Insurance

[JamesB]

Instead of playing games, why not post the information and the source footnote and be done with it?

[Drew Aldred]

The number I heard was so ridiculously low that we shouldn't even bother with having insurance. Just be self-insured and pay out any claims - WAY cheaper than the 1.7 M insurance policy. Again, IF the number I heard was correct, I haven't talked with anyone else to verify it yet.

Just like UPS carries no insurance for it's trucks, they just pay out any claims against them.

[JeffYoung]

Drew, I understand, but that is the case with most insurance. The premium far exceeds any actual payout.

The point is you are trying to avoid a single catastrophic loss with no coverage that bankrupts you. That is the risk avoidance that you are paying for.

For example, take a look at the SCCA's books. They could not handle a $1 MUSD uninsured cash payout, much less a $10 MUSD one.

[Joe Harlan]

Drew, I understand, but that is the case with most insurance. The premium far exceeds any actual payout.

The point is you are trying to avoid a single catastrophic loss with no coverage that bankrupts you. That is the risk avoidance that you are paying for.
For example, take a look at the SCCA's books. They could not handle a $1 MUSD uninsured cash payout, much less a $10 MUSD one.
[/b]

That would be things like the fran am deal....

[JeffYoung]

Joe, the court file you sent me on that showed some stupid stuff on SCCA's part, that is for sure.

Still, different from a catastrophic personal injury -- pure business losses that are hard to insure against anyway.

But could have been entirely avoided if they had just been fair to the Fran Am guys.

[Joe Harlan]

Joe, the court file you sent me on that showed some stupid stuff on SCCA's part, that is for sure.

Still, different from a catastrophic personal injury -- pure business losses that are hard to insure against anyway.

But could have been entirely avoided if they had just been fair to the Fran Am guys.
[/b]

Woa,,,,,,,Jeff. We found something we publicly agree on......It could be a good day after all..

[JeffYoung]

I will drink to that.

[Mattberg]

Ok Jeff.

My guess is a little over $8,000,000 in premiums in and something like $16K a year in payouts. Furthermore, less than 10% of that attributed to club racing with rally first and solo second. Those light poles in high school parking lots are expensive!

And as I've said. It has NOTHING to do with how fast you go or the risk of the activity to the individual. Even catrastrophic loss is out of the question because of the definition of participating in an ultra hazardous activity. No one has ever sued successfully for a racing accident as a principal.

It has to do with the venue, number of people there and the damage that can be done to third party property/individuals. Race tracks are set up for such. High scool parking lots are not. Race tracks have limited access and fences. Parking lots do not.

The big question to me is this... where is all that insurance money going? If you only have payouts of $16K or so a year for 50 years, why would you keep paying millions protecting an asset for ten times it's inate value? Something doesn't jibe. We carry $15,000,000 policies on everything including umbrellas. We're the most over insured organization I've ever seen. Why? What is it we have to protect? Well I guess that depends when your risk analyst is also your broker and your general counsel and gets paid a commission on the policies he sells you. :026:

I hate to tell you this Jeff but common sense has to kick in sometime. Someone is making a shitload of money. I have a very hard time believing it's one guy. Why wouldn't you self insure after 50 years of history? In another ten years we will have paid another $20 million in premiums and payout will not have changed other than CPI increases on medical. Wouldn't it just be better to risk losing our less than $1M in assets and pay out the claims ouselves? The bigger question is why our BoD has not taken this approach.

Better question for you Jeff...

You're an attorney. Would you pay $1,700,000.00 in premiums per year for malpractice to protect what you have? I hardly think you even have close to a risk of $16K a year, but all the same, would you pay it? It just doesn't make sense.

[Andy Bettencourt]

I have claimed $0 on my car insurance policy over the past 15 year. I have paid roughly $1K per year. Based on these arguments, I could have 'self insured' my car and had $15K in the bank.

But this isn't how real life works IMHO. You pay a yearly note to protect yourself for a huge loss. I can't afford to have my car become a total loss, but I can afford a small amount per month/year to INSURE (duh) that I don't end up with nothing.

I have a feeling that if the SCCA WASN'T properly insured (ie: self insured) and we lost it all, these same people would be up in arms that we have no club because we were taking a calculated RISK and LOST. (Headline Topeka: SCCA BoD takes HUGE risk with YOUR dues and loses it all!!) That is what insurance is for. Protection.

Now are we OVER insured and could save some money on annual premiums? Someone with way more knowledge that me, that is for sure. And if that is Matt, so be it but he has no credibility here - or almost anywhere because of his actions/tactics. If its a real issue, drop it on someones doorstep who can actually get the ear of someone who can change something because Matt is done outta 'cred'.

I bet if someone came over from a large member organization like AAA or something, we could really get down and dirty with these business issues. Driving costs down, bulking up features and benefits, etc. I just don't know how the 'business' department of the SCCA is staffed.

[Joe Harlan]

Regardless of how you feel about Matt, Do you not question why after getting rid of rally our insurance fees didn't drop? Fact is Andy I have actual documents that show the payouts on our claims over a 5 year period. I am not sure how we can be rated at the level of risk we are. I have not had time to finish a complete analysis of this and I am not planning on posting any of it on the web. I would suggest this topic be moved over to save club racing site and not take up anymore space on this site. Thanks

[JeffYoung]

Andy is right.

Also, the umbrella portion of the insurance is probably very cheap. The real risk to the insurer is the first $1 MUSD, not the last $14 MUSD.

Will the SCCA give you a break down of how the premiums break down?

Then, as Andy says, what you really need to do here to see if there is an issue is see if (a) the amount of insurance we are carrying is too high given our risk (I suspect not, as one single wrongful death claim can approach our coverage limits) and ( whether the premiums we are paying are too.

Point ( is really a question to be determined by looking at what other insurers, IF ANY, are offering for this type of risk. That's really what you guys need to be doing. Ask NASA or PCA or BMW CCA how much insurance they carry, and at what cost and then compare it to the SCCA.

[Joe Harlan]

Andy is right.

Also, the umbrella portion of the insurance is probably very cheap. The real risk to the insurer is the first $1 MUSD, not the last $14 MUSD.

Will the SCCA give you a break down of how the premiums break down?

Then, as Andy says, what you really need to do here to see if there is an issue is see if (a) the amount of insurance we are carrying is too high given our risk (I suspect not, as one single wrongful death claim can approach our coverage limits) and ( whether the premiums we are paying are too.

Point ( is really a question to be determined by looking at what other insurers, IF ANY, are offering for this type of risk. That's really what you guys need to be doing. Ask NASA or PCA or BMW CCA how much insurance they carry, and at what cost and then compare it to the SCCA.
[/b]

Jeff, this is my intent and unfortunatley this thread has been reopened. I have the information needed to get an accurate bid. Anyway enough said from me on this

[bldn10]

"Why did they see Fran Am as such a threat?"

Like Joe said, to protect the SCCA's investment in the FSCCA via Enterprises. I think it is a conflict of interest for a sanctioning body to be in the business of building and selling cars. Enterprises should be divested. The excuse not to was that the BOD felt we should hold onto it but I presume that the real reason was that they didn't get crap for offers. Anyone know anything about this?

Earlier someone said in effect that Pete Lyon had the ins. locked up. What does that mean? Surely he isn't on both sides of the transaction.

[JeffYoung]

The funny thing is it looks to me that the SCCA (and Enterprises) could have BENEFITTED from Fran Am by adopting their car and selling it at a slight markup. I don't know all the ins and outs though, just what I got from the Court papers Joe sent.

What disturbed me in those was the decision by the SCCA NOT TO CLASS THE FRAN AM cars. That was just wrong and silly and righfully led to a lawsuit.

Bill, Pete Lyon is SCCA General Counsel and also the broker for the insurance company thorugh which the SCCA buys insurance. While it looks bad, it may not be if the premium is reasonable, etc. Also, Lyon may play no role in selecting the insurance. We'd have to look at BoD minutes to see who voted on this and approved it.

That said, I woudln't have set it up that way just to avoid any appearance of impropriety.

[Joe Harlan]

The funny thing is it looks to me that the SCCA (and Enterprises) could have BENEFITTED from Fran Am by adopting their car and selling it at a slight markup. I don't know all the ins and outs though, just what I got from the Court papers Joe sent.

What disturbed me in those was the decision by the SCCA NOT TO CLASS THE FRAN AM cars. That was just wrong and silly and righfully led to a lawsuit.

Bill, Pete Lyon is SCCA General Counsel and also the broker for the insurance company thorugh which the SCCA buys insurance. While it looks bad, it may not be if the premium is reasonable, etc. Also, Lyon may play no role in selecting the insurance. We'd have to look at BoD minutes to see who voted on this and approved it.

That said, I woudln't have set it up that way just to avoid any appearance of impropriety.
[/b]

Let me add, that while I would have never headed doen the path of building spec cars from a non-profit. The fact is we did. We sold 800+ cars under a stable rules set and have a very competitive group of cars attending every race they can. SRF has the highest participation numbers over the laast 7 years (all I can count) We made a promise to the guys that bought them to maintian stable rules and cost controls on the class and we need to honor that until the cars are not a viable option. Like all things SCCA i believe enterprises suffered from piss poor managment in the past and that was the biggest issue with it turning good numbers. I believe the current manager has the best interest of turning a profit while maintianing the cost effective nature of these cars. I have no propblem with the choice to service our customers as we should. That said other business practices of the past and current are the real issues this club faces.

[Mattberg]

And what is this insurance protecting? What is it we have so dear that we fear losing so much? If anything the insurance sets us up as a target. So why have it?

No one's going to sue the club if there isn't any insurance and if they do what are they going to get? Why not save almost $1.8 million a year? Or, if as Jeff said, the first $1M is the expensive part, let's just self insure the first million. We'll save $800,000 given we actually have a catastrophic loss.

But the problem is that the insurance is the big money in the club and its controlled by little minds. Either something is not right or those in charge have simply lost their heads over-insuring. There's nothing worth $15,000,000 to lose except the possible PERSONAL losses of officers, officials and directors... now there we might be onto something.

[charrbq]

I agree with your protection of the Enterprises commitment, Joe. But the did the same on the Shelby CanAm, didn't they? As far as price protection, the original Spec Racer sold for a little over $10 grand, but after Renault and the SCCA had a "divorce", and the Roush/Ford drivetrain came on board, the transition amounted to another $10,000 to purchase in kit or to transform. Then, the SCCA dumped totally on the Renualt powered cars and refused to allow them to race in any form of SCCA event.

But, say we protect the SRF's and their racers...what caused the FE formula cars and the sports racers? Did we, as a club, need another spec class that was sold by us to be raced by us? Did Mazda, as some have suggested, lay an abnormally large quantity of bucks in the back pockets of some to get such a class created?

Cheese, when F500 was created as F440, we promised to keep the rules and the engines solid, but once they went national, the chassis were rendered illegal. Shortly there after, the engine supplier went away, only to be replace by another, and then replaced by an even different one. Where was the stability in that?

Even Formula Atlantic has gotten lost in the rules changes. Gone are the Ford BDA's, replaced by the Toyotas, and now booted by the Mazdas.

No wonder the production guys P&M! Their's is a nightmare of confused rules.

[Joe Harlan]

I agree with your protection of the Enterprises commitment, Joe. But the did the same on the Shelby CanAm, didn't they? As far as price protection, the original Spec Racer sold for a little over $10 grand, but after Renault and the SCCA had a "divorce", and the Roush/Ford drivetrain came on board, the transition amounted to another $10,000 to purchase in kit or to transform. Then, the SCCA dumped totally on the Renualt powered cars and refused to allow them to race in any form of SCCA event.

But, say we protect the SRF's and their racers...what caused the FE formula cars and the sports racers? Did we, as a club, need another spec class that was sold by us to be raced by us? Did Mazda, as some have suggested, lay an abnormally large quantity of bucks in the back pockets of some to get such a class created?

Cheese, when F500 was created as F440, we promised to keep the rules and the engines solid, but once they went national, the chassis were rendered illegal. Shortly there after, the engine supplier went away, only to be replace by another, and then replaced by an even different one. Where was the stability in that?

Even Formula Atlantic has gotten lost in the rules changes. Gone are the Ford BDA's, replaced by the Toyotas, and now booted by the Mazdas.

No wonder the production guys P&M! Their's is a nightmare of confused rules.
[/b]

Oh Chris that's alot to absorb. My comments don't respond to the mistakes of the past. They deal with the current deal. Average of 22 entries per weekend and even if we lost 10 of them by dumping the class. thats an average of 2500 bucks a weekend that regions loose of the top. Now times 10 races a season thats 25k. My region would fail to exist if we lost 25k over a season at this point. The 25K doesn't include the other monies these guys spent with the club. SRF if ran at a break even is good for the club. It is a member getting program. It was also start many years ago when startup cost were alot better than today. Do I agree with a spec formula car? Nope not at the credibility that it has cost this club. None of this would really be an issue if the doors were open and there was more membership oversight of this stuff. But unfortunately what happens when you disagree with this group is they kick you to the curb. If your a stward you better tow the line or you wont get good jobs, If your a bod member and speak out you get shit jobs or ignored. Unfortuate but true.

[seckerich]

Is it possible that the extremely high coverage is a carry over for minimum amounts required for Trans Am and Pro? Might be the reason it is still so high. Could some of the pro venues require this coverage? Just thinking out loud.

[JeffYoung]

Matt, not trying to be rude, but I think you are still missing the point of the insurance.

You've seen the SCCA's books. A $1 million judgment against them that was not insured would sink the Club, or come very close to it. That's why they pay the premium that they do -- because there is no way the Club could take the huge cash hit from even a single large claim.

Steve, you may be right, that some of the high premiums paid in years past were due to Pro and Rally.