The “Insurance Guy” – Club Owner (My thoughts for 1999)

Over the past few years, I have noticed two disturbing trends in the health club industry. Litigation against club owners has grown significantly and the business of running a health club has become increasingly more difficult. I guess our industry is not unlike many service businesses. We have found that to be competitive in this marketplace AND make a profit requires an extraordinary work ethic, cutting edge service ideas and a little bit of luck.

I, along with my partners Vikki and Neal (who also happens to be my younger brother) have been insuring health clubs since 1987 and now are proud to call 1,300 club owners and nearly 2,500 personal trainers our “clients”. We became club owners ourselves in 1995 when we built the Women’s Workout Company in Lakewood, CO. This jump to club ownership has opened our eyes to many of the problems and opportunities that need to be addressed NOW if we are to survive in the years to come.

When we first started writing insurance for health clubs twelve years ago, “professional liability” was the hot issue of the day. Litigation against club owners was beginning to heat up and the courts were beginning to take the position that our industry owed a higher “duty of care” to the public. We are now holding ourselves out to the general public, in many cases, as experts in nutrition, weight loss, cardiovascular training, and muscle development. Several, so called, health clubs are now more rehabilitation clinics than gyms. In fact, the most successful club owners we now insure have positioned themselves strongly in the medical-related areas of rehab, chiropractic care, and holistic healing. If you don’t think that this dramatically increases your “liability”, guess again.

Club owners have also discovered that survival by membership dues alone is difficult and getting worse. I have had the pleasure of working with Thomas Plummer and Associates over the past four years and thanks to Thom, we have learned the true meaning of the term “profit center”. Clubs that have adapted by offering other services to their members (ie: personal training, nutrition/supplements, juice bar, facials, etc.) have found that “return per member” is the key element toward reaching the golden goal known as profit. Not to change the subject, but if you want to get a good start this year with your business plan, I highly recommend that you order Thom’s book, Making Money in the Fitness Business. It will be the best $59 you have ever spent. You can call (323) 964-4800 Ext 156 to order a copy. The main reason I promote Thom and his ideas is simple. Successful clubs have the fewest claims. Successful clubs can afford the best staff, best (and safest) equipment, and have written procedures in place to provide them with the best possible defense when they are sued. Please note that I used the term “when” and not “if”. It is not a matter of “if” you will be sued, it is only a matter of “when.” Lets face it, with a typical club having 1,500 patrons, it only takes ONE disgruntled member to ruin your day.

I won’t dwell on all of the risk management systems and procedures you can implement in your club to help reduce member injuries and costly litigation. The fact is, even the safest clubs in the industry find themselves on the receiving end of an ambulance chasing attorney’s letter. I’m sorry if I showed my prejudice in that last line. O.K., I’m not sorry.

I would like to point out some of the more important insurance topics that all of us should address this coming year.

  1. Employment Related Practices – One in four civil suits filed in this country today are employment related. Unless you have Employment Practices Liability Insurance (EPLI), you are subject to lawsuits from existing and former employees for wrongful termination, discrimination, and sexual harassment. A typical club can expect to pay about $1,500 a year for $250,000 in coverage. Expensive but important.
  2. Workers Compensation – If you don’t have, get it. In nearly every situation, the law requires that you have it. If you do have it, shop it. Workers comp rates are more competitive this year.
  3. Business Income Protection: Most of you have coverage for your business property and buildings but very few club owners purchase “business income” protection. Remember, it is not the fire that will put you out of business, its the absence of revenue that will. It is relatively cheap insurance and again, highly recommended.
  4. Boiler & Machinery: Ask you agent to quote this coverage for you. It is actually “equipment breakdown” coverage for items such as air conditioning and treadmills.
  5. Key Man Insurance: If you have corporate officers or partners considered key to the long term survival of the business, buy term life insurance on each other. It’s cheap and smart business.

And now my tips for improving your bottom line in ’99. Kind of catchy, huh?

  1. Write your business plan for this year and set your goals for the next three. All of the best business seminars that I have ever attended have one common theme. How do you get to your destination without a good roadmap?
  2. Really concentrate on the development of your profit centers. Several concepts can make huge profits (rehab, day spa) and others have small margins (pro-shop, drink coolers), but all can make you money. Visit other clubs and steal the best ideas; I do.
  3. Focus on your “niche”. Unless you are the only game in town, you have competition. Don’t try to be all things to everybody. Modify your clubs “concept” and attract the clientele you want. Are you a hard core gym? Family center? Elite women’s club? Tennis & Racquet? Decide your niche and design all your marketing around that concept.
  4. Update your employee manual. This will also help reduce those employment related practices claims I told you about.
  5. Have fun… I know this sounds a little corny, but I mean it. Life is too short and being a club owner is a difficult. Either enjoy what your doing, or sell it and go get a job. If you are not portraying an enthusiastic, energetic image, how do you expect your staff to do the same. Recognize the dangers of being in a rut and do something about it.
  6. Read Thom’s book.

I would like to close by thanking all of my clients for their support through the years. Association Insurance Group is now the leading provider of insurance for the health club industry thanks to you. As a self serving plug, I would like to let all of you know that we have a new program for property, liability, workers compensation, and employment practices insurance for 1999. The coverage is enhanced, pricing is still very competitive, and I think you will enjoy working with us. Give us a call at 800-985-2021 to receive an application. Have a great year.