Interesting Article
Posted: Wed Mar 14, 2007 1:20 pm
Might interest some - an article from last weeks' Insurance Trade Press.
(NB. as a fully qualified insurance professional I'm happy to offer an opinion on any insurance issues/problems that industry personnel may experience. Please feel free to email me direct.)
No sex please, we're British
Despite the increasingly mainstream status of the sex industry, with pole dancing now an accepted form of exercise and Ann Summers a popular highstreet name, many insurers still spurn the sector. But, as Sam Barrett explains, this squeamishness is misplaced given the low risks involved.
Kylie Minogue and Amanda Holden have done it, Zoe Ball does it and even Eastender's great-grand dad Jim Branning is about to appear in a story line involving it. But while pole dancing may be the latest celebrity must-do, anything involving the sex industry is still a big no-no for most of the insurance industry.
"It is becoming more socially acceptable but clubs still get turned down by insurers because of the moral hazard," says Gary Philip, sales director of RHG Corporate Insurance Brokers, which advises a number of clubs, including Spearmint Rhino. "Cover is normally underwritten through standard commercial combined policies."
Although a readily available product, insurance can be difficult to procure if there is even a whiff of the exotic about the risk. "We've had cases where the local office will accept cover for a lap-dancing club but it's then turned down by the head office. They don't want to be associated with naked girls and the sex industry," Mr Philip adds.
Not so risky business
But although insurers might shudder at the thought of covering these clubs, those that are happy to write business are finding it to be rather a good risk. Simon Lonnergan is managing director of Fenchurch Insurance Risk Management, which covers everything from high street sex shops to swingers clubs. He says: "A sex shop is no different to a newsagent from a risk perspective. Over the four years that we've been providing cover to the sex industry, we've only had three claims notifications and one of those was for the shop front glass, which could happen to any business."
Those involved in the lap-dancing industry are also keen to stress that their clubs do not present any more risk than any other nightclub. "We're probably lower risk than the average nightclub," says Cliff Silver, financial director of lap-dancing club Stringfellows. "Our clientele are executives and professionals who wouldn't dream of causing trouble while they're out enjoying themselves."
Mr Philip also believes the calibre of the clientele reduces the risk of a claim, simply because they wouldn't want to be publicly associated with a club in this way. In addition to the well-behaved, and possibly claims-shy, customer base, the clubs also go to great lengths to ensure risk is kept to a minimum. To operate, both the local authority and the police must license them, with each requiring minimum standards before they will grant a licence. These standards include areas like security and fire prevention.
Mr Silver adds: "We do have a variety of controls in place, such as our health and safety and risk management procedures, which mean we reach standards above the minimum set by the local authority. We also employ our own security staff, rather than using a security company. They are all fully trained and have at least 10 years' experience. Our insurer will also regularly review our business, pointing out areas that could affect our risk profile from an insurance point of view."
As well as these measures, clubs have other ways to ensure they can remain open for business. "At Spearmint Rhino they insist the girls abide by a code of conduct, which outlines exactly what they can and can't do," says Mr Philip. "They also send in ghost customers to check the girls are following this code."
This helps them to gain insurance. Even the underwriters that are happy with the sector shy away from covering clubs where prostitution may be occurring, and policies are littered with clauses to ensure cover is only for legal activities. From an insurance perspective this attention to risk pays off. "It's a very profitable market for the insurers. We've seen a loss ratio of about 15% over three years," explains Mr Philip.
Although it is a hugely profitable sector, market penetration throughout the sex industry is tiny. Mr Lonnergan says: "There are plenty of businesses that will have tried to get cover in the past but, probably because they approached one of the composite insurers, were unable to get it so never tried again. I'd be surprised if more than 15% of the market has cover."
Mr Lonnergan says he used to have around 250 clients when he worked at Bray Wintour Patis, although this number declined after Towergate bought the business in 2005. Now with his own company, he is looking to build the business up again through advertising in the press, as well as attending trade shows such as Erotica at Olympia.
Covering the uncovered
The government is also driving demand in the industry, bearing in mind that Employer's Liability insurance is a compulsory class of insurance. Its inspectors will do spot-checks on cover in the industry in different parts of the country. "We can tell when this happens as we'll suddenly get a flood of enquiries from one part of the country," he adds.
But while there are plenty of opportunities to provide commercial cover, providing insurance on an individual basis is much harder. Some have tried. For example, last year SLE Worldwide launched a policy for professional dancers, which could cover anyone from chorus girls to pole and lap dancers.
This offered income replacement in the event of an accident or illness forcing them to stop working and public liability cover. But less than a year later the policy has been shelved, with SLE focusing on other markets such as motor sports.
However, Mr Philip is considering launching a policy for dancers, which will provide income replacement at the rate of ?2 a year for every ?1 of weekly cover. "I don't think it'll necessarily get a huge take-up as the girls don't always declare all the money they make!" he concludes.
(NB. as a fully qualified insurance professional I'm happy to offer an opinion on any insurance issues/problems that industry personnel may experience. Please feel free to email me direct.)
No sex please, we're British
Despite the increasingly mainstream status of the sex industry, with pole dancing now an accepted form of exercise and Ann Summers a popular highstreet name, many insurers still spurn the sector. But, as Sam Barrett explains, this squeamishness is misplaced given the low risks involved.
Kylie Minogue and Amanda Holden have done it, Zoe Ball does it and even Eastender's great-grand dad Jim Branning is about to appear in a story line involving it. But while pole dancing may be the latest celebrity must-do, anything involving the sex industry is still a big no-no for most of the insurance industry.
"It is becoming more socially acceptable but clubs still get turned down by insurers because of the moral hazard," says Gary Philip, sales director of RHG Corporate Insurance Brokers, which advises a number of clubs, including Spearmint Rhino. "Cover is normally underwritten through standard commercial combined policies."
Although a readily available product, insurance can be difficult to procure if there is even a whiff of the exotic about the risk. "We've had cases where the local office will accept cover for a lap-dancing club but it's then turned down by the head office. They don't want to be associated with naked girls and the sex industry," Mr Philip adds.
Not so risky business
But although insurers might shudder at the thought of covering these clubs, those that are happy to write business are finding it to be rather a good risk. Simon Lonnergan is managing director of Fenchurch Insurance Risk Management, which covers everything from high street sex shops to swingers clubs. He says: "A sex shop is no different to a newsagent from a risk perspective. Over the four years that we've been providing cover to the sex industry, we've only had three claims notifications and one of those was for the shop front glass, which could happen to any business."
Those involved in the lap-dancing industry are also keen to stress that their clubs do not present any more risk than any other nightclub. "We're probably lower risk than the average nightclub," says Cliff Silver, financial director of lap-dancing club Stringfellows. "Our clientele are executives and professionals who wouldn't dream of causing trouble while they're out enjoying themselves."
Mr Philip also believes the calibre of the clientele reduces the risk of a claim, simply because they wouldn't want to be publicly associated with a club in this way. In addition to the well-behaved, and possibly claims-shy, customer base, the clubs also go to great lengths to ensure risk is kept to a minimum. To operate, both the local authority and the police must license them, with each requiring minimum standards before they will grant a licence. These standards include areas like security and fire prevention.
Mr Silver adds: "We do have a variety of controls in place, such as our health and safety and risk management procedures, which mean we reach standards above the minimum set by the local authority. We also employ our own security staff, rather than using a security company. They are all fully trained and have at least 10 years' experience. Our insurer will also regularly review our business, pointing out areas that could affect our risk profile from an insurance point of view."
As well as these measures, clubs have other ways to ensure they can remain open for business. "At Spearmint Rhino they insist the girls abide by a code of conduct, which outlines exactly what they can and can't do," says Mr Philip. "They also send in ghost customers to check the girls are following this code."
This helps them to gain insurance. Even the underwriters that are happy with the sector shy away from covering clubs where prostitution may be occurring, and policies are littered with clauses to ensure cover is only for legal activities. From an insurance perspective this attention to risk pays off. "It's a very profitable market for the insurers. We've seen a loss ratio of about 15% over three years," explains Mr Philip.
Although it is a hugely profitable sector, market penetration throughout the sex industry is tiny. Mr Lonnergan says: "There are plenty of businesses that will have tried to get cover in the past but, probably because they approached one of the composite insurers, were unable to get it so never tried again. I'd be surprised if more than 15% of the market has cover."
Mr Lonnergan says he used to have around 250 clients when he worked at Bray Wintour Patis, although this number declined after Towergate bought the business in 2005. Now with his own company, he is looking to build the business up again through advertising in the press, as well as attending trade shows such as Erotica at Olympia.
Covering the uncovered
The government is also driving demand in the industry, bearing in mind that Employer's Liability insurance is a compulsory class of insurance. Its inspectors will do spot-checks on cover in the industry in different parts of the country. "We can tell when this happens as we'll suddenly get a flood of enquiries from one part of the country," he adds.
But while there are plenty of opportunities to provide commercial cover, providing insurance on an individual basis is much harder. Some have tried. For example, last year SLE Worldwide launched a policy for professional dancers, which could cover anyone from chorus girls to pole and lap dancers.
This offered income replacement in the event of an accident or illness forcing them to stop working and public liability cover. But less than a year later the policy has been shelved, with SLE focusing on other markets such as motor sports.
However, Mr Philip is considering launching a policy for dancers, which will provide income replacement at the rate of ?2 a year for every ?1 of weekly cover. "I don't think it'll necessarily get a huge take-up as the girls don't always declare all the money they make!" he concludes.