“With the economy in recession, the outlook for insurers is mixed” says Craig Smith Director of John Ansell & Partners, and British Activity Holidays Insurance Service (BAHIS scheme) for over 27 years. “For some, a run of strong performance that began in 2001 is coming to an end with possible consequences for the gym, health and fitness centre industry.”
Fortunately most insurance companies have avoided investing in assets that have gone toxic for banks, and remain in fairly good shape, nevertheless there is evidence business models are being restructured and some are still far from fighting fit
In this economic downturn risks are being reappraised, costs for insurers are rising causing them to look twice at unprofitable areas or restrict the cover offered. What this means for the fitness industry is that gyms, health clubs and fitness centres who find their membership falling away and may be considering diversifying to attract market share, eg into beauty treatments, holding activities away from the premises or involving children, may find, their progress is hampered as insurers become less obliging and refuse to cover some of these extra activities.
“We frequently come across policies where the gym owner thinks they have all their needs covered only to find when you look at the small print this not to be the case. For instance archery, clay pigeon shooting, motorised activities etc, are generally not included as standard, likewise compensation for bodily injury following wrongful advice or instruction is normally excluded from a liability policy but is essential to a gym or health club operation, that employs personal trainers.” comments Craig.
There is also a knock on effect on claims. The costs tends to rise and we are seeing an uplift in the incidence of reported accidents or incidents, with more thefts, and malicious damage and personal instructors being sued for wrongful advice coming through. There can also be a temptation to exaggerate the loss or for the most unscrupulous claimant, to invent “phantom injuries”. (One insurer has identified that between 1st and 2nd quarter of this year fraudulent claims increased by more than 13%). As a consequence insurers have to divert more resources into dealing, inevitably pushing up their costs - and ultimately causing premiums to rise.
For businesses already operating under very tight margins with little or no capacity to withstand serious losses, (a prospect enough to raise anybody’s blood pressure), the current challenging economic climate and need for financial protection is even more critical. At times like these, those who can least afford to lose financially are most at risk. There is understandably a temptation to cut costs by reducing insurance protection. Yet the cost of insurance can be comparatively modest. It really is a false economy not to have the peace of mind and financial security that it can provide.
So what can a gym or fitness centre do to “tone up” their insurance protection. Well, the good news is that not every insurer is “out of condition” and some are in the enviable position of remaining strong, stable and well financed. They continue to cover the more esoteric risks and adopt a considered underwriting approach.
Talk to your adviser, there are still good deals to be had involving, insurers with A rated security, industry expertise, who offer a product providing the best possible protection, at a realistic price.
“2010 will see some challenges for UK insurers but with good quality information, and a willingness to demonstrate a well managed risk, and using a bit of muscle it should be possible to strengthen and reinvigorate your insurance programme and ensure you remain in good shape for the year ahead.