What should brokers ask when a leisure client goes interactive?

[00:00] Trying to make it feel real means more props, more flashing lights, more bangs and crashes, more smoke, more obstacles. Make sure you're writing those inspection and maintenance regimes down. Make sure that you're documenting it.

[00:14] Paul Lucas: Hello everyone. Welcome to Insurance Business TV for the first in a three-part series on why today's leisure businesses are becoming harder to recognize in association with Hiscox. Over the course of this three-part special, we'll be examining activity exposure, business exposure, and digital exposure alongside a genuine expert in the field. That man is Simon Ratcliff, head of commercial property and casualty at Hiscox UK. Simon, welcome to Insurance Business TV.

[00:44] Simon Ratcliff: Hi Paul, glad to be here.

[00:46] Paul Lucas: So let's begin, Simon, if we can by talking about activity exposure. Hiscox's research has found that two-thirds of UK consumers are more interested in participatory leisure than they were five years ago. So what do you believe is driving that shift and indeed what does it look like on the ground from escape rooms and VR venues to paddle clubs and maybe crazy golf bars as well?

[01:11] Simon Ratcliff: I think there's a few factors in play here. I think firstly is the way that our town and city centers have shifted from being physical retail centers towards more experiential locations, places where you might take your family for a day out and do more than just shop. I think there's also just a move away from the sort of slightly stuffy, old-fashioned and frankly quite expensive, if you want to take the whole family, theater, museum, art gallery experience, which is a rather passive one, frankly.

[01:52] We've now had several generations growing up playing computer games. They're used to getting involved with their leisure time activities. Those advances in technology we're seeing playing through now in these venues, whether it be virtual reality, esports, that sort of thing. So, I think there's a few little things at play there. But conversely, I think there's also the opposite of that going on, which is people are sick of their phones, they're sick of screens, and there's also an element of just getting out, getting back to nature and trying to experience the outdoors again rather than looking at a small screen on your sofa.

[02:33] Paul Lucas: Yeah, I think you've put quite a positive spin on it there, giving us more of a look at the great outdoors. But that of course brings a lot of risks with it. I did mention, of course, that you've got some new research out. You do have a new white paper available at the moment and that reveals that 60% of operators in that research agree that interactive venues can encourage riskier customer behavior. So how does greater participation actually change the risks that leisure businesses face and where do you see it catching operators out?

[03:05] Simon Ratcliff: Well, I think the businesses that are more successful in the space are the ones that make their experience feel real, feel authentic. If it feels staged, people pick up on that pretty quickly. But trying to make it feel real means more props, more flashing lights, more bangs and crashes, more smoke, more obstacles, all that kind of stuff.

[03:27] And venues have got to be pretty clued up to the fact that individuals are going to have different types of reactions to these things. And if you throw in a scenario where you're trying to then herd a group through potentially quite a small space and asking them to get competitive at the same time, well, that's asking for trouble. And then if you throw in alcohol and hot food into that mix, suddenly you've got quite a lot of risky activities to consider if you're that business owner.

[03:54] Paul Lucas: Well, let me get some specifics from you if you don't mind. Just walk us through a realistic scenario here. Maybe a key piece of equipment is damaged or a popular area has to close for a few days. What does that cost the business beyond simply the repair bill?

[04:10] Simon Ratcliff: Well, what I always say to our underwriters with exposures like that when you're considering what we're talking about is really the business interruption exposure. And the advice I always give is dependency, dependency, dependency. What are the business's dependencies and how can they work around them if, for example, a particular place or piece of kit was either damaged or unavailable to them?

[04:42] Those business interruption costs can often be quite a lot more than the actual damage to the item itself. So, to give you an example, we've had a recent claim go through for an outdoor digital screen that was completely destroyed in a fire. Now, that screen might cost the best part of a million pounds to replace, but the business interruption loss that goes alongside it is probably likely to be more than double that because of the income that they're generating from running that screen. So, businesses have got to be smart and they've got to think about how they can minimize those dependencies and try and build in backups wherever they can.

[05:22] Paul Lucas: Well, let me throw another stat at you if I can. Twenty-seven percent of operators apparently have temporarily closed or lost income because of risky consumer behavior. That rises actually to 32% among those that added services over the past year. So why does that number climb for businesses that are changing and indeed what practical steps around maybe safety briefing, supervision, maintenance, contingency planning would make the biggest difference here?

[05:50] Simon Ratcliff: Well, the minute a business adds something new, it's just one more thing for their staff to have to get their head around and keep an eye out for. And so for me, employee training is the absolute key thing when you're introducing something new to your business. Having staff who can act swiftly and confidently when something doesn't go according to plan is absolutely crucial.

[06:11] And then the other part is the inspection and maintenance of the equipment itself. If the public are going to interact with your stuff, you better make sure it's safe, right? And the other piece of advice I'd give to business owners is make sure you're writing those inspection and maintenance regimes down. Make sure that you're documenting it.

[06:29] Whenever I talk to someone in our liability claims team, I often hear the story about, well, the customer says that they did the right things, but they can't evidence they did the right things. So, it's about having your staff training and those equipment inspection and maintenance regimes in place, but it's also about documenting them and being able to pull them out if you need to.

[06:51] Paul Lucas: Let's give our broker audience a few tips if you don't mind. If a client tells a broker they're introducing a more interactive activity, what are the first questions that the broker should ask about safety, supervision, essential equipment, and indeed the financial impact of that temporary closure perhaps?

[07:09] Simon Ratcliff: I think the first question I'd ask is what experience have you got of running something like this? Now, it doesn't have to be the same activity, but just something where similar considerations come into play. And the next question for me would be, what other advice have you taken on the subject?

[07:25] Have you carried out a risk assessment off the back of that advice and can I have a copy of it please? Because if you've got it in black and white in front of you, you can see all the things that they've considered and you can try and spot the gaps. I think that way you'll get a good sense of whether the customer has considered all of the aspects that they need to.

[07:44] And in terms of the financial impact of temporary closure, it's back to those dependencies again. So, have they thought about what it would take to set up somewhere else? That's the other crucial part of the planning if they can't operate in the way that they're expecting to.

[08:02] Paul Lucas: Yeah, great insight, Simon. Indeed, there is more information of course available within Hiscox's brand new white paper and on its website newtroublebrewing.co.uk.

[08:11] And of course, a lot more to look forward to in this series, too. So, make sure you tune in next time right here on Insurance Business TV.

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