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Risk management the key to way out of attractions industry’s insurance crisis

Risk management the key to way out of attractions industry’s insurance crisis
November 18, 2021

The reported insurance crisis in Australia’s attractions industry and related sectors could be reduced if operators adopted higher standards of risk management according to Adrian Gamble, General Manager at specialist Australian underwriting agency Coversure Pty Ltd.

Explaining that the reason insurers have pulled out of the market “is that they are not making money”, Gamble advises “over recent years there have just been too many payouts resulting from claims in the industry”.

Citing insurers having to pay out multiple claims in the “tens of thousands of dollars” resulting from incidents over recent years, Gamble explains "many operators rely on outdated risk management procedures and, with the world having moved on, they need to adopt an active approach to risk management.

“While over the last year it has frequently been said that it is impossible to insure class 4 and 5 rides, that is not true, class 4 and 5 rides are something we underwrite every day … but we insist on operators undertaking thorough and ongoing risk assessments.”

Gamble’s comments follow Nine Entertainment media’s A Current Affair show last week addressing the issue, in a feature ‘Amusement park operators priced out by insurance hikes’.

In ‘tabloid TV’ style the show suggested that “Luna Park (Sydney) could close, the (Sydney) Royal Easter Show is in doubt, and it could be the end of the jumping castle”.

Highlighting the rising cost of insurance in the attractions industry, A Current Affair reported that “insurance hikes are pricing amusement rides and their operators out of the market”.

Other reports have recently referred to one attraction that apparently had to close because of the high cost of insurance.

However, Australasian Leisure Management understands that the operator was offered insurance subject to the adoption of improved risk management practices. This included, as an example, having a lifeguard at the top of a waterslide to supervise guests - a change the operator declined to adopt, as a result of which his insurance was declined.

In this type of situation, Gamble explains “if an operator chooses not to follow risk management and wants to carry on activities that are not consistent with what we set out to offer, we cannot insure them.

“Operators have to want to reach the highest standards of risk management.

“Recent years have seen too many incidents were avoidable risks have led to incidents and the industry needs to reach ever higher standards.

“Operators must constantly assess risk, commit to safety processes and procedures, educate and train their staff and underpin this with technology.

“Examples of this include installing CCTV cameras to keep a record of operations that can be referred to if a claim arises - in some case years down the track.”

Emerging prior to COVID-19, rising insurance costs have placed additional strain on industry operators through the pandemic. To combat this, the Australian Amusement, Leisure and Recreation Association (AALARA) has looked to establish a Discretionary Mutual Fund (DMF).

In moving forward with this, the Australian Small Business and Family Enterprise Ombudsman, Bruce Billson, continues to explores whether a DMF can be a durable solution.


A Current Affair’s ‘Amusement park operators priced out by insurance hikes’ report.
Referred to as ‘Damian De John’ in the report, Damian De Jong is Director of Melbourne-based Action Events.

However, Gamble points out that a DMF would have limitations, explaining “a DMF is not insurance, but offers 'discretionary cover' in the form of an insurance-like product owned by a legally owned company and run by industry members (through a Board of Directors).”

“Even if a DMF does attract the funds to get off the ground it will still be critical for risk management practices improve as, the Fund will need to minimise claims and payouts.

“And if the DMF doesn’t have enough funds it will have to secure them through reinsurance.””

Gamble is also critical of site owners, venues and showgrounds demanding operators have $20 million in public liability.

He goes on to say “so that insurance remains available and for the industry to deliver the highest standards of public safety and inspire guest confidence the industry must look to constantly improve its standards and should look to national risk management training that goes beyond statutory requirements and focusses on hazard identification and risk reduction.”

In response to the A Current Affair report, the Insurance Council of Australia issued the following statement:

“The Insurance Council has initiated a rigorous and collaborative process which includes the amusement park sector to find viable market solutions to the problems regarding availability and affordability of public liability insurance for some small businesses.

“Local and state governments, not insurers, set minimum sum insured requirements (which can be in the order of $20 million) under public liability policies for amusement park businesses. While insurers have no involvement in determining these requirements, we support the use of appropriate commercial coverage limits to allow for a greater level of insurance affordability. 

“Discretionary Mutual Funds are not a traditional insurance product with very few active in Australia.

Where there are no commercial general insurance products provided in a market, DMFs may have a role to play as an alternative. DMF's members who are also its owners are able to submit a claim which may be approved at the discretion of the DMF.

“However, in order to be sustainable and viable long term, DMFs must be carefully designed and established to ensure adequate resources exist to cover claims of the members of the DMF. The Insurance Council supports the Small Business Ombudsman's consultation process which seeks to fully canvass the benefits, challenges and alternatives to DMFs.”

Image: The Slingshot, a significant attraction at past editions of the Sydney Royal Easter Show, was not at the event this year.

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