The 1 Reason the 5%-to-9% of Your Budget Spent on Insurance Will Rise

What happens when big insurers like AIG cut off the NFL and Pop Warner?  In June, 2016, the New York Post reported the $61 billion insurance giant AIG dumped the NFL, saying it would not write any more policies.  Clearly, AIG is trying to avoid any part of the $1+ billion lawsuit liability from the players suing the NFL for knowingly withholding what it knew about the damaging effects of head trauma.  AIG wants to force the NFL to pay the bill, and not have to share the tab.  Strangely, while maintaining its coverage for USA Football’s Heads-Up Football program and its 2016 Protection Tour for 7- to 14-year-old players, AIG also pulled its coverage for Pop Warner, which is not, as far as we know, facing a huge NFL-type lawsuit from former players.

What’s going on?  Is AIG’s action “concussion-omics,” a tactic to avoid the liability associated with chronic traumatic encephalopathy (CTE) by claiming it would never have covered the NFL if it knew what the NFL knew about CTE?  After all, AIG’s competitor Aon, through its subsidiary K&K Insurance, seems to be comfortable with the risk.  As soon as AIG bowed out, K&K rushed in to provide Pop Warner up to $2 million policies, including coverage for head trauma.

Should you be worried if you are buying insurance for girls’ soccer, since there is some evidence that concussion levels there are as high as tackle football?  Our how about girls’ lacrosse, which starting next year will require headgear because there have been many reported concussions?  Or baseball, where pitchers and batters regularly get beaned?

The short answer is:  yes.   Truth is, insurance companies make money when premiums exceed overhead and payouts.  And payouts come in several flavors.  One flavor is legitimate claims, such as when someone holding a life insurance policy dies.  Another is fraud, as in when someone fakes a car accident to get the insurance payment.  And yet another is the cost to defend lawsuits, which come in far greater numbers when public outrage about a topic rises—exactly what is happening now with CTE and “concussion-omics.”

As a youth league manager, you are spending somewhere between 5% and 9% of your annual budget on insurance premiums.  If you are like most, you have four types of coverage: i) accident to pay medical bills for injuries, ii) general liability to cover lawsuits and property damage, iii) Director & Officers (aka D&O) to cover mismanagement, and iv) crime to cover embezzlement or theft.

Chances are that you are buying 40% or more of your insurance coverage through one of the national governing body (NGB) plans, such as those offered by AYSO or Little League.  As a rule, the insurers and brokers selling the NGB policies are paying the NGB, which, like AARP, often earn more on insurance fees than they do from membership dues.  But if you are a larger or multi-sport league, you may also have one or more policies from a broker such as K&K or Sadler or another company such as Philadelphia Insurance.   While pricing is now often “banded” by sport and priced on a per-participant basis, buying youth sports league coverage is still pretty complicated.  Unfortunately, no insurance company is now offering simple direct-to-league policies in the same way you can now buy car insurance online.  Still, league managers’ best practice is know that “concussion-omics” will cause a hike in your premiums and a change your carrier or policy.  Stay alert.

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