ASC INSURANCE REPORT Cont...

Most sports noted that they would be willing to consider a group buying or pooling scheme.  A pooling scheme may have advantages for smaller sports in that by increasing the number of insured organisations, distortions get less likely.  However it should be noted that once this has been achieved there would, in theory, be no benefit of additional members as the overall incident rate does not change.  

A self-managed mutual fund would allow the sports to have ownership of the program and control over benefits and claims management however traditional insurance would also be required for when claims reached a certain level and in order for the premium pool to be of a sufficient size a number for sports would need to enter such a scheme.  There are many steps, however, prior to establishing such a scheme. The first is the collection of detailed data in relation to claims.  This should be done over a three year time period and be linked to any improvements in risk management.  Following the collation of the data it would need to be actuarially evaluated to establish whether such a scheme would be viable.  If proved to be viable then there would be significant set up costs in respect of infrastructure, including the selection of an outside administrator.   It should also be noted that such schemes have the potential to make significant losses which it is assumed the sports would need to fund, although as not for profit organisations most do not have significant reserves to fund any losses.

The single biggest initiative that the sports can adopt to reduce their premiums is to have an effective risk management program (including policies to mitigate risk) throughout all levels of their sport.  Only 31% of the NSOs indicated that they have a documented risk management program in place and of those only 44% extended across all levels of the sport. 

Page  2

The sports need to collect data to be able to evaluate if the risk management programs are working and then present the findings to the insurance companies.  Whilst a significant number of organisations commented that they were considering a risk management program the main obstacles noted were lack of time and expertise.

Based on the findings from this review we make the following suggestions and recommendations for the ASC:

1. To encourage the sports to take a more active interest and hands-on approach to insurance requirements rather than assuming that their brokers are adequately dealing with it;

2. To prepare guidelines as to what insurance and terms of policies the sports should have (eg a checklist to ensure that 'member to member' ;liability is included) and to provide training and education in respect of insurance issues.  This will require significant education of the sports, including down to the operating level that arranges its own insurance;

3. To encourage better communication with the insurance companies.  This will help the insurance companies to better understand the sports industry and to help dispel any unfounded beliefs that it is a high risk industry.  In addition the progress made on risk management can be communicated and information sought from the insurers as to what they require in order to assist with the reduction in premiums;

                                         Continue...