API Summer 2021


when a claim does happen, it can be costly. The average cost of a claim in 2019 was $81,437 (see the Average Participant Claim chart, below). That is actually an improvement from prior years. Back in 2016, the average cost was $236,630.















What is leading to lower per claim costs?

1. Operators are reporting their incidents much quicker. In 2014, the average time to report an incident was 184 days af- ter the incident. In 2019, the average was 26 days. The earlier an operator involves the experts (the insurance company) in an incident, the more time the experts have to take action, and the more control they have over how the claim develops. 2. Claims are settled faster due to quicker claims reporting. In 2014, the average claim took 454 days after the incident to close. In 2019, the average claim closed in 79 days. That means less expense for insurance and legal staff. 3. Defense attorneys have deepened their knowledge. As defense attorneys learn the ACCT standards and the inher- ent risks of industry activities, they become more skilled in defending industry claims. As a result, the average amount of money spent on an attorney during a claim has dropped from 22 percent in 2015 to 7 percent in 2019. (That figure is likely to increase to roughly 12 percent due to ongoing 2019 claims that have not settled/closed.) Using an attorney who knows the industry can save an operator money. DATA AND INSURANCE PREMIUMS The data on claim rates and claim amounts indicate that, on average, an operation with 10,000 annual participants will have $720,000 in claims over a 10-year period. Insurance companies see your premiums as “funding” for the $720,000 in claims that will likely occur over that 10-year period. That is part of the calculation that goes into setting insurance rates. Further, the insurance industry has endured a “hard market” over the past three years, which has led to a rise in insurance rates. We are hopeful that the market has peaked, and that quarterly increases will start decreasing. When evaluating your renewal for this year, though, keep in mind that the av- erage annual premium increase for all businesses in the U.S. was 22 percent in the fourth quarter of 2020. While this hard market is not specific to the adventure park industry, we are experiencing the same trend.

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