Camp Insurance Trends — Social Inflation and the Hard Insurance Market

Gaetana De Angelo
May 2020
Camper and staff getting for ropes course

For more than 20 years, the American Camp Association (ACA) Insurance Committee has held an annual roundtable with many of the camp industry insurers and brokers in conjunction with the ACA National Conference. The 2020 Roundtable brought some new things for consideration to the table, but also saw the recurrence of many of the same types of trends we’ve discussed before.

Each year the committee reports out the findings of the roundtable in several ways. At the conference we hold a session called Trending Now and simply report out to the attendees what we learned, infusing the discussion with not only facts, but practical information camps can use to respond to the trends. As many of our members do not have the opportunity to attend the national conference, this article serves as our report to the members at large.

In general, several positive notes came from the roundtable. Keep in mind that each camp is unique. If you are not experiencing the following, take the time to chat with your broker or agent to find out what you can do to improve the processes.

  • Camps are doing a better job of managing outside user groups as evidenced by claims (or lack thereof). This seems to be a product of better contractual wording by camps and proactive questions to brokers or agents about proposed uses.
  • Workers’ compensation premiums have been trending downward. Remember that your camp’s premium is a factor of several things, including payroll and your experience modifier (Mod) factor (which is based on losses). If your payroll and/or experience Mod increases, your premium may increase. Conversely, if your payroll and/or experience Mod decreases, you should expect to see a reduction in premium.
  • Camps appear to be doing a great job of workforce development, especially with such a tough employment market, which helps lead to retention of staff. Still experiencing trouble retaining your staff? ACA’s website offers many products to help you meet your goal of training and retention.

With this roundtable, a new term kept popping up in the discussion — social inflation. Social inflation generally refers to the rising costs of insurance claims resulting from societal views toward increased litigation (injured party feels they are entitled to a large payout), broader contract interpretations, and larger jury awards (juries feel the injured party is entitled to a larger award). As we explore each of the following trends from 2019, you will see how social inflation is causing such a stir in the insurance industry.

Property Losses

Property losses were felt by most of the providers.

  • The wildfire losses in the West created catastrophic problems for camps and insurers.
    • Undervalued and undermaintained buildings/infrastructure resulted in losses far exceeding projections based on policies.
    • Business interruption issues related to smoke, road closures, evacuations, and other factors the camp had no control over.
  • Flood and wind damage losses were also reported. Flood reports generally resulted in a loss of income, largely due to the interruption of business.

The result of these staggering losses will be felt primarily in the West:

  • Reduced limits of coverage at renewal (due to limited availability of reinsurance).
  • Huge premium increases for the coverage you can get — camps can expect to see a 200-percent or higher increase in premium.

What can you do to reduce impact on your operation?

  • Property loss mitigation
    • Have defensible zones; keep leaves and pine needles away from and off buildings and roads (a leaf blower is a good tool).
    • Use noncombustible materials when building/renovating buildings and structures.
    • Install standpipes and pumps in your lakes for use by staff or fire fighters, particularly important if your camp is remote.
    • Keep buildings and equipment properly maintained, including the smaller things like cleaning the lint out of the dryers, removing frayed cords, and using fewer extension cords (and unplugging them after each use).
    • Hire a professional arborist to evaluate your trees — eliminate any dangerous or unhealthy ones before they fall.

Abuse

Barely a day goes by when we don’t see in the news something related to abuse of some sort.

  • Social inflation has created enormous claim awards.
  • The #MeToo movement is manifesting in camps with an increase in peer-to-peer claims.
  • The definition of abuse has broadened — many actions previously seen as harmless are now seen and treated as a threat.

The result in this ever-changing arena:

  • Awards to plaintiffs can be staggeringly high.
  • Survivor statutes are being passed by states and being opened up.
  • Groups of attorneys and venture capitalists are looking to capitalize in states with higher limits — banking on social inflation to create nuclear verdicts (think about the previous asbestos and talcum powder class action suits).
  • Longer tails are creeping into policies, and limits of coverage may be reduced or radically changed.

What can you do to reduce the impact on your operation?

  • Take every claim or concern seriously and investigate it. Every victim, regardless of their age or when they claim the incident occurred, needs to hear, “I believe you; it wasn’t your fault, and I will do what I can to help heal you.” In addition, when an adult comes forward who may have been a victim years ago as a child, you need to let them know that the practices in place today have much higher standards and safeguards.
  • When a child is involved, don’t only report to Child Protective Services, but also to your insurer. This doesn’t mean a full-blown claim — just put them on notice that an incident was reported to you. Failure to do so could result in a loss of coverage.
  • Unstructured time is critical to a child’s growth, but unstructured does not equal unsupervised. Adult staff should still be actively supervising the children and young adults participating. 

Cyber Losses

  • Ransomware claims are the most common and are becoming more prevalent in camps. While they are not exceptionally high-dollar claims compared to the two preceding, they do result in a disruption of services to your business.
  • Social engineering — the most common losses are usually related to a transfer of funds based on a fraudulent exchange of emails requesting funds transfers between a legitimate employee and a third party. The thieves are very good at what they do, and it is hard to detect the fraud unless you have redundant procedures in place to ensure all transfers are validated in several ways. For example, follow up an email request with a phone call to the requestor to be sure they actually sent the email.
  • Using cloud-based services? Did you read that endlessly long contract/agreement? Generally, most cloud-based services stipulate that the user of the service, not the provider, is responsible for any losses.

What can you do to help protect your assets? Speak to your broker or agent and clearly discuss your work practices, especially related to the use of the internet. Don’t assume that because you have cyber coverage you have the right cyber coverage — there are many different forms. If your broker or agent is not aware of your practices, you may not have all the coverage you need to be protected.

Workers’ Compensation

Frequency and severity of injuries that could have been prevented were the most reported. These resulted from things such as staff wearing flip-flops and poorly stepping or tripping, over-participation in camp activities (acting more like a camper than a staff member), and general distracted behavior.

What can you do to help reduce preventable work accidents?

  • Have procedures and practices in place that eliminate the problems and zero tolerance for repeat offenders. No matter how good an employee you think they are, if they repeatedly flaunt the rules, they are costing you money.
  • Make sure all equipment used by staff is properly maintained and used. If there is a safety bar or other safety feature, make sure it is engaged.
  • Watch for fatigue in your staff and adjust schedules as needed to relieve them before they get distracted or cloudy headed.

Other Types of Claims and Trends

  • Vehicles (very similar to last year)
    • Largely related to golf carts, ATVs, and service carts. Be sure to properly train your staff, and, again, zero tolerance for repeat offenders.
    • Social inflation hits in this area also when it comes to auto claims. Training and frequent assessment of drivers is critical to road safety — and if you are still using those old high-capacity vans, make a solid plan to get rid of them. They are a hazard and when involved in accidents will result in injury or death.
  • Slips, trips, and falls — oh no, here comes that social inflation factor again.
  • Deaths — while several deaths were reported last year, two stand out that may hold a high impact on camp operations:
    • A drowning at a non-ACA-accredited camp in California has resulted in the family seeking legislation to regulate all organized camps in California, with a goal to roll out nationwide regulations for all organized camps.
    • A camp running a day care at their facility during the noncamp season suffered the loss of a young child to sudden infant death syndrome (SIDS). While this has not yet resulted in a claim, it is a reminder that all unrelated business that is conducted on your properties could result in a loss that might also impact your camp program. As you look for ways to financially supplement income to your properties, be sure to look at it from every angle and know your potential risk.
  • Medical marijuana, opioids, and anxiety medications — while no claims were reported yet, it is important to keep in mind the following:
    • Policies must state clearly what “under the influence” means and include non-negotiables to protect both the employee and others.
    • Claims related to regulation of staff and the use of such drugs may result in employment practices liability. While many nonprofit camps have this coverage as part of their Directors & Officers policy, many for-profit camps may be missing this important coverage.
    • Policies must be in place for campers also. Many medical practitioners are prohibited by licensing from administering medical marijuana.
    • Don’t forget about marijuana edibles. The use of such products often produces a more intense high and may be accidentally ingested by children.
  • Insect/bat/waterborne illness
    • Check when setting up geocaching locations that bats are not living in the trees above where you have placed the box.
    • Equine encephalitis has been reported in Michigan and the East. This is spread by insects and often starts with flu-like symptoms.

What Is an Insurance Hard Market and How Might it Impact Camps?

An insurance hard market occurs when investments are showing poor or low return, capacity for reinsurance is diminished or not available, and multiple catastrophic losses across lines result in higher premiums and lower coverages. This generally leads to underwriters taking a more conservative approach to risk and suppliers being less inclined to negotiate cost. Undoubtably, the social inflation factor with abuse, auto, and other liability claims along with catastrophic property losses have helped to harden the market.

Property coverage, particularly in the West, will see a huge increase in premium and reduced limits of coverage. While financially this may be overwhelming, be cautious of making any decisions about reducing coverage without fully understanding the impact to your business. If you are considering changing carriers to save money, be sure you are getting comparable coverage, not just similar — the parts that are missing may be the most important.

Liability coverage, especially excess/umbrella coverage, will certainly experience premium increases and reduced limits of coverage. The market will greatly impact premiums for higher limits of coverage, if you are able to get them. This is largely due to the social inflation factor and the staggering number of claims that are presenting in the area of sexual abuse.

Automobile coverage — expect to see some increase in premium, again because of the social inflation factor when it comes to claims awards.

Workers' Compensation coverage is regulated by each state. You should not expect to see any significant increase in premium, all things remaining constant with your payroll and experience Mod. If either or both increases, it will impact your premium upward.

The hard insurance market may also impact other lines and types of insurance that have not been discussed. The focus here is intentionally on insurance types that are most contemplated by camp professionals.

How Can You Be Sure You Have the Right Coverage?

  • Enlist a broker/agent who knows the camp market. If your organization provides other services or has other business practices, be sure your broker/agent understands them as well.
  • Give quality data to your broker/agent. You simply cannot get the best and most efficient coverage if you are not sharing what you do with your broker/agent. Every camp business is unique — give them the information they need to show underwriters you are better than the average risk.
  • Keep your website current. Underwriters love to surf camp websites. If you have old or incorrect information and/or pictures on your website that don’t support what you have presented in your application or renewal packet, it will not result in good will and could negatively impact an underwriting decision or premium.
  • Have strong policies and procedures in place and in practice. Share them with your broker to strengthen your case to the underwriters. Underwriters are wary of low-functioning camps — camps that have low or no policies and procedures or that fail to practice what they do have. You can be sure that if you incur a loss at your camp, you will be asked for your policies and procedures and proof that you are practicing them.
  • At renewal time, don’t just sign on the dotted line because the premium seems right. Have your broker/agent explain to you any changes that may have occurred to your policy. Here are a few questions you need to consider when discussing your policy:
    • Have limits changed?
    • Is coverage replacement cost or actual cost value?
    • Is coverage “claims made” or “occurrence”? (An occurrence policy covers claims resulting from an injury or another event that occurs during the policy term. Coverage depends on the timing of the event. A claims-made policy covers claims that are made during the policy period. In this type of policy, coverage depends on the timing of the claim.)
    • Will increasing my deductible decrease my premium substantially? This is a very important question because once you pass a certain threshold, further increasing the deductible may not make a notable change in the premium.

Don’t be afraid of the insurance hard market; ride it out like other unpleasant occurrences — it will equalize again, hopefully within a few years. Work with your broker/agent to ensure that you have the coverage you need at the lowest cost available.

Finally, do you know where all your insurance policies from previous years are stored, and do you have ready access to them if needed? With the influx of past abuse claims rising, it is critical that you can locate and access those policies. It could mean the difference between coverage and no coverage for prior years abuse claims. Find them and, if possible, scan and store them electronically.

Focus on the mission of your business and camp — providing a safe, fun, and educational outdoor experience for children and youth.


Gaetana De Angelo is an independent consultant specializing in risk management in the camping and nonprofit sectors with more than 20 years’ experience. She is the outgoing chair for the ACA Insurance Committee, previously served as an ACA instructor and visitor, and recently retired after 30 years with Girl Scouts of Greater Atlanta. Gae can be reached at gaetanadeangelo@gmail.com.

Photo courtesy of Gold Arrow Camp, Lakeshore, CA.