By Leroy Larson Cooter, Larson & Stephens LaMesa, Calif.

From AA&B August 1985

In the last decade, gymnastics has become one of the most popular competitive sports for young women. Last summer’s Olympics did nothing to diminish the sport’s appeal. With gold-medal winner Mary Lou Retton now beaming at them from cereal boxes and other products, it’s no wonder that many girls are asking their parents for a pair of leotards and a membership in a gymnastics club.

Insuring these clubs has become a specialty for our agency, and today we write gymnastics training facilities throughout California. I became involved in this market in the early 1970’s when my daughter began taking gymnastics classes. I discovered that there were few insurance programs specifically written for this kind of business. At my urging, a standard carrier we represented developed one. In the years since, I’ve placed this book of business with three or four standard companies, only to have them eventually lose interest in it. For the last three years, I’ve found stable home for this business in the excess-surplus market, using Rhulen Agency as an intermediary. Our gymnastics clubs constitute our only sizable block of specialty business. Our experience, I think, demonstrates how a typical independent agency can use E-S and specialty facilities to provide customized coverage for a profitable marketing niche it has discovered.

Our insureds generally are small, private gymnastics schools and clubs. A few offer jazzercise classes to adults as a sideline, but most concentrate exclusively on teaching gymnastics to children. Some specialize by age groups. One school may accept children up to the age of 6; another may offer training to those older than 10. The vast majority of clubs train girls. Men’s gymnastics has not caught on with the general public nearly as much as women’s gymnastics has.

Most of the clubs and schools are started by former gymnasts. They may have a few employees, buy many have none at all outside of the owner and his or her spouse. The training at the facilities varies in its intensity. A few clubs are geared toward developing gymnasts for state even national competition. Most, however, are recreational facilities at which children can be introduced to gymnastics under professional guidance. If, after a few years, a child shows signs of becoming an exceptional gymnast, the owner operator may advise her parents to transfer the child to a club offering a higher level of competitive training.

Gymnastics clubs typically have $10,000 to $20,000 worth of property, which we insure with inland marine floaters. The gymnastics equipment itself is bulky and not very attractive to would-be thieves. We have had a few losses involving the disappearance of video cameras and sound equipment. Although I’ve obtained property floaters from E-S and specialty markets in the past, I’m currently using a standard company to provide this coverage.

We secure workers’ compensation insurance for a small percentage of our gymnastics clubs. If a club has just a couple of employees, it usually obtains coverage through the state workers’ compensation fund, which competes with private insurers in California. If the club has several employees, the workers’ compensation premiums might become large enough for a private insurer to offer coverage.

The only major claim any of our gymnastics clubs have experienced, incidentally, was a workers’ compensation loss. Several years ago, an employee of one of our insureds severed his spinal cord in a mishap on a trampoline. We’ve had an ongoing workers’ comp claim ever since.

The premises and operation liability exposure is the principal risk that must be addressed in insuring gymnastics clubs. We provide our insureds with a broad form CGL that has several modifications designed for this class of business. One of the most significant provides liability coverage for incidents involving a non-owned auto. This provision protects the club from any liability that might arise in connection with the transport of members to competitions, etc. The club itself does not do the transporting. I emphasize to insureds that they mush not use their own vans, cars or other vehicles for this purpose. The required business auto coverage would be extremely expensive. Instead, the club should direct parents to make their own arrangements for transporting children to meets. Should a child be injured en route to or from such an event, the club’s specially modified CGL would respond to any charges of liability imputed to the club.

Most of the clubs rent facilities. A landlord customarily is named as an additional insured on a club’s liability policy.

The market for gymnastics liability insurance has contracted significantly primarily because of diminished capacity among reinsurers. A year ago, we had no problem securing $1 million of liability coverage for gymnastics clubs. I’m told such limits will be available again later this year; but at present, we can provide no more than $500,000 of coverage. Several years ago, insurers would not accept clubs having trampolines, but that’s no longer the case. We currently can obtain liability insurance for them at no additional charge.

Rates for gymnastics liability insurance, once based primarily on the size of a club’s premises, now usually are determined by the number of members the club has. We urge our insureds to not exceed an 8:1 ratio of students to instructors. Most keep within that ratio simply out of common sense. It’s much easier to maintain control of a class, impart training and instill discipline when there are fewer students to work with.

Our loss experience with gymnastics liability insurance has been quite good. During the 14 years we’ve been working with clubs, few have reported liability claims. None of these losses have exceeded $10,000.

Referrals are a major source of new gymnastics-club accounts, just as they are when writing any specialized market. Regardless of whether we are referred to a prospect or vice versa, most of the business between us is transacted over the telephone. Among the underwriting data we obtain from prospects are the legal definition of their business (partnership, corporation, etc.); the status of their facilities (owned or rented); the size, age and construction characteristics of their premises; the owner’s experience in gymnastics instruction; the number and experience of any employees; the number of students the facility accepts; the club’s loss history; and the frequency with which the club participates in activities away from the club’s premises.

We rate applications in-house and deliver quotes to prospects over the telephone. We have binding authority, but we always notify Rhulen immediately when we use it. If a prospect wants to put coverage into effect immediately, we tell him or her that we must receive payment the next day. Clients remit premiums to our agency. If they so desire, we can arrange premium financing with AFCO or other outside sources. Premium transactions between us and Rhulen are conducted on a accounts-current basis.

The claims for this business – what few there are – are handled by Rhulen representatives located throughout the state. Outside of taking the preliminary information from the client and reporting the loss to Rhulen, our involvement in claims handling is minimal.

Premiums for our gymnastics-club accounts range from about $1,500 to $3,500. Most of the premium, of course, is for the gymnastics liability coverage. The agency’s commission on this business is comparable to that on private auto insurance – about 15%.

That’s the story of how a chance encounter with an emerging sport led to a large, profitable book of business for our agency. The customized coverages available from E-S and specialty companies have been an important part of our success in developing the gymnastics-club niche. Thanks to these markets and to Rhulen, our intermediary, we score a “10” with our clients every time.