Insurance coverage is one of the most important, yet overlooked, expenses until it is often too late. Over the last few years, the costs of premiums have risen substantially due to factors from both within and outside of the fitness industry leading to what some have called a “crisis.”

“There are several factors that are impacting insurance rates from the continued fallout from Sept. 11, increased litigation and the stock market troubles,” says Andrea Pugliese of Andrea Pugliese Insurance Services. “In 2002, rates were up 20 to 50 percent and we are probably looking at another 20 percent rise this year.”

For every business, insurance included, economic woes of the last few years have impacted bottom lines. This need to make up losses from troubled investments, as well as the increases in the re-insurance market — the insurance that insurers carry to protect themselves — have added up to the rapid rise in rates across the board.

“In the past, insurance carriers were making money in the stock market so they were less worried about their loss ratios and were able to offer highly competitive rates,” says Cheryl Meyers a senior underwriter with K&K Insurance. “Today, they can't support the combination of lower earnings on investments and higher loss ratios without charging more for the coverage. It's a case of accountability.”

John Urmston, president of SFIC of North Carolina, also sees the economy playing a bigger role in rates than in years past and it isn't confined to the health and fitness industry.

“Rates are going up across the board through every industry; it is not a reflection of the clubs although their individual loss ratio plays a part, as always,” says Urmston. “But the whole insurance industry is trying to recover their balance sheets and it is impacting rates.”

Living in a litigious society has also added to the increased rates that insurance companies are charging their customers.

“Litigation in this industry is out of control. Unfortunately, we live in an age where accountability and negligence are not well defined,” says Ken Reinig, president of the Association Insurance Group. “When someone flys off the back of a treadmill and is injured the club owner is often held at fault. Not that this is right, it is just the way our legal system works. Unless we see significant changes in the way people sue each other, we will continue to see rising liability insurance premiums.”

But while the general economic and business climates have an impact on the insurance rates that fitness facilities are seeing, there are internal, industry-specific changes that are influencing costs, in addition to each company's record of loss ratio.

“The fitness industry is one that is considered high risk, and it is unlikely that your local State Farm agent will touch a health club,” says Reinig. “There are very few legitimate options for club owners to choose for their insurance.”

And, these options may continue to dwindle as several large insurance companies have specialty markets looking for safer and larger industries to tackle.

And the risks associated with health and fitness facilities are growing along with the clubs themselves.

Within the last decade, the typical fitness facility has grown from a small (5,000 to 10,000 square feet) fitness-only club to large (as big as 200,000 square feet), multisport facilities with various group programming, sports programs, children's facilities and more.

“Prior to 9/11, combination clubs were on the rise, and they are still growing,” says Meyers. “Today, we are seeing clubs that are a little bigger and a little broader in their offerings and that has an impact on their coverage.”

And this impact comes from the fact that increased offerings often result in increased risks.

“A club's loss ratio begins to expand as they do,” says SFIC's Urmston. “And higher ratios often result in higher premiums.”

Urmston explains that in a review by major underwriters of “thousands” of the clubs that his company works with they found that the claim ratios were very low with small, fitness-only facilities and became much higher when looking at large, multi-sport facilities.

“I'm not sure what the reasons were for the differences between the two. While there are risks inherent in things such as 80-foot climbing walls and children's programs, wet spots and treadmills are very common claims and most clubs have them regardless of the size,” says Urmston. “I think the problem comes from the fact that the bigger a club becomes and the more offerings it has, the less personal control an owner has over the risks.”

And while amenities such as climbing walls, diving boards, daycare and more add to the risk of operating a club, and in turn the club's insurance needs, often clubs add these operations without thinking of the impact.

“A low percentage of club owners come to us first when they are adding to their club, thinking of insurance as an after-thought,” says K&K's Meyers. “A lot of owners think that everything is insurable, but it isn't always as easy as they think.”

Mark Meck, VP of marketing at K&K, adds that it is important to be proactive when adding amenities.

“A lot of times an insurance carrier doesn't know that a club has added something until they visit them when talking about renewal,” he says. “Or worse, when the owner makes a claim — that is the wrong time for an insurer to find out the club has added something.”

In fact, according to many of the insurance companies, a claim on an unreported amenity may not be covered under a current policy — and the amenity may not be coverable at all depending on the company.

“The health club industry changes yearly as clubs strive to find and keep members by adding services and amenities,” says Marisa Burke, marketing coordinator at the Philadelphia Insurance Companies, which has seen its rates rise between 7 percent and 15 percent on average year. “But it is important they check with their agent or carrier because not everything will be covered. For instance, we won't cover things like diving boards or climbing walls.”

Despite the fact that insurance costs are growing steadily, depending on the part of the country, premiums can range from being a small portion of a company's expenses to a large portion.

According to Loretta Worters, VP-communications for the Insurance Information Institute, premiums can cost up to $50,000 a year for clubs in New York, compared to as little as $500 elsewhere in the country.

“But generally speaking, even with rate increases, insurance is not a big part of the budget,” says Reinig. More often than not, club owners will pay more for their family's health insurance than for the club's property and liability coverage.”


While an entire article can be written on controlling costs, insurance carriers suggest owners take these steps for starters.

  1. Better staff training.
  2. Well-written waivers.
  3. Great customer service (friends don't sue friends).
  4. Don't try to be all things to all people.
  5. Keep the facility well maintained.
  6. Keep equipment updated and well maintained.
  7. Use monitoring cameras.
  8. Use AEDs.
  9. Have specialists [i.e. therapists, trainers, etc.] not on staff bring proof of insurance.
  10. Know your local laws and regulations.

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