The Dangers Of Unregulated Martial Arts Insurance

This is something we’ve covered before and will likely need to cover again – the importance of ensuring your association or governing body isn’t issuing you with a regulated product without the proper FCA regulation themselves.

As an instructor you’ll likely find the expense of instructor insurance is something you don’t look forwards to on an annual basis. The martial arts industry is specialist in it’s very nature and so there isn’t a great deal of choice when it comes to insurance. As more and more insurers start to enter the martial arts market, and as ever more associations and ‘governing bodies’ spring up there’s never been a better time to look again at how important it is ensuring you understand where your insurance comes from.

What’s been happening?

For many years now it’s been illegal for any person or company to perform a number of functions relating to a regulated product or service without proper authorisation. In the United Kingdom the FCA (Financial Conduct Authority) overseas a range of financial institutions and businesses, including the insurance industry.

Despite this, due to either a lack of understanding or a lack of regard, many associations continue to offer their members instructor insurance from named insurers. This might include, for example, an association taking money from you to set up cover through an insurer such as MartialGuard or Insure4Sport (both of which are perfectly regulated and professional insurers – this article certainly isn’t about them, it’s about the associations that use them incorrectly).

In order to perform any of the following activities a martial arts association will need to be regulated;

• Arranging the purchase of insurance policies: This covers a range of activities
  including introducing a customer to an insurer or insurance broker, as well as helping
  someone fill in an application form and forwarding it to an insurer.
• Advising on insurance policies: This includes recommending a specific insurance policy
  to a customer.
• Dealing as an agent: This includes entering into a contract of insurance with a
  customer on behalf of the insurer (for example, if you issue cover notes) or vice versa.
• Assisting in the administration and performance of insurance policies: This includes
  notifying an insurance claim to the insurer and negotiating settlement of the claim on
  behalf of the customer. Where you are only handling claims on behalf of the insurer and
  not the customer, this will not be a regulated activity. Simply providing information to
  a claimant or insurer in connection with the assessment of a claim is not a regulated
  activity either.

As you’ll see from the above list, if your association issues you any insurances that come from a third party they’re likely carrying out a regulated activity.

The exception to the rule is instructor insurance provided by group cover policies. If your association has a group cover policy, you can be assigned instructor cover via that policy provided it’s combined with membership. In this scenario the association, who is the insured party, is simply including you on their policy (and therefore there is no contract of insurance commencing). There’s a lot of ‘grey lines’ in this area so it’s important you understand the role your association plays and that you ensure it’s combined with membership – and not a standalone insurance product.

So, what’s the problem?

Let’s set aside the fact that it’s illegal for a moment, and let’s forget about the liability under which the association providing the insurance puts themselves at risk for. Instead, let’s think about you.

When an insurer underwrites cover on you, as an instructor, they’re basing the insurance policy on a number of assumptions. This is why you need to fill out proposal forms – it tells the insurer the information they need to make an informed decision and to make an offer of insurance.

When a third party does this on your behalf you have very little transparency on what is being said, what declarations are being made and what terms of contracts or policy wording you’re being bound by. A simple mistake by your association when setting up your policy could be a material breach – and could kick a claim out.

There’s also a much more insidious danger. How do you know you’re even insured? Have you seen an insurance certificate, and if so, how do you know it’s directly from the insurer and that it hasn’t been altered or replicated by your association? Unfortunately not everyone runs a reputable organisation. It’s happened before – in our industry – with fraudsters pocketing cash and not instigating insurance properly. In this instance, whilst there is a case to answer for the person or company responsible – when all is said and done you’re still not insured. This is exactly why such activities are regulated by the FCA.

What’s the solution?

You have two choices. Either find an association that can provide you with insurance via a specialist group cover policy – such as us, or find insurance yourself and go direct with the insurer.

If you deal directly with the insurer you can be clear on the terms of insurance, any limitations of cover and the material facts that are binding you to the policy.

If you do decide to use a group cover policy make sure you take the time to ensure you properly understand what is and isn’t covered. Very few organisations have these policies in place because of the high costs incurred, and even fewer have specialist or bespoke policies that will offer tailored cover.

1. Always ask to see the association’s group cover insurance certificate to ensure cover is in place for the association. You’re going to be insured via this same policy, so make sure you’re confident it’s all in place and running as expected.
2. Always check the policy wording and the limitations of cover. There will always be insurer issued limitations or exclusions. Whilst policy wording may not be the most enjoyable read, it is really important. You should be able to talk with the association offering cover with membership and they should know what is and isn’t covered. If they don’t sound sure, can you really be sure their policy is fit for your needs?
3. If in doubt, don’t proceed. If you have any doubt – be it a logical argument or a gut feeling – stop and think. How can you be sure you’re really covered, or that the policy is truly fit for your needs? Perhaps it’s worth shopping around to see what is available elsewhere.

Want to explore instructor insurance from a professional association?

Our group cover policy has been set up between our specialist broker and a number of key insurers. It’s unique and bespoke to our organisation, and as a trusted association we set the regulation on policy requirements so you can be clear on your own obligations.