Tag: K&K Insurance

Scrambling to insure Florida parks

In the aftermath of Hurricane Ian, 2022

Back in April, when Beryl wasn’t even a glimmer on the horizon and as national campground leaders continued to pretend they can do business as usual, I wrote about the especially dire situation in Florida. This is a state, after all, that has a front-row seat for the some of the most devastating hurricanes to afflict the northern hemisphere, a state that with an average elevation of just 100 feet above sea level poses no more than a speed bump for the increasingly savage maelstroms periodically pounding the peninsula. How do RV park owners cope with such a growing threat? Where do they turn for some measure of relief?

Piquing my interest was a half-page ad in an industry publication placed by K&K Insurance, advising readers that it “protects campgrounds with coverage designed for your unique needs”—mostly. Because even though the ad specifically stated that K&K is a licensed insurance producer in all states, the ad just as specifically stated that its campground coverage “is not available in Florida.” Only Florida. California and its wildfires, the entire Midwest and its tornadoes—hell, even Texas and its comparable hurricane and tornado exposure were not singled out for exclusion. Isn’t that special?

Nor is K&K an outlier. Indeed, property insurance has become so prohibitively expensive in the Sunshine State, when it’s available at all, that even the most resolute climate-change deniers have been forced to confront the one thing everyone understands. Think what you want about internal combustion engines and carbon dioxide and the greenhouse effect, but airy-fairy opinions don’t stand up well against the remorseless logic of cold, hard cash. When your business is on the line and every hurricane season means a fresh roll of the dice as to whether you’ll make it to December—well, what’s that saying about atheists and foxholes?

It therefore isn’t entirely surprising, although still to its credit, that the Florida-Alabama RV & Campground Association has taken a tentative first step toward dealing with a seemingly intractable problem. As recapped on its website, the association has started exploring the possibility of creating a captive insurance company—an insurer, as the name implies, that is owned and controlled by its customers. In one sense, this amounts to self-insurance on a grand scale, dispersing risk over a wider base than would be possible if each campground set aside only its own reserves. In another sense, a captive insurance company would be an attempt to insulate its members from wider market forces, such as “changing investor appetites,” which the association blames in part for its plight.

To make its case, the association recently hosted a “virtual Q&A” with Austin Gaines, a partner in Alabama-based insurer Starke Agency, and is currently seeking expressions of interest from its members. But while the session detailed the benefits of a captive insurer, including more control over insurance costs, profit retention and customizable coverage, it provided only a sketchy description of the downsides, diplomatically labeled “challenges and considerations.” Most notably that includes substantial up-front capital contributions, which Gaines apparently did not enumerate—although, to be fair, how much those might be will depend on how many campground owners sign up. “Economies of scale are crucial,” he said, noting that “the more members and premium dollars a captive has, the lower the fixed costs per member.”

Radical though such a concept might seem to some, it’s actually just an example of history repeating itself. Evergreen USA was the insurance company for campgrounds and RV parks for more than 20 years, created in 1989 with investments from privately owned campgrounds because conventional insurers didn’t know how to assess the risks of a relatively exotic business they didn’t understand. That’s a lot like the concept being examined in Florida, although Evergreen was set up as a risk retention group, which is similar to a captive insurance company but with several key differences that the Florida association might also consider exploring.

Evergreen, meanwhile, is no more: it shuttered its doors a decade ago, a victim of those same “changing investor appetites” that prompted the stuffy insurers who had turned up their noses at an upstart industry to suddenly decide this was a hot new product line, after all. Now the pendulum has swung the other way, and Florida won’t be the end of it. Other states, as alluded to above, have at least as perilous a risk profile as Florida’s, with their RV parks having just as many problems obtaining affordable insurance. At least California and Texas have the advantage, as in Florida, of having their own independent, active and well-subscribed state associations through which to raise the issue and explore solutions with their members.

The same can’t be said of the great swath of the country’s interior that gets pummeled by tornadoes, flooding and hail the size of softballs. Many of those states, like Iowa, Oklahoma and Arkansas, don’t even have state associations. Those that do, like Missouri, Kansas, South Dakota and Illinois, are too small to shoulder the burdens imposed by self-insuring, and the umbrella organization that should be filling the void, OHI (formerly the National Association of RV Parks and Campgrounds, or ARVC), is too busy rebranding itself as a marketing and lobbying group for the “Outdoor Hospitality Industry” to notice what’s happening at the grassroots level. Crippling weather events? Unaffordable insurance rates? OHI doesn’t recognize these as problems in any sort of public way, other than to periodically issue requests for contributions for campgrounds that have been pummeled by the latest weather outrage.

The route Florida has chosen is a tough slog, starting with having to convince individual campground owners to cough up a whole lot of paperwork and financial records going back at least five years so that valuations and risk can be properly assessed. But clearly something has to change, and the notoriously self-reliant campground industry just may be up to the challenge. Or as the Florida association’s recap concludes, the “captive insurance solution holds promise of stabilizing and potentially reducing costs for its members.” It’s been done before. Could be, it’ll be done again.

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Notes on an evolving RV landscape

When we bought our campground, in 2013, there was only one insurance company that would provide us with liability coverage. It wasn’t that we were an especially bad risk. Campgrounds were such a niche market, and so poorly understood, that the insurance industry simply didn’t want to touch them. The sole exception was Evergreen U.S. A., which had been founded almost 40 years earlier and was owned by campground and RV park owners precisely because that was the only way they could get the financial protection they needed. We were lucky they were around.

But that didn’t last long. Just as we acquired a campground because—among other reasons—we thought this was a dynamic industry, larger, more mainstream insurance companies likewise realized they were missing out on a sure thing and suddenly began piling on. By mid-2014, Evergreen’s board of directors had thrown in the towel and stopped renewing policies. Bigger, better capitalized insurance companies had the resources “to beat our rates and provide incentives we can’t always match,” explained Evergreen’s president, Lucas Hartford, at the time. “In these times, price is more important than ever to our customer’s success.”

Well, what goes around comes around. This month’s Woodall’s Campground Magazine has a half-page ad from K&K Insurance advising readers that it “protects campgrounds with coverage designed for your unique needs.” Campground owners should ask their insurance agent for a quote from K&K, the ad advises—unless their “unique need” is owning a campground in Florida. Because even though the ad specifically states that K&K is a licensed insurance producer in all states, with FL license #L007299, the ad just as specifically states that its campground coverage “is not available in Florida.”

Care to guess why? What is it about hurricane central, garnished with rising sea levels and appalling heat, that makes it unappealing for a company that exists specifically to underwrite risk protection?

K&K is just a canary in the coalmine, but similar redlining is all but inevitable. And it won’t be just Florida that gets hung out to dry, or just K&K pulling in its horns, as extreme weather becomes more widespread, more prevalent—and as campgrounds and other outdoor venues increasingly are seen as being especially vulnerable.

But unlike past decades, when RV park and campground owners rallied to meet a common need, the industry these days is far too fractured to respond in similar fashion. The big corporate-owned chains have deep enough pockets to self-insure or to package their various properties into more insurable risks. The national organization that once represented campgrounds and that might have taken a leadership role in addressing a common threat now has a new, androgynous name—OHI—and broader ambitions: it wants to be the spokesperson for “outdoor hospitality,” a role that apparently precludes any conversation about climate change.

That leaves the so-called mom-and-pop owner/operators fending for themselves, just as they did in the good ‘ol days.

Meanwhile, another slow-motion train wreck affecting the campground industry—and specifically those campgrounds chasing after algorithm-driven reservation systems—is shaping up in the form of lawsuits in Arizona, Tennessee and Washington, D.C. and criminal investigations in North Carolina and by the U.S. Justice Department. In their cross-hairs is RealPage, a Texas-based property-management software company that is being accused of illegally fixing apartment rental prices.

ProPublica reported extensively on this problem 18 months ago, and in a subsequent post I raised the question of how something similar is happening with many campground reservation systems generally, and with CampSpot specifically. As outlined in a second post, Campspot already has a lion’s share of campground business, which means it also has an enormous amount of reservation data to crunch, such as site and occupancy rates sorted by campground size, day of the week and any number of other variables. This data is then available to Campspot’s clients, in supposedly anonymized form, with those campground owners free to do with that information what they will.

That’s handy for the campground owner who wants to see how his property stacks up against others. It’s also a first step toward cartelization, enabling supposed competitors to adjust rates in lockstep without directly talking to each other, which would be an antitrust no-no. Whether RealPage—and by analogy Campspot, if on a much lesser scale—are nevertheless facilitating anticompetitive behavior is the question state and federal authorities are raising, but as a Wall Street Journal article a couple of days ago noted, the Biden administration is generally taking a much harder line on price fixing.

“Any rulings against Real Page could have legal ramifications for other business sectors, such as online retail, where companies also use algorithms to make pricing decisions,” the Journal noted.

The headlong rush by the industry to embrace new digital technologies—AI increasingly is coming into play, as well—is just one more step away from the fundamental aspects of camping that made it a worthwhile pastime in the first place. It’s all done in the name of improving business fundamentals, of course, but those “improvements” invariably reshape “the business” until it becomes just like everything else: more gentrified, impersonal, homogenized and packaged—and, above all else, expensive.

The glamping phenomenon is of course the apotheosis of this trend, exploding across the campground industry over just a few years. But just how far things have gone may be exemplified by the recent announcement that AutoCamp is now partnering with . . . Hilton Hotels, which has as much to do with the outdoors as Louis Vuitton. “This is the first time a major hospitality brand and outdoor lodging company have come together in this way to create even more choices for travelers while redefining the outdoor hospitality experience,” crowed a Hilton executive. How nice for OHI’s expanding portfolio. . . .

Which brings me to one final report, that of a Colorado entrepreneur who earlier this month broke ground on Kosmos Stargazing Resort, just outside Alamosa, in the San Luis Valley. The planned 22 glass-domed stargazing villas, which have received a special use permit as a “campground,” are to be rented for $700 to $1,200 a night.

Now that’s camping, eh?

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