Skyrocketing Insurance Costs Put Australian Shows, Festivals at Risk

Visitors to Sydney's Luna Park fun fair enjoy bright autumn sunshine in Sydney, Australia, on June 2, 2014. Peter Parks/AFP via Getty Images

The Australian amusement industry has raised concerns that state shows—known as fairs in U.S.—festivals, and school fetes across the country could be shut down after surges in insurance costs have led to amusement vendors finding it difficult to obtain operating insurance.

The Australian Amusement, Leisure and Recreation Association (AALRA) said prices of insurance coverage for local businesses had soared by 300 percent in the last few years.

Additionally, theme parks have had difficulty getting affordable coverage after public liability insurance leapt from $150,000 (US$106,000) to up to $1.5 million over the past four years.

However, businesses cannot switch providers because there is only one insurer offering the service to the amusement industry.

Decline In Attractions At City Shows

While state shows, such as the Melbourne Royal Show, Queensland’s The Ekka, the Royal Adelaide Show, and the Perth Royal Show, have not seen a noticeable drop in attractions compared to previous years, there have been a number of vendors who have pulled out due to problems with insurance coverage—including an inflatable attraction from the Royal Adelaide Show and jumping castle operators at the Perth Royal Show.

FMX Showtime Freestyle Motorbikes perform at the Royal Melbourne Show in Melbourne, Australia, on Sep. 18, 2010. Enzo Tomasiello/Getty Images

In Tasmania, organisers of The Royal Hobart Show witnessed a gradual fall in the number of attractions in the past four to five years, and have said they expect the situation to continue in the next three.

“They are smaller operators down here, and they haven’t spent the money to invest in the infrastructure as what people on the mainland have,” a Royal Hobart Show spokesman said.

“We are definitely concerned about the impacts of the limited insurance options and severe increases in insurance costs that our amusement exhibitors are facing.”

According to The Showmen’s Guild of Australasia, the insurance crisis has caused businesses to scale back on the number of rides that can be insured and the number they can put into circulation.

In addition, the Australian Amusement Association’s vice president Damian De Jong said the industry was utilising about 70 percent ride capacity, which was not profitable under the current insurance situation.

As a result, the future of family businesses that have operated for decades is now at risk, he said.

Solution To The Crisis

Last year, The Australian Small Business and Family Enterprise Ombudsman Bruce Billson found that the only “workable and durable” solution to the crisis was an industry-initiated discretionary mutual fund.

With the establishment of the fund, members can chip in money to cover each other’s agreed financial risk obligations as long as they satisfy the requirements.

Nevertheless, to set one up, the industry has to rely on a loan of up to $5 million “seed capital” from the federal government.

The AALRA will meet with the government later this month and hopes that it will accept the mutual fund proposal.

“I hope that this government does see the value in what our industry brings to the table,” association general manager Kristy Ahrens said.

Meanwhile, a spokesperson said the federal government was aware of the problem facing the amusement sector and it was considering the matter.

The industry generates 7,000 jobs and contributes $1.84 billion to the Australian economy.