Is Event Insurance for You?
In a recent series of posts on LinkedIn, there was a discussion about interruption and cancellation insurance. It’s an ongoing discussion among meeting planners. Those that work with or sell into the corporate market are quick to say that a well-worded contract will suffice to protect clients from excessive penalties and shortfalls.
I agree. However, in the faith-based and trade show arena, a drop of 25 percent or more of the attendees due to some unforeseen occurrence could have fatal implications for a sponsoring organization. Here are a few questions you need to answer to determine if you should consider cancellation and interruption insurance:
➤ Does your show/event generate a significant amount of your annual revenue?
➤ Would a sudden, last-minute and significant (5 percent or more) downturn in attendance substantially impact your organization’s financial status?
➤ Could your organization cancel an event and not be significantly affected by the loss of profit?
All of these questions relate to the financial viability of the sponsoring organization. For those unfamiliar with this type of coverage, it protects your revenue—not your profits.
Here’s an example, based on a very realistic scenario: You produce an annual event with 2,500 attendees. Each registrant will pay $500 for registration. Your event has a trade show component; 150 exhibitors each pay $2,500. And don’t forget your sponsors: Add another $500,000. Between all of the above, you’ll generate $2.125 million in revenue. Your profit will be based on the difference between what you spend to produce the show and your revenue—an estimated $1 million.
Close to the start of your program, there is a health issue—say swine flu or SARS. Remember SARS? Your host city has a high number, or the highest number of documented cases. A renowned medical agency publicly recommends, “Don’t go there because there’s a chance you may get sick.” It isn’t an epidemic, but suddenly your attendance starts falling. You’ve already contracted and committed based on 2,500. Now it may be 1,700 or as low as 1,200. Your revenue projections now look like you may break even at best. If you had purchased an event cancellation/interruption policy, you can now get a good night’s sleep.
Here’s why: The insurance will protect your top-line revenue. You’ll be able to pay your bills, protect your income and remain financially intact. A claim of this magnitude will take a while to settle and requires an enormous amount of documentation and substantiation.
There’s a reason we don’t drive without insurance: risk. Ask yourself how much risk you’re willing to accept for your denomination, organization or company. The premium for this type of coverage is expensive. You have to plan for it, budget for it and apply for it each time you want it. It may not be best for everyone, but this is where you need to do your homework, assess your risk, discuss the upside and downside, and be prepared to live with your decision.
Industry associations—Meeting Professionals International, Professional Convention Management Association, etc.—have researched numerous providers and options and will serve as a great first step in determining which is best for you. So, take the time to make a well-informed decision.