The high-value of even the lowest-priced racing cars and the likelihood of calamity drive up overall insurance costs and make liability coverage for motor sports particularly difficult to find, according to motor sports insurance experts.
Race car insurance is also difficult to find because only the best drivers have long careers. Beginners and even experienced drivers soon spin out of control, causing accidents that cause premiums to skyrocket. Insurers take a close look at off-track speeding tickets and some cancel coverage at the drop of the “yellow flag,” note specialists in this field.
Because race car operations require teams of dozens of employees, workers’ compensation, health insurance and employee-related coverages are just as important to those insureds as their liability coverage. But those, too, can be tough to locate or afford.
Laura Hauenstein is the recently named president of the Indianapolis-based WSIB Insurance Agency LLC. Her firm’s WSIB Motorsports Division offers coverage for professional and semi-professional race teams and race tracks.
Hauenstein entered the insurance industry as a general agent specializing in trucking accounts and plastic manufacturing. “Trucking companies sponsor small racing teams on dirt tracks like crazy,” Hauenstein said. “You can’t walk through the pit without seeing a trucking company decal.”
She said her love for auto racing on dirt tracks pushed her into specializing in motor sports insurance. In fact, many of today’s successful drivers on the NASCAR circuit started on dirt tracks.
As part of her job, Hauenstein spends “a great deal of time visiting different teams and facilities from the East Coast to the West Coast,” she said. Two of the biggest insurance concerns in racing are finding reasonable general coverage for participants, whether for amateurs or professionals, and obtaining workers’ compensation coverage, she said.
“It’s tougher for the racer at the amateur level right now,” Hauenstein explained. “If a racer is big enough and high-profile enough, the insurer will find a way to work the policy into its program.”
But sport racing is not all about the well-known names; it’s about the guys working their way up.
“They have a team, they are not homeowners, and the auto insurance doesn’t cover them and they have to find coverage somewhere,” Hauenstein said. “When I look back at what we have done over the years, it makes me smile, because we insure NASCAR and all the big names, but more important, we designed a program for guys that need the coverage but no one else will sell it to them.”
The insurance covers drivers’ transporter, tractor and trailer, equipment, and a few tools. Most have an auto policy for their vehicles, an off-track policy to cover their cars while in storage and general liability.
The on-track racers have to deal with risk managers who dictate that they buy $10 million of owners’ and sponsors’ coverage before they will put their decal on a car.
With small teams, WSIB covers the tractor trailer, off-track and general liability. Then, as the driver grows, Hauenstein has a Chubb program that covers auto exposure and general liability as property exposure needs increase. WSIB uses Capacity Coverage Co. of New Jersey Inc. as its umbrella company.
Workers’ comp concerns
Hauenstein said workers’ compensation in racing is the biggest consideration and costs the most for successful teams. Only a few companies will write workers’ comp because race car operators are not included in insurance bureau ratings.
“Day-to-day workers’ comp exposure of employees isn’t that bad,” Hauenstein maintained.
“The liability occurs on Sunday, when you are watching that big race, and employees are going over the wall, being hit by and thrown over speeding cars. That’s the comp case we are on, and it is very high severity. If you aren’t careful and haven’t selected enough premium or monitored what’s going on, there have been many companies that go in and out of the business.”
Hauenstein said one claim in which someone is plowed over in the pit lane can really skew a team’s safety record and its books.
“Compared with usual garage risk, we are talking about high-paid individuals that are very much into their work,” Hauenstein added. “They want to work. They want to go racing. So you are not about to find that they are going home and, ouch, wanting to collect a disability check … But the typical garage employee does not run the high risk of being hit by a race car coming into the pit.”
Non-standard auto insurer
The United Automobile Insurance Group, a Miami Beach, Fla.-based property and casualty insurance company focusing on the non-standard auto market, has taken its own marketing approach. The insurer sponsors a Vision Racing Indy car, which was driven by Ed Carpenter in the 2006 Indianapolis 500.
“By sponsoring an Indy car, we hope to increase name recognition and develop closer ties to our independent agents,” said Michael Parrillo, UAIG’s executive vice president.
Ken Liffick, assistant to the owner of Vision Racing, said that the cars used in Vision Racing are now approaching the last year of their lifespan. He said finding liability insurance for race cars isn’t usually a problem. Most owners opt for the best coverage when the cars are brand new, but as they get old, insurance coverage becomes less pricey.
“When the cars are brand new and have new chassis, all the drivers insure them,” Liffick explained. “When it gets toward the end, before the new chassis come out, they don’t insure them any more; they just buy used cars and use them as parts.”