Insurance companies are coming around to lower prices for inflatables premiums.
Renting inflatables can be an excellent source of revenue for a rental company, but the profits can come at a high cost. A few years ago, insurance was not just expensive: It was difficult to find carriers that would even insure the units. Today, the insurance market is beginning to soften, signaling that now is the time to shop around for good inflatables coverage.
The inflatables industry has evolved in leaps and bounds over the last 10 years. “There’s nothing they can’t build now,” remarks Larry Cossio, of the Cossio Insurance Agency in Simpsonsville, S.C. But as the industry has grown, insurance companies have become more and more reluctant to cover inflatables.
“When insurance companies first started writing just the bounce houses at $200 to $300 apiece, they didn’t have any underwriting experience,” Cossio says. “Then, claims started happening. There were no standards, no installation guidelines, no guidance whatsoever. The claims came in, and the insurance companies rolled up their cards and said, ‘We’re not playing anymore.’”
Rob Winter, an insurance broker with Golden State West Insurance Services in Sacramento, Calif., says only a handful of companies were willing to cover the inflatables business—and of that handful, many had high minimum premiums. “There was this inherent perception that the risk was too high, and in order to cover themselves they had to charge a certain premium,” Winter says. With high minimum premiums, smaller companies were hit with paying a larger percentage of their overall revenue, making insurance painfully expensive for many in the industry.
In addition to what is perhaps a lingering perception that inflatables are unsafe, the insurance industry a few years ago was suffering from what is known as a hard market. “Prices went up; availability was scarce; insurance costs were much higher,” says Cossio. “It didn’t hurt the big guys as much as it hurt the little guys.” But in 2006, the market began to soften, and insurance companies had more money to develop programs that could serve the rental industry’s need for inflatables insurance.
According to Winter, insurance companies were approached by those in the industry who were looking to develop an inflatables program. As these programs mature, Winter says, they will begin to amass data on claims, allowing them to adjust toward pricing that makes more sense. Eventually, with better safety guidelines and loss control procedures, the insurance companies can offer appropriate pricing for appropriate risk.
It’s no secret that many companies have chosen to operate without coverage, instead placing their faith in a waiver or simply hoping for no incidents. But industry veterans know it’s important to take insurance—and safety—seriously. “I definitely am against the idea that people can go out and not carry insurance,” says June Hardin, of Wapello Fabrications Co. in Wapello, Iowa. “My own feeling is if they had to carry the type of liability insurance that an amusement park does, they wouldn’t be in business.”
Winter advises people to do their research before getting into the inflatable rental business. “In my opinion, the ones who take it seriously as a business and run it as a business are going to price their rentals appropriately,” he says. “Then there are some that will undercut everybody. They have that ability, because they don’t have insurance.” In the event of an incident, a customer waiver won’t protect the companies without insurance, and there is a lot at stake. Business owners can lose their company’s assets as well as their own. With insurance prices on the downward trend, it’s time for rental companies to reconsider whether they have the right coverage.
Both Cossio and Winter agree that the key for rental companies looking for insurance is to find someone who knows the industry well. “The key is to make sure to talk with somebody that is experienced in this class of business,” Cossio says. “The majority of the customers we get have usually been on the internet for a week or two, and they’re waiting for people to come back and give them quotes. It’s a very specialized niche—it’s not something a normal insurance agent is going to carry.”