Here’s An Insurance Option That Could Save Australian Music Festivals

The long tail of COVID, which still has music festivals cancelling or delaying because of costs, keeps the problem of insurance in the spotlight.

Some are refused coverage, while some small to medium events whose premiums went up tenfold take the dangerous step of ignoring cancellation coverage.

The industry is looking at the reasons behind rising Public Liability costs and exploring alternative insurance solutions.

One of these is the Mutual model, a not-for-profit members-owned collective that pools the funds and takes from them when claims are made. Among the initial advantages identified is that it can be shaped specifically around the unique needs of festivals.

“There are three reasons why this has the potential for moving the needle in the conversation, which has been stagnant for a while.”

So says Heidi Lenffer, founder of FEAT (Future Energy Artists), who has been leading the industry study alongside Allan Deacon, CEO of Bloom Insurance.

Firstly, she says, the not-for-profit mandate of the model. “This got me really excited because in the current system, you have a full-profit mandate for an insurance company.”

The current system involves getting coverage from a well-funded company, usually from abroad, because most Australian firms are too small, usually booking Lloyds of London.

By the nature of their being profit-driven, their priority is try not to pay out claims, and blame the complainant for the problem.

For international insurers, there is little reason to take risks. The live entertainment sector falls right under the too-risky category.

A report in TheMusic.com.au of the insurance industry’s October 11, 2024 appearance at the House of Representatives Standing Committee on Communications and the Arts spelled out why insurance companies were distancing themselves from the live entertainment sector.

Partly, it was what it considered a dangerous mix of big crowds, alcohol and drugs, frenzied dancing, unpredictable weather and restricted access to medical services in remote sites.

Pay-outs, too, have escalated. Ten tears ago, a broken ankle was worth $10,000. Now it’s $200,000; some damages go up to $400,000 if a lawyer can successfully argue mental anguish by their client.

Lenffer points out, “For an industry like ours, a not-for-profit structure would have a much greater alignment behind insurance as a safety net for hard times.”

Second Appeal

The second appeal is that “this is an industry-owned industry-controlled structure.” This goes back to the origins of insurance, when ship owners or farmers would band together to create a safety net for members of their community. 

“So if the ship went down or the crop was ruined, they could help their community out. The best modern-day version of that is the Mutual, [which is] the most sophisticated, and it’s got the industry at the centre.”

The third attraction for FEAT. about the model is, “This isn’t a pie-in-the-sky out-dated idea from yesteryear. This is an operating model for industry groups today, especially in Australia, where we have two key industries that’ve done it successfully for 40 years—universities and local councils.”

Universities found it difficult to get specific cover for experiments in their labels, and three were denied cover. Eight universities came together in 1989 and formed Unimutual. It still operates with a wider amount of members.

Similarly, local councils around that time were also facing challenges getting public liability insurance. In 1993, 96 NSW councils formed Statewide Mutual. It now has 113 members, and many of these cover regional music festivals under that model.

Launched in June 2009, FEAT. came into being after Lenffer was stunned to hear that a 15-date tour by her band, Cloud Control, would generate 28 tonnes of carbon emissions—the equivalent of an average household’s annual output.

She worked with festivals such as Laneway, Splendour and Falls, and touring artists on reimagining themselves as the climate crisis worsened. It led her to look for insurance options as worsening weather patterns made the live entertainment industry even more risky by the larger insurers.

Allan Deacon from Bloom Insurance turned her on to the concept of the Mutual. At the time, he was working on finding an innovative weather insurance model for the organic farming industry, which is facing similar challenges to live events with unpredictable weather.

Growing up in a regional NSW town, he recalled how farmers survived by forming themselves into Mutuals. “In the early days, they were farming co-ops. You put your money in a jar. If you had a fire in your haystack, you took the money out.

“The difference today is that it’s very heavily regulated by ASIC (Australian Securities and Investments Commission) and APRA (Australian Prudential Regulation Authority).

The Mutuals model includes tax benefits, can reduce insurance costs by 20 to 30 per cent, and allows members to leave without paying a penalty.

Mutuals also provide a greater choice of who and what gets covered. 

“We see smaller regional festivals where a lot of volunteers are aged over 70 and not covered if they had an accident. But they would be in a Mutual. You have the potential to include performing artists in the cover as well.”

Deacon notes that setting up in Australia means Australian festivals are not being unduly penalised because of international claims.

“If you look at the festivals claims in the last few years, there have been significant ones in the US. So when we’re buying insurance from the UK, we’re also being penalised for claims being made by Americans.”

One aspect to be investigated is how much funding is needed to set up a Mutual to ensure claims can be paid out. 

Depending on what that figure is, the question remains as to whether local, state and the Federal Government should be brought in to underwrite even if it’s just for the initial stage.

Lenffer and Deacon were speaking at a webinar organised by Music Australia and Creative Australia, which are funding the study. Also making an input on the webinar were Christen Cornell, Research Fellow and Manager of Research Partnerships at Creative Australia, and Music Australia Director Millie Millgate.

The study has further industry backing from the Australian Festival Association, Australian Live Music Business Council, Folk Alliance Australia, Festival City Adelaide, and the Country Music Association of Australia. 

Study

The webinar was also held to encourage festival promoters to supply data and anecdotes to take the study to the next step.

The survey divides festivals into five types: small to large commercial ones, small to large non-profit ones, and touring events.

Promoters are asked to provide information on public liability insurance premiums and recent claims history. Privacy is guaranteed, and the survey can be answered anonymously.

The information will be used in two ways. Firstly, to better understand how the current insurance policy landscape is influencing and impacting the costs and risks to festivals.

Secondly, to get a wider take on alternative insurance solutions.

Lenffer stressed the need to get a diverse response from the sector to find more options so the study “can conduct analysis and modelling, and what could have happened if the Mutuals had been in place.

“The key issue here is, unpredictable weather is not going away. It’s only going to become more frequent and more severe.

“The current model of festival insurance doesn’t really fit the purpose. We couldn’t see a way forward in this system.”

The deadline to provide information is Friday, April 4, at the FEAT. website.