Two and a half weeks before the American Society of Tropical Medicine and Hygiene's fall conference in Puerto Rico, a hurricane hit, doing massive damage to the area and the hotel. Needless to say, the meeting was canceled.
“It would have been unpleasant at best and possibly dangerous to get people in there,” says Joyce Paschall, CMP, The Sherwood Group Inc., the Northbrook, Ill. — based association management group that planned the event.
But the story has a happy ending. Unlike many associations, the ASTMH had invested in cancellation insurance, taking out a policy with Albert H. Wohlers (now Seabury & Smith). “We were made whole by the policy and didn't suffer from the loss of the event,” says Paschall.
Known as “business interruption insurance” cancellation policies usually cover perils that are beyond the control of a planner, such as inclement weather, a principaldropping out, municipal strikes, airline strikes that cause a significant number of attendees to miss the event, or outbreaks of disease.
Coverage is valuable even when the entire event isn't a wash. For example, an association holding a meeting in Dallas during a heat wave was worried that attendees wouldn't want to walk outside from their hotels to the convention center, says Paulette Norman, assistant vice president of insurance company Seabury & Smith in Park Ridge, Ill. The group's policy paid for air-conditioned buses to ferry attendees back and forth.
What the insurance won't cover is poor planning, meetings canceled because your organization went bankrupt, or losses due simply to low attendance because of a lack of interest in the program.
“Why would insurance companies take these losses?” says meetings industry attorney John Foster of Foster, Jensen & Gulley, LLC, in Atlanta. “If there was insurance for bad business decisions, insurance companies would go broke.”
If you think you are already covered by your liability insurance, think again. Liability coverage would kick in if someone was injured at the meeting, says James M. Goldberg, an attorney with Washington, D.C. — based Goldberg & Associates, but wouldn't help your association or company recoup the lost profits and expenses incurred because of a canceled event. Planners can't rely on a venue's liability coverage to help them in case of calamity, either. If a convention center burns down, the venue's policy will help the owner construct another building — but it won't help a displaced conference find another meeting site, points out attorney Jonathan T. Howe of the Chicago-based law firm Howe & Hutton Ltd.
“You're going to see an even greater trend toward this kind of coverage, thanks to the volatile nature of the financial market.”
— Michelle Holmes
While many groups don't bother with cancellation insurance — for example, only about 30 percent of the associations represented by the American Society of Association Executives purchase it — some experts predict a spike in interest. “You're going to see an even greater trend toward this kind of coverage, thanks to the volatile nature of the financial market,” says Michelle Holmes, vice president of Rust Insurance, based in Washington, D.C. “People are less willing to take the loss upon themselves.”
Is Insurance Worth the Cost?
Whether planners should consider purchasing cancellation insurance depends on how important an event is to an association or corporation financially, and what kind of risk it is assuming.
“If you're holding a board of directors meeting for 65 people that won't generate income and is inexpensive to hold, there's no point,” explains Goldberg. “But if it's a big annual event for 3,000 people that's a major source of revenue, definitely think about insuring.”
Foster recommends doing a risk-benefit analysis, looking at what you could lose versus the cost of the insurance. “If you have $100,000 in potential revenue/loss, and the insurance is $1,000, it's worth it,” he says. Everyone interviewed recommended seriously considering the insurance when planning events in areas prone to hurricanes, earthquakes, and heavy snowfall.
The cost of a policy depends on several variables, such as where the meeting is being held, the budget, and the time of year. The minimum cost is $500, and that could spiral upward to $140,000, says Eileen Hoffman, program manager, AON Association Services, Washington, D.C. The standard range of cost is generally 45 cents per $100 of exposure, says Holmes, adding that in earthquake, hurricane, or severe winter weather areas, the cost would go up to about 65 cents per $100 of exposure.
Because it is sold to a smaller, more specialized market, cancellation insurance isn't standardized the way that term life insurance is, and it is written on a policy by policy basis, says Goldberg. For instance, policies can cover multiple meetings or just one event. Goldberg advises that planners read the policy thoroughly before signing, and make sure they understand what is and isn't covered.
Avoid Pre-existing Conditions
What situations are covered depends, in part, on when you take out a policy. The earlier in your planning you purchase cancellation insurance, the sooner it can start working for you. Hoffman says coverage begins as soon as premiums are paid, and extends to five days after the event, to cover things like extra expenses if trucks or movers don't show up to break down exhibits. The insurance can be purchased as close to one month prior to an event or as far out as three years in advance. Coverage can be vital before an event if something happens to the facility where the event is booked, Hoffman says, explaining the policy would cover any costs incurred to relocate the event.
It is also usually less expensive if purchased far in advance, adds Foster, because even though there are an infinite number of policies to be written, the insurers take advantage of the theory of supply and demand — the closer the event is, the more desperate a group must be for coverage.
The recent power outages and concerns about blackouts, especially in California, illustrate another example of why it pays to think ahead. Rust's Holmes notes that people who purchased policies before the crisis started have coverage, but for people getting insurance now, it's considered a pre-existing condition and isn't covered. “You don't insure a burning building,” she says.
Picking a Vendor
Don't panic — this is much easier than site selection. There are only three main players in the cancellation insurance market that specialize in meetings. Since the market is so narrow, it pays to consider all the players, experts advise. The American Society of Association Executives endorses the Showstoppers Association Event Cancellation Insurance policy administered by Aon Association Services and underwritten by Gulf Insurance Group.
Showstoppers Association Event Cancellation Insurance
Aon Association Services
(800) 424-8830 ext. 333
Contact: Eileen Hoffman
Seabury & Smith
(800) 323-2106, ext. 34271
Contact: Paulette Norman
Rust Insurance Agency Inc.
Contact: Michelle Holmes or Laura Johnson