Group Liability Purchasing Programs

 Buying groups, cooperatives, and stores with bulk items from office supplies to advertising have proven to be sensible ways of saving money.  Now America’s entertainment industry is realizing that liability insurance programs can also be purchased more economically at "group" rates.

Since there are only a few insurance purchasing groups available for the entertainment industry, the advantages and availability of these groups is still relatively unknown to many equestrians.  During the last liability insurance crisis a little-known law called the Risk Retention Act of 1986 was passed by Congress to allow homogeneous entities to buy insurance at group rates. Considering the advantages of insurance purchasing groups for the equine industry, it’s surprising more isn’t known about them.

Lower prices and rate stability are two of the greatest benefits of insurance purchasing groups. Since venues, event sponsors and promoters are participating as members of a large group there is greater predictability created in the pricing of premiums. A single stable, buying its own separate liability policy, would present a much higher degree of uncertainty about risks and claims, so it would pay higher premiums. A primary liability policy generally has a $1 million limit. If a single stable’s premium is $5,000, it is subject to the limits of a $1 million claim. With a group plan, however, where there may be $10 million in premiums as a whole, a single large loss doesn’t have such a huge financial effect on individual premiums.

Group purchasing allows more stability in pricing. An efficiently managed purchasing group will accurately allocate group premiums to individual participating equine businesses based on their overall loss experience. Anyone can have a single large claim, but some businesses may show a series of claims or a pattern of excessive claims. A stable with a continuing poor loss history will not be subsidized by the group.  Members are rarely asked to leave a group, but heavy losses will mean that their premiums will increase, perhaps dramatically.

In today’s insurance market that favors buyers, it pays for equestrian businesses to look at alternatives. Group coverage plans should be high on their list of options to explore. With purchasing groups, trainers and stables are also able to negotiate more favorable rates for higher limits of liability insurance. Some groups are able to offer excess liability limits as high as $20 million. Pricing for these groups is similar or better than premiums for the largest equine operations.

Purchasing groups are also able to customize their pricing methods to fit the specific industry. For the entertainment industry, utilizing standardized rating methods as the basis for setting premiums not only eliminates the uncertainty of audits after policies expire, but also better matches the risk with the premium. Entertainment and recreation businesses without the benefit of a purchasing group will be usually rated on receipts. Those facilities will pay more premium if they are able to charge more for their services. This has a greater impact on better managed stables that are able to command a higher price from their customers.

Another advantage of purchasing groups to entertainment business is the insurer’s familiarity with the risks associated with entertainment and recreation. Risks such as those found with theaters, concerts, event promoters, meeting facilities, and stadiums are routinely dealt with by groups who can offer higher limits, broader coverage, and lower premiums. Many standard insurance policies in the industry still have restrictive coverage for exposures such as therapeutic riding and special events, at a time when they are becoming more common activities.

Two additional elements important to those responsible for ferreting out the best insurance coverage possible for the entertainment industry are loss control programs and professional claims management. Because purchasing groups specialize in a particular industry they are able to maintain a higher standard of service customized to that special market niche.

If Insured's do have claims, the claims services available from a purchasing group are specialized for the  industry. The groups will associate with third party claims administrators who are able to customize their services. These third party administrators will usually offer adjusters with greater experience who are held more accountable than insurance company claim departments.

Those are only a few of the reasons to examine the advantage of liability insurance groups for the equine industry—potentially lower rates, higher limits, broader coverage, specialized service for a specific group of clients, and professional claims handling by specialists in the industry.