For several years, the caravan park industry has suffered acute insurance affordability and availability issues. According to the Caravan Industry Association of Australia (CIAA), this year some premiums for park operators soared by 400%.
If that’s not challenging enough, “Of greater concern”, said the CIAA in July, more than 50% of operators expressed “diminished confidence” in their ability to renew their liability insurance.
“We do work with some [caravan parks] and we receive a lot of inquiries, it still is difficult,” said Graeme Hay (pictured above), Sydney based director of Barrack Broking.
Hay said that while caravan parks have always faced some challenges, recent weather events, in particular floods, storms and bushfires have “probably” brought these insurance challenges “to a head.”
“In the last two to three years I think it's heightened the sensitivity around providing coverage for a caravan park, with perhaps a bit more scrutiny on the liability aspects as well running that kind of operation,” he said.
However, the insurance market for caravan park operators did recently improve slightly, he said.
“There was an insurer in the market that didn't have the capacity to be able to continue to provide a solution but we understand that that's [that capacity’s] returned,” said Hay. “That's helped the position in the short term.”
Barrack provides risk management and insurance advice to caravan park operators as part of a recent renewed focus on an industry sector broadly described as accommodation.
Despite the difficulties, he said the “good thing” is that the many in the caravan park industry are aware of the issues and are “pretty proactive” about operating to a high standard.
“We want to be able to also get that message out very clearly to insurers, so that perhaps there are new opportunities for that industry to be able to find providers that acknowledge that,” he said.
Hay said his firm is taking “a longer-term view” and investigating what can be done to make the sector less volatile for operators.
He explained some of the caravan park industry’s insurance and risk management issues to Insurance Business.
“It’s really been a very up and down right ride for many, partly, I think because of location and natural catastrophe risks that are often in those areas but also with the liability aspects of the types of services and equipment that they have in their parks,” he said.
Hay said one example is the playground equipment and jumping pillows that many caravan park operations look to include as a service to their customers. However, he said because of the risks associated with this equipment, “sometimes getting the insurance coverage can be problematic.”
One issue with insuring equipment like this, said the CIAA, is that some insurers don’t understand the differences between, for example, a jumping castle and a jumping pillow.
“It is overwhelmingly evident; lack of understanding and differentiation of product is having a marked effect on underwriter action,” said the CIAA’s industry roadmap released in July.
“For example, external underwriters have demonstrated they are unfamiliar with the distinction between the terms “jumping castle” and “jumping pillow”, having referenced the tragic disaster in Tasmania in 2021 as cause for caravan park concern in relation to “jumping pillows.”
The CIAA said this highlights the importance of having underwriters who understand local terminology and the unique aspects of the caravan park industry “to ensure accurate risk evaluation and appropriate coverage.”
Other possible major issues for caravan parks, said Hay, can be their location. This can also make them susceptible to natural catastrophe risks.
“From the location point of view they're often close to waterways, rivers or the sea,” he said. “Many in northern parts of Australia would have severe storm or cyclone risk associated with their locations as well.”
Hay also said the amenities on some of these sites are not constructed like they would be for a “bricks and mortar hotel.”
“Then on the liability side, if you're close to waterways, you might have a jetty, or paddle boats or a kayak hire service and there are a lot of responsibilities on operators to make sure that they're educating the people that are using those kinds of facilities so that they can avoid having an accident,” he said.
However, Hay said “real care” is required to deal safely and effectively with these challenges.
IB asked the broker if caravan parks are getting better at risk managing these tough issues.
“From what I've seen – and we would normally ask for quite a lot of information if we were engaged by a caravan park around what their risk management practices are – a lot of the operators have really good procedures in place to make sure that they manage those kind of on site risks really well,” said Hay.
However, he said it’s not always possible to do anything about some nat cat risks.
“That is a different challenge,” said Hay.
Are you a stakeholder in the caravan park sector? Please tell us how you see the risk management and insurance challenges below.
