For the golf industry, 2008 business is at best a bogey — probably worse. And for the agents, carriers and program managers who cater to the golf and country club world, that’s made for a rough market, lately.
Three key trends are shaping the market — and changing the game –for golf insurance agents.
First there’s a trend with golf itself. The growth of the sport remained flat or fell in most parts of the country in the past year. The number of rounds played shrunk, and the net number of courses fell slightly for the second straight year, according to the National Gold Association, mirroring trends that began at least two years ago.
Second, the economy is affecting the market. Golf, like any leisure activity, is tied to disposable income. When the economy in general sags, as it has during much of the year, people play less golf. In other words, courses are looking for new revenue streams and any other means they can to shrink their bills.
Lastly, is the insurance market itself. As the commercial insurance market has softened, premiums have fallen. Pair that with the entry of relatively new companies into the golf insurance program world in the past several years and the result is big competition.
To agents, the dynamics of the market look a lot different than they did just a few years ago, said Neely Herridge, founder of Secure Insurance Agency in Conroe, Texas.
“I’ve been insuring golf courses for five years. I started because everyone was building these courses and Tiger Woods had piqued everyone’s interest in the sport. But lately, the number of rounds played has fallen and with everything else going on, the courses are trying to save money on insurance.”
Such dynamics have sparked a major interest on the part of carriers and program managers in touting the use of loss and risk control to keep and expand business in their golf programs.
While agents and carriers are struggling to attract new business, golf course owners are benefiting from the soft market, which is in some parts of the country has lowered premiums significantly, said Fran Coulter, president of Fairway Underwriters in Lowell, Mass., a wholesaler specializing in package policies for golf courses.
Premiums are “very price competitive,” right now, Coulter said, explaining that the price has a lot to do not only with the commercial insurance market, but also with the number of new companies that have ventured into the market for golf courses and country clubs during the past half-decade.
“If I was an agent, would I target golf courses? Probably not,” he said. “And the reason for that is everyone else is. Every company has a golf course program, and it’s becoming like a (business owner’s policy) in that everyone has one to offer.”
Michael DeMarco, executive vice president of Venture Program’s Preferred Club Program, agreed. “In a soft market like this, companies tend to look for programs like those for golf courses. They have seen the success companies like Chubb and AIG and Travelers have had, and want to get into the market.”
In the past few years, carriers such as Philadelphia Insurance Cos., Harleysville Insurance Co. and Safeco have intensified their efforts to gain a share of the golf insurance market. Meanwhile, longer-tenured players in the market have bulked up their policy forms and increased services such as risk control.
And they should, said Herridge, the agent from Texas. “What’s unique about golf courses is they are a good risk from an insurance standpoint. They don’t make a claim for every little thing because they have maintenance crews and if something happens, they fix it. They tend to wait until bigger claims. But those claims tend to be few and far between.”
Severity, rather than frequency, is the bigger concern with claims when it comes to golf courses and country clubs. Consequently, carriers that focus on serving the golf industry tend to emphasize their value-added loss and risk programs, particularly during down cycles like this one.
“Risk control is a really important part of servicing this market,” said Tom Duggins, the Atlanta-based marketing director of national programs for Travelers. “It’s a very important way to compete. When we go to trade shows, now, we bring a risk control person with us. They’re the ones that everyone ends up waiting to talk to.”
Part of the demand for risk control is being driven by the changing environment of golf club houses. As rounds-played have stagnated, a lot of clubs have ventured into providing less traditional clubhouse services — such as pools, waterslides, daycare and event hosting — and have consequently found themselves facing less traditional risks.
“It’s a little bit of everything,” Duggins said. “Restaurants? Country clubs have them. Water slides? Have ’em. Parties for non-members? Have ’em. So the need to better evaluate those risks is big.”
Of course, there are normal, day-to-day hazards on the course, said Kevin Kullman, Philadelphia-based assistant vice president in charge of the golf program for Chubb Commercial Insurance.
“Like any other commercial building, fire, wind and water are a big concern for claims costs,” he said. “There are a lot of carts stored on the premises, too, and that can occasionally pose a problem in terms of electrical capacity.”
There’s even an electrical hazard unique to golf courses: exponentially inflated claims that stem from lightning strikes.
Most golf courses use a computer-controlled, satellite-linked irrigation system that — when paired with the extensive network of pipes and wiring — can be highly vulnerable to a ground lightning strike, said Randy Watts, a senior risk engineer for Chubb based in Harrisburg, Pa. If grounded improperly, these systems can create major claims. That’s because repairing the equipment requires closing holes — a potentially large loss-of-use claim — and digging up fairways.
“Some of the values that we have seen in terms of claims can be in the $50,000 to $60,000 range,” Watts said. “We found that the average cost of when we have an irrigation system hit by lighting is $16,000. For comparison, when lightning strikes a building, the claims average $10,000.”
Watts, Smith and Duggins agreed that the risk control programs are a key piece of client retention, as far as insurance for golf courses goes.
Despite the difficulties facing the industry, agents and broker specializing in golf insurance still say the programs they offer will continue to be profitable books of business and will outlast short-term hiccups facing the sport.
“Right now, golf is just really feeling the effects of real estate market,” said Chubb’s Kullman. “But golf as (a) leisure activity isn’t going away, and you have a built-in interest in the sport. I think that will continue and it’s going to grow.”
Herridge of Texas added, “Although there have been some courses that have ended up being sold to land developers, I think that golf insurance will continue to be a good market for agents.”
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