Active's Race Insurance

I tried to enter a race last week, which I do from time to time (whether I complete the entry or not) just to see what the process is like. I saw something I’d never seen before, and it interested me. Today I found it what it was all about. announced this new program today. It’s the “first ever Race Registration Protector,” says the Active Network, underwritten by Allianz Global Assistance.

First, what is Allianz Global Assistance? It’s a travel insurance company more than a half-century old. It incrementally became part of the Allianz family (Allianz is a large German underwriter) starting in 1995. This company has been providing this sort of coverage already, for sporting events and also for event tickets.

The concept is simple. You pay $7 at the point of race entry on—this is what I saw on the site when I went through the registration process—and you’ve bought race insurance.

Whoa. $7? Period? Regardless of the race? Yes. Here’s what Active promises: “With Registration Protector, a participant who misses an event for a covered reason such as an injury, illness, job loss, transportation delays, military/family/legal obligations, and more can get their registration fees reimbursed.”

So I asked some more questions and here’s what I found out.

ST: I sign up for an Ironman, pay my $675, plus Active’s fees, what is the insurance going to cost me?

Active: The insurance costs a flat $7 fee for each insured participant.

ST: If I’m injured, lost my job, etc., what is the proof required to collect on a claim?

Active: The consumer just needs to call the number on their certificate of insurance and Allianz will send them a simple claims form. If you’re injured, the insurance company will send you a brief form to be filled out and faxed back by your doctor. If you lose your job, you’d typically just need to send in the notification you received from your employer.

ST: what amount will the policy pay?

Active: When canceling for a covered reason, the event participant will receive reimbursement for 100% of the cost of registration, up to a maximum of $10,000.

ST: who pays, Active or Allianz? Who is the claims agent, the point of contact for the insured?

Active: All claims are paid by Allianz Global Assistance USA and they are the sole point of contact for the customer and manage all customer service requests and manage claims.

ST: how long before I get my reimbursement?

Active: Most customers receive their reimbursement within 30 days of filing their claim forms.

So I said, wait, here’s the part I don’t understand. An Ironman race may fill up a year in advance. The farther in advance the race fills, the more likely something bad is going to happen that is going to trigger a claim due to the inability to race.

Let’s say that the race has a 15 percent no-show rate. That’s 300 people. Let’s say the race fills at 2000 people and all those people take out the insurance, that’s $14,000 in premiums. Allianz is going to realize some portion of that, as in, $7 minus what Active collects and, perhaps, minus an agent’s fee. So, let’s say Allianz realizes $12,000.

If 12 percent of the folks who bought this insurance yet did not start file a claim, that’s a 100 percent loss ratio for Allianz. If 25 percent of those who did not start file claims, that’s a 200 percent loss ratio. If half the people file claims and are successful at collecting, that’s a payout of $100,000. And that’s per race.

Now, the only reason why I can see that this MIGHT work, if it’s a flat $7, is if Allianz and Active both suspect that they’re going to get creamed on every WTC race, but they’re going to make it up by all the folks buying $7 insurance on $50 half-marathons and then just not attempting to collect.

Still, I think the premium could easily be $50 on an Ironman race and people would pay it. why have this be so cheap? Why have it be so cheap it seems, intuitively, destined to generate big losses for Ironman races? Why not ratchet the amount to reflect the risk?

What am I missing?

“We may lose money on a single event if it has a significant cancellation rate,” is what I heard in reply. “But we’re not worried about single events. Allianz’s underwriting department has taken a close look at ACTIVE Network’s entire portfolio of events and they expect that on average, we will have a profitable product at the $7 price point. We also feel that a single product at an easy to understand price point helps simplify things for consumers who are new to this type of insurance. Our goal is to understand the market through experience and then introduce products for particular segments as needed. This is how innovation in our industry works.”

Remember that OpEd I wrote a few days ago about cancellation and refund policy through the individual race organizer, and how we’re way past due for a change in how we go about things? Here’s the change. This solves it. Now, yes, a refund policy is nicer, because it’s no-fault, no proof of injury, no “doctor’s note”, no proof of job loss or relocation is required, you don’t have to file a claim. But this insurance goes a long way toward solving the problem.

Further, I must believe that this policy is weighted toward races that, A) fill a long way in advance; and B) costs a lot of money to enter. As such, this is insurance that must be bought for those entering an Ironman (especially an Ironman taking place way into the future).