Principal Consultant Simon Weatherill has spent the last 20 years developing the world renowned Melbourne Sports Hub, as former Chief Executive Officer of the State Sports Centres Trust…read more
Ombudsman’s insurance crisis report says ‘the show must go on’
The Australian Small Business and Family Enterprise Ombudsman, Bruce Billson, has today released an interim report into whether the creation of a Discretionary Mutual Fund (DMF) would be able to solve the insurance crisis facing Australia’s amusement, attractions and tourism industry.
Releasing The Show Must Go On interim report, Billson commented “there is a clear and present danger facing the amusement and recreation sector because an inability for these businesses to get insurance cover means that many of the attractions people know and love won’t be able to operate.
“The lack of insurance coverage could lead to the closure of businesses in the amusement and leisure sector, significant job losses - particularly in regional areas, stranded assets and loss of economic activity generated by metro and regional shows and amusement parks.”
The interim report explores whether a Discretionary Mutual Fund (DMF) can be a durable solution and discusses required legislative reform by states and territories to ensure it is ‘fit for purpose’. It also highlights the need for DMF to be recognised and accepted as a suitable solution by councils and showground managers.
Advising that said the interim report seeks urgent feedback from all stakeholders by 3rd November to the ideas and questions raised in the report, Billson explained “we are calling for submissions from those in the industry so we can further understand any issues before we release a final report to government
“As businesses look to re-open after lockdowns, this issue is a shattering blow for those small and family businesses in the amusement, leisure and recreation sector which will be forced to stay shut because they can’t get insurance.
“There is a very real possibility shows won’t go on - something has to be done for the show to go on. A DMF may represent the only workable solution.”
The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) has been reviewing a proposal by the Australian Amusement, Leisure and Recreation Association (AALARA) to establish a DMF as a solution to the critical and immediate need for insurance in the sector.
The interim report found the lack of affordable insurance was not the fault of the amusement industry but due to a “hardening” in the global insurance market. Very few insurers are willing to insure the industry, and premiums - when available - had risen by as much as 200%.
The report states “in many instances the policy is priced such that it may as well not exist because small operators have no capacity to pay for the cover they need to continue operating,” the report says.
“In the case of the amusement, leisure and recreation sector, there isn’t an offering that provides full coverage.”
Public liability insurance coverage is a legal requirement for the operation of rides at showgrounds and fixed installations, both through contractual obligations and obligations imposed on councils and other landowners by state and territory governments.
DMFs operate to provide cover on a discretionary basis to a group of individuals or organisations that have a similar risk profile. Under a DMF, members who meet requirements would have access to a certificate of protection, enabling them to operate these amusement rides.
Click here to view The Show Must Go On interim report and overview
Submissions should be sent by COB 3rd November 2021 to: email@example.com
Report Overview - October 2021
The Show Must Go On: Is a discretionary mutual fund the solution to the insurance crisis facing Australia’s amusement, leisure, and recreation sector?
• The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) conducted a self-generated inquiry in 2020 into the insurance market for small business, finding significant dysfunction for several sectors.
• The Amusement, Leisure, and Recreation Association (AALARA) submitted to that review noting that many members were facing closure and/or stranded assets due to the unavailability of insurance.
• AALARA then approached the Federal Government to seek support to establish a discretionary mutual fund (DMF).
• A DMF suits the industry represented by AALARA.
• A DMF may be a suitable way to address the current insurance crisis facing the industry.
• The suitability and durability of a DMF solution for the sector will depend heavily on:
o support for legislative reform from states and territories, and willingness to accept the solution by councils and land/showground managers.
o the final makeup of the membership.
o the cost of premiums and reinsurance, the management of the DMF and any management costs, and the size of any claims in the first years of operation.
About Discretionary Mutual Funds (DMFs)
• DMFs operate to provide risk cover on a discretionary basis to a group of individuals or organisations, through a ‘Certificate of Protection’.
• DMFs do not offer an insurance product: o Under traditional insurance coverage, a policy holder has a contractual right to have their claim paid upon meeting the policy’s terms and conditions.
o Under DMF coverage, the DMF’s members are entitled to submit a claim for indemnity to the DMF’s board, which may or may not approve the claim, at its discretion.
Benefits of a DMF
• DMFs are often created to address market failure or significant dysfunction.
• DMF members are accepted or rejected by the Directors, who have significant industry knowledge, allowing them to more closely monitor risk profiles of those covered.
• DMF membership can also be predicated on compliance with a range of risk management and training protocols to lessen the risk profile across the membership.
• Because DMFs do not have shareholders to make returns to, they are able to operate on slim margins, potentially reducing costs to members.
• DMFs can offer additional services to their members, adding value over the protection offered.
• The DMF should be fully funded for the first year, requiring a reasonable amount of start-up capital.
• Many pieces of state, territory, and local government legislation and regulation require businesses operating on their land to hold insurance, which a DMF cannot offer.
o To address this, these pieces of legislation and regulation could be amended to allow membership of a DMF in lieu of insurance where insurance is not available, or the market is significantly dysfunctional.
• A DMF should be established in such a way to ensure its ongoing durability.
• Consumers may have concerns about the discretionary nature of coverage.
• A range of alternative options have been considered to address this issue, including a captive, self-insurance, group insurance schemes, a reinsurance pool, tort reform to address risks (‘the New Zealand solution’), implementation of a National Injury Insurance Scheme, and hybrid models.
• A recent entrant to the market has been Coversure, a respected UK-based insurer.
Here, The Show Must Go On interim report claims that Coversure "only provides $10 million coverage (half of the $20 million required by most legislation/regulation); that industry is reporting premiums of at least double that they were previously paying (and) may not cover the whole market".
However, Australasian Leisure Management understands that statements in relation to Coversure may not be accurate.
Article amended, 11am 28th October 2021, to reflect that references to Coversure in The Show Must Go On interim report may not be correct.
Image: The Barra Fun Park in Townsville was reportedly closed as a result of being unable to secure insurance.
18th October 2021 - 2021 Royal Hobart Show to proceed
15th October 2021 - Live music sector continues call for national event insurance scheme
2nd October 2021 - 2021 Perth Royal Show organisers delighted with attendance levels
28th September 2021 - AALARA President defends Adventure World in enforcing ride weight restrictions
11th August 2021 - Australian live entertainment groups call for federal insurance guarantee
2nd August 2021 - AALARA works through solution to insurance market challenges
12th February 2021 - Inability to secure insurance forces closure of Barra Fun Park in Townsville
2nd February 2021 - Tasmanian Government helps tourism attractions with insurance contributions
14th January 2021 - QTIC to survey operators on insurance crisis
30th December 2020 - AALARA releases ‘urgent request for the survival of our industry’
18th November 2020 - AALARA takes action as attractions operators face public liability issues
16th November 2020 - Industry operators impacted by rising insurance premiums
12th June 2020 - Insurance refusals impacting adventure tourism operators
15th September 2018 - Commercial trampoline centre operators struggle to secure insurance
30th December 2014 - Queensland entrepreneur launches new adventure tourism insurance company
Asking a small favour
We hope that you value the news that we publish so while you're here can we ask for your support?
The news we publish at www.ausleisure.com.au is independent, credible (we hope) and free for you to access, with no pay walls and no annoying pop-up ads.
However, as an independent publisher, can we ask for you to support us by subscribing to the printed Australasian Leisure Management magazine - if you don't already do so.
Published bi-monthly since 1997, the printed Australasian Leisure Management differs from this website in that it publishes longer, in-depth and analytical features covering aquatics, attractions, entertainment, events, fitness, parks, recreation, sport, tourism and venues management.
Subscriptions cost just $90 a year.
Click here to subscribe.
The Complete Guide to Leisure Industry Products & Services.
SLE Worldwide Australia is a Managing General Underwriter specialising in insuring risks in the world of Sports, Leisure and Entertainment. Be it relaxing, playing, organising or watching sports,…read more
Fun Wheels Pty Ltd are the premium dealer in Australasia for the Dutch company BERG’s commercial and domestic products. Our flagship product is their revolutionary pedal go-kart – the…read more
Tim Batt Water Solutions are at the very forefront of the commercial aquatic business in Australia, with over 30 years specific experience supplying and installing chemical control and dosing…read more
Founded in 1961, Myrtha Pools® quickly became Italy’s première swimming pool company, and has since grown into one of the world's leading swimming pool construction…read more
Centaman has been a market leader in Enterprise Software Solutions for the leisure and recreation industry and both profit and not-for-profit attractions since 1991. It offers a wide range of software…read more
We are Aussie Strength. The ultimate supplier for Commercial Gym Equipment that's built to deliver in the toughest environments. From USA-Built hardcore weight training equipment from Arsenal…read more
BH Fitness, part of the long-standing and iconic bike manufacturer BH Group, is a global leader in fitness equipment for both Commercial and Home markets. The company, with the headquarters based in…read more
get listed with our suppliers directory
Get your business noticed in our targeted directory. Viewed by 10,000 industry professionals per week!