Tough Insurance Market
The paddlesport industry is a very small insurance pool compared to larger industries. In this case, a pool is the number of policies or the amount of premiums paid by an industry. The statistical chance of losing 100 percent of the water in a large pool is much less than with a small pool. It takes only one or two buckets (claims) to empty the small pool, while hundreds of buckets hardly make a dent in the large one. For insurance companies, large pools are safer, and consequently, a better investment.
When money starts to dry up in the insurance market, insurance companies put their investments in safe places only, and the paddlesport industry is not one of them because of its size and potential for loss.
Potential for Loss
If the largest possible loss in a pool is one cup, the insurance risk is small. The law of averages (actuarial forecasting) predicts that only a few losses will occur each year. Consequently, a small pool with small losses is also a good investment. One example is boats. The chance of a fire or hurricane destroying all boats is very slim. When a loss occurs, it’s for a fairly small amount. Boat insurance is relatively easy to find. It’s a small pool with a small potential for loss.
As much as the outdoor industry has grown, it is still very small. There are ten times as many cycling retailers in the United States as outdoor retailers, and paddlesports is just a percentage of outdoors. And though it’s much bigger, the cycling market is also very small. Look at the NASDAQ or Fortune 1000. Not a single recreation company is traded.
Insurance underwriters, the people responsible for choosing who or what to insure, only underwrite businesses that they understand. Compared to the possible return, our market is simply too small for them to spend time investigating.
Another important factor is exposure. The paddlesports industry sells equipment that can potentially kill people. We sell that equipment to anyone, we rent to anyone, and we teach anyone how to use it. The overall exposure, or potential for a loss, appears astronomical to insurance companies. Even though we know the actual exposure is relatively small, actuarially the possibility cannot be ignored.
Bad Moves Within the Industry
A compounding problem is the misguided attempt by some in the outdoor industry to put their competitors out of business by urging injured parties to sue. In the eyes of the insurance industry (and from a practical business perspective), this is stupid. It leads not only to increased insurance costs for all, but has caused some companies to stop insuring the industry altogether.