The campground and RV park industry faces a significant challenge as insurance premiums continue to rise, according to Leavitt Recreation & Hospitality Insurance (LRHI). This trend, impacting operators across the United States, calls for a deeper understanding of the factors driving these increases and strategies to mitigate their effects.
Inflation has emerged as a primary contributor to the escalating costs. The general rise in prices affects all sectors, including commercial insurance, leading to higher premiums. This inflationary trend is not isolated but part of a broader economic shift affecting various industries.
Supply chain disruptions, a consequence of the COVID-19 pandemic, have further complicated matters.
Issues such as global port congestion, geopolitical conflicts, and labor shortages in transportation sectors have delayed the delivery of essential goods.
According to LRHI, these disruptions extend to construction materials, crucial for campground and RV park maintenance and development, thereby prolonging insurance claims and contributing to increased premiums.
Labor shortages present another hurdle. The struggle to find skilled workers has forced many employers to raise wages, inadvertently inflating project costs and extending completion times. This scenario has a direct impact on commercial property insurance costs, as longer project durations and higher expenses translate into greater insurance liabilities.
Property replacement costs have also surged due to the combined effect of inflation, supply chain issues, and labor shortages. The increased expense in replacing buildings and contents following significant property losses adds to the overall insurance burden for campground and RV park operators.
The reinsurance market, which provides a safety net for primary insurers, faces its challenges. Natural disasters have led to substantial losses, causing reinsurers to become more selective and limit their coverage offerings. This shift results in higher rates for primary insurance carriers, a cost eventually borne by end consumers, including campground and RV park owners.
Catastrophic losses due to natural disasters like wildfires, hurricanes, and severe storms have become more frequent and severe. These events not only cause immediate damage but also lead to long-term financial implications in the insurance market, particularly for properties like campgrounds and RV parks that are often located in vulnerable areas.
The rising insurance premiums affect all business owners, but those who have filed claims feel the brunt of these increases. This situation underscores the collective nature of insurance, where widespread costs are shared among many to cover the claims of a few. However, when claim costs exceed the premiums collected, rates inevitably rise for all policyholders.
To navigate these rising costs, campground and RV park operators are advised to understand the relationship between agents and insurance companies. Specialized insurance agents in the outdoor recreation industry can offer invaluable guidance, helping operators explore cost-saving opportunities and negotiate better terms.
Operators should also regularly review their insurance coverage to ensure it aligns with their current needs and risks. This review includes assessing the range of insurers an agent can access and understanding the implications of their coverage types.
Several steps can be taken to mitigate rising costs without compromising coverage. These include considering pay-in-full discounts, regularly comparing quotes from different carriers, and exploring self-insurance options for certain aspects of their operations while maintaining essential liability coverage.
Policyholders have the flexibility to make changes to their policies at any time. It is recommended that operators engage in regular discussions with their agents and account managers, especially during off-peak seasons, to thoroughly review and understand their coverage.
Leavitt Recreation & Hospitality Insurance, a leader in the field since 2006, insures over 3,500 RV parks across all 50 states. The agency is well-equipped to address the unique challenges faced by the campground and RV park industry, offering tailored insurance solutions that encompass a wide range of outdoor activities and facilities.
This rising trend in insurance premiums is a crucial issue for the campground and outdoor hospitality industry. Understanding the underlying factors and exploring effective strategies is essential for operators to navigate these challenges and ensure the sustainability of their businesses in a dynamic economic landscape.