who says the premiums cost the same doesn't know what they're talking about."

Differentiating risks

Understanding the differing risks of amateur and professional levels of sports is imperative for Nash: "Amateur boxers wear head guards, their crowds are smaller and the aim of the bout is to score points over three rounds, whereas professional boxing has far more spectators, virtually no body protection and the aim is to knock someone out within 12 rounds. Understanding the nuances of amateur and professional boxing will save your claims manager a hell of a lot of time and your shareholders a significant amount of money."

Specialist underwriting skills are cited as a necessity by many brokers operating in sports club insurance. According to one source, many policies are little more than "bastardised standard commercial policies", leaving brokers in danger of underinsuring their clients if they sell these policies at face value. Sportscover employs only those that have participated in a sport, whether they are Olympic medal winners or "weekend warriors". Nash claims that first-hand knowledge of a sport's key risks can make the difference between a club recovering from a major claim or being forced to close down.

Colin Mico, managing director of Croydon-based broker PCM Risk Solutions, agrees. He adds: "The liabilities of the committee in particular are rarely covered. Captains, club umpires and coaching officials are also huge grey areas because they tend to be professional indemnity-based rather than public liability." For this reason, executive liability or directors' and officers' cover is often recommended.

Cover for loss of earnings is sometimes a sensitive subject for asset-rich but cash-poor clubs, though Mico stresses the cover's importance. He sayst that, in one case, non-league footballers had been forced into selling their houses because the insurers had not picked up the loss of earnings claims quickly enough.

Some clients are keen to purchase the minimum amount of cover required by their club's sporting body and need convincing to take out additional policies. Jackie Burns, general manager of County Insurance Services Schemes, nots: "Those (policies) put forward by the Lawn Tennis Association and the Rugby Football Union, for example, tend to be sufficient and well priced, but they don't always cover extra events like fundraising efforts and bonfire nights." Business interruption is important for semi-professional clubs, especially as many clubs' facilities are built on flood plains; in the event of a deluge, sewerage complications can lead to the local authorities prohibiting the use of the facilities until a full decontamination process has been completed.

Many clubs run by volunteer committees are unaware of the possibilities and implications of defamation. Mico stresses that brokers must make their clients aware that sports clubs' risks are changing as an increasing duty of care is expected by sports' governing bodies. This began with the Management of Health and Safety at Work Regulations Act (1992), made under the Health and Safety Act (1974) but is constantly reviewed, with the Health and Safety Executive recommending different guidelines for different sporting bodies. Other covers seen as important include player accident cover, property, loss of earnings and legal expenses.

Competition

Gaining critical mass is essential when attempting to rise up alongside the broking giants already in this sector like Towergate and Endsleigh. Andy May, director of Marshall Wooldridge, says that being an English Cricket Board-recommended broker has helped to retain its clients over the last 23 years.

Alongside Kerry London, Marshall Wooldridge is a cricket club specialist and covers half of the 6,000 clubs in the UK. Cricket can be a tricky sport to insure, though thanks to a good relationship with Allianz and its promotion of risk management the business is profitable for Marshall Wooldridge. May notes: "One of our biggest claims involved a club taking its league to court over a relegation issue in which the league had docked points from the club for fielding an ineligible player. Other claims have included one-off flood events and arson attacks; they tend to happen in the off-season and can cost around £35,000." May adds that, while premiums of £450 to £500 are relatively low compared to the higher end of the cricket club market, other brokers are not attracted to the smaller policies, allowing Marshall Wooldridge to gain the lion's share of the market.

Another profitable and difficult sports market to enter is golf. The nature of the sport means that the locations and equipment used are expensive to buy, maintain and replace. One established broker in this area is Finch Commercial Insurance Brokers, which insures the prestigious Wisley Golf Course. Along with policies for groundskeeping and property cover, Finch's senior commercial broker, John Barlow, asserts that the best brokers will include member-to-member liability. He says: "Thanks to the Americanisation of the UK that has seen us become increasingly litigious, member-to-member liability where members sue each other through the club is on the increase." He adds that members even attempt to blame the golf club for badly designed courses if their shots go wayward, and even where there is not a hefty settlement at the end of the dispute, the enormous solicitors' fees still need consideration.

Market predictions for the year ahead are favourable, though the saturation of the market and soft conditions could lead to some unsustainably cheap premiums. Brokers should be wary of overextending themselves by offering schemes that are ultimately too big for them to handle in the event of a claim. The size of the market should expand as sports participation rises in the UK and the buzz being generated by the London Olympics in 2012 increases; it seems the market may have reached the bottom of the cycle and that the only way for premiums to go is up.

IMPORTANT CLUB POLICIES

- Public liability

- Professional Indemnity

- Player Accident

- Business Interruption

- Property

- Employment liability

- Legal Expenses.