27th December 2006
The Importance of Insuring Yearling Risks
Gary Knowles – writing in the December 2006 issue of Breeding and Racing Magazine.
There is a famous black and white poster depicting a steam train that has gone over the edge of a collapsed river bridge. Its caption simply: S**T happens. And that, in a nutshell, is why insurance exists.
Sir Winston Churchill made the following observation about the desirability of insurance for English households. “If I had my way, I would write the word insurance over the door of every house, because I am convinced, for sacrifices that are inconceivably small, families can be secured against catastrophes which otherwise would smash them up forever.”
Churchill might well have been talking about the risks associated with owning your thoroughbreds. As bold of eye as they may be, and with a concomitant intelligent head to go with it, thoroughbred yearlings are for the most part 400 plus kilos of youth, and with the propensity to find trouble that goes with that. Some of them are also by nature highly fractious and skittish, and that combined with their genetic athleticism should be sufficient to make even the most risk-prone owner think twice before eschewing insuring them.
Obviously, if an owner parts with a substantial sum for a yearling then there is a de facto assumption that he or she will ensure that the young thoroughbred is given the best opportunity with a leading speller, breaker and trainer. Sadly, that doesn’t mitigate the risks involved of something untoward happening, and ultimately boils down to playing Russian Roulette with an expensive investment.
Strangely, like in Roulette, there can be the number ‘0’ at yearling sales too. Here’s how: a vendor insures their yearling to fall of hammer. The buyer, for example, puts in a winning $100,000 bid, gets congratulations all around and heads off to find a broker to insure the purchase. During those 5 minutes the yearling slips, breaks a leg and has to be put down. The vendor can’t claim (the horse has changed hands), and the new owner has no insurance. Can’t happen? It can and has!
The no-risk way for a vendor to avoid that scenario is to insure the horse up until they receive payment; for a prospective buyer the answer is to approach a broker before bidding and arrange for a cover note from fall of hammer in the event of a winning bid.
Logan’s principal Bob Logan says that one leading studmaster once told him that buying horse insurance was the cheapest part of the business. That’s because with “roughly 10 out of 100 horses having something severe happen”, the approximate premium of 4 percent makes insuring a mathematically very good bet. “Of course, what we can’t know is whether those 10 will be $1,000 or $1 million yearlings”.
In the business for some 40 years, Logan believes that yearlings, some more so than others, find it quite challenging to be taken from their familiar, relaxed, environments to suddenly finding themselves in the hustle and bustle of a sale where they are pulled out of their boxes and examined umpteen times a day. “We have had specific cases in the past”, Logan notes, “where yearlings are so relieved to be in a paddock after the sale that they run wild and end up with smashed legs or shoulders”.
Logan says one of the truisms of the insurance industry is that the premium paid becomes irrelevant when a claim arises. What ultimately matters for the insured is how good the broker’s underwriter is, and how quickly the broker usually settles claims.
Full article available from: http://www.breedingracing.com/ by Gary Knowles