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Feature - Fun at a premium

Insurance industry woes put the squeeze on adventure activities

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"In the big scheme of things, insurance is such a small percentage of our operating costs. We have to buy and maintain machines, pay staff, pay for office space, and things like that," she said. "The cost is not outrageous as the cost of doing business goes, and it’s just one of those things that we absolutely have to have.

"We haven’t had any claims yet in all our years of doing business, but just in case."

A broker’s perspective

Don Cochrane of Sea to Sky Insurance Services Ltd. provides insurance to a handful companies in the adventure tourism market, but says he is careful to balance those policies with more secure sources.

The entire insurance industry, which revolves around several large companies, is dictated almost entirely by those companies. As a result, the industry as a whole is shying away from high-risk investments and customers.

In addition, the reinsurance industry – a handful of companies that insure the insurers against large claims – are watching out for their well-being as well.

"We (insurance agents) don’t increase the rates, the insurance companies increase the rates," Cochrane explained. "The industry is all about capacity, as in our capacity to pay out on claims, and that capacity took a hit recently. Now (the insurance industry) is in a position where they can’t attract enough investment income."

According to Cochrane, "The insurance companies are now starting to get rid of what they would classify as undesirable risks in their portfolios. It was a business decision. One company I know only wanted to do homeowner insurance, not commercial, because that was considered a safer investment."

A strong portfolio is one that spreads out the risk as much as possible. Because of the perception that adventure tourism is risky, and there have been a few large payouts by the industry in recent years, Cochrane says some companies are looking at insurance for adventure companies as a losing proposition. While they do have good safety records, Cochrane says they reached this decision by looking at the potential for injuries and death, and how high the payouts might be.

While insurance increased around 20 per cent for various policies, insurance prices for adventure companies have doubled and tripled because brokers and insurance companies are worried about the high cost of claims, said Cochrane.

The light at the end of the tunnel

There are signs that the insurance company is poised to make a recovery in the next few years, and that things will improve for customers once the pool of capital has been rebuilt.