IEA has been providing insurance service to the Australian sports industry since 1978.  We opened our first office in Melbourne and within a couple of years had established offices in every state capital, as we continue to do today.  During those 23 years we have witnessed many changes in the sports industry, but never has the speed of change been as rapid as it is now.  Insurance could be perceived to be a traditional industry which responds slowly to change, but insurance too must move with the times.

In 1978 sporting organisations did not regard insurance with the high priority they do today.  The incidence of litigation was nowhere near as high as it is now and it is fair to say that in past years there was a greater acceptance that injury was an inherent risk of participation in sport.  The insurance cover which was available was not specific to the requirements of the sports industry and IEA in fact led the way in designing insurance products which did address those specific needs.

As stated, there has been enormous change since 1978, but in regard to insurance coverage most of that change has come in the area of liability insurance.  Fuelled by litigation trends, we now see Professional Indemnity, Directors and Officers, Employer Practices, Legal Expense and others, in addition to the more familiar Public Liability, Being included in the sporting organisation's insurance portfolio.  Personal Accident (Sports Injury) insurance protection has remained largely unchanged during this period, with Death and Permanent Disability, Non-Medicare medical expenses and Loss of Income benefits still providing the basis of the cover provided.

So how is sports insurance perceived by the stakeholders involved?

Sports administrators see it as costly and causing administration they could do without.  They find policy wordings difficult to understand and in many cases not giving cover in areas where they see a need for protection.  Insurance is not seen as providing a total solution to the sport or it's participants.

Insurance companies see sports insurance as an unprofitable line of business that has high administrative costs.  It is very labour intensive due to the high volume of claims incurred.  Sports insurance does not have a good record in terms of underwriting result for insurers, which is why there is a limited number of insurers prepared to write sports business.

To better understand the view taken by insurers let's look at how an insurance company determines its result for an insurance account.  A simplified methodology for calculating the profit or loss is as follows:-

• Premium received (prior to government charges)

• Less claims incurred

• Less provision for claims incurred but not reported (see not 1 below)

• Less administration expenses (see note 2 below)

• Equals the bottom line result for the insurance company

Note 1: Insurers have to provide for claims which have been incurred but at the time of review have not been reported.  This is particularly relevant in the liability area where often a great deal of time will elapse between the time of the incident and the claim being reported and subsequently settled.

Note 2: As stated previously, due to the high volume of claims sports insurance has higher administration expenses than most other classes of insurance.

                                                                     ....Continued