There is a page on our website specifically dedicated to the concept of the wrong policy, because it is one of the most important concepts in our clients' insurance education and one of the least discussed in general insurance conversations.

A wrong policy is not a fraudulent policy. It is not a policy with an obvious flaw. It is a policy that, read carefully, does not cover the specific activity or circumstance that gives rise to a claim even though the policy holder reasonably believed it did.

This situation arises in martial arts and fitness insurance in several specific and recognisable ways.

The Undeclared Activity

A club that teaches Karate and Kobudo has arranged Public Liability cover around these two activities. Over time, the instructor begins running a regular BJJ open mat session on Saturday mornings, which becomes popular and grows. The BJJ sessions are never specifically declared to the insurer because nobody thought to, or because the assumption was that "martial arts" as a category covered everything.

A student is injured during the Saturday BJJ session and makes a claim. The insurer investigates and notes that the policy declares karate and kobudo only. The BJJ sessions were never disclosed. The insurer's position becomes complicated at minimum and potentially results in a partial or full dispute of the claim. The cover that the club owner believed was in place was, in reality, the wrong policy for the activities actually being conducted.

The Wrong Limit

A school operating from a commercially leased space has a $10 million Public Liability limit. The lease, which the instructor signed and filed away, specifies that $20 million is required. A significant incident occurs and the landlord becomes involved. The mismatch between the policy limit and the lease requirement creates a separate problem alongside the claim itself.

The Single Premise Policy in a Multi-Venue Operation

A policy arranged around one dojo address for an instructor who now teaches at three different community venues does not automatically follow the instructor to the other venues. An incident at one of the undeclared venues may not produce the cover the instructor expected.

The Legacy Policy Nobody Has Re-Read

One of the quieter versions of the wrong policy problem involves no change to the business at all only the passage of time. A policy taken out five or ten years ago, on the recommendation of whoever the club owner happened to speak to at the time, may have been entirely appropriate for the business as it existed then. Insurance wordings, industry standards, and the club's own operations all shift over that period, often without anyone consciously deciding to update the paperwork that sits behind them.

We regularly review policies for new clients that were arranged years earlier by a generalist broker or directly with an insurer with no specific martial arts expertise involved, and find gaps that were never the result of anyone acting in bad faith simply that nobody with the relevant specialist knowledge ever looked closely at whether the policy actually matched the business it was meant to protect.

The Franchise and Multi-Instructor Complication

Schools that operate under a franchise model, or that have multiple instructors running semi-independent programs under one banner, introduce a further version of this problem: who exactly is the named insured, and does the policy extend to cover the activities of instructors who are contractors rather than employees? A policy written around a single named business owner does not automatically extend the same protection to an independent contractor instructor running their own program under the school's name, and this is a distinction that matters considerably if that instructor's class is the one involved in an incident.

Clarifying the actual legal and working relationship between a school and everyone teaching under its name employee, contractor, franchisee is a conversation worth having explicitly with your broker rather than assuming the existing policy wording has already accounted for it.

How These Situations Are Caught Before They Matter

The pattern across all of these scenarios is the same: a policy that was accurate at one point in time and became misaligned with the business as it evolved, without anyone deliberately updating it. Catching this before a claim is what an annual review process is actually for.

A proper review is not a rubber stamp on last year's paperwork. It involves specifically asking what has changed: new activities added, new venues used, new instructors brought on, any change in the split between adult and junior students, any change in whether the business runs events or competitions in addition to regular classes. Each of these questions is designed to surface exactly the kind of drift that turns an accurate policy into a wrong one.

What to Do If You Suspect Your Own Policy May Be Wrong

If you are reading this and recognising your own school in any of the scenarios above an activity added since the policy was last reviewed, a second venue that was never specifically declared, a lease requirement you have never checked your limit against the right response is straightforward: raise it with your broker now, not at renewal, and certainly not after an incident has occurred. A mid-term adjustment to a policy to correctly declare an activity or venue is a routine piece of administration. Discovering the same gap during a claim investigation is a substantially worse conversation to have.

Our annual review process exists specifically to catch and correct these mismatches before they matter.

The Real Cost Difference Between Review and Regret

It is worth being blunt about the comparison, because it is genuinely stark. A mid-term policy adjustment to correctly declare a new activity or venue typically takes a short conversation and, at most, a modest adjustment to premium reflecting the additional risk. A claim dispute arising from an undeclared activity can involve months of investigation, legal costs, reputational damage within your local martial arts community, and in the worst outcomes a claim that is reduced or declined entirely, leaving the club owner personally exposed to costs the policy was meant to absorb.

There is no version of this comparison where proactive disclosure is the more expensive option. The reluctance we sometimes encounter to raise a change with an insurer — a worry that it will complicate the policy or increase the premium unfavourably is understandable but, in our experience, almost always outweighed by the protection that comes from a policy that genuinely matches the business.

A Simple Test You Can Apply Yourself

If you are unsure whether something needs to be raised with your insurer, a useful test is to ask: if my insurer sat in on a class this week, would they see anything they don't already know about from my current policy documents? A new instructor, a new style, a new venue, a materially larger class size, a new event format — any of these would likely produce a "no" to that question, and any "no" is worth a short conversation with your broker before it becomes relevant to a claim rather than after.

How We Structure Our Annual Reviews

Rather than sending a renewal notice and hoping the policyholder reads it carefully, our review process is a structured conversation with every client each year, covering activities taught, venues used, instructor changes, student numbers, event or competition activity, and any incidents in the preceding period, whether or not a claim resulted. The point of this structure is to make disclosure a routine, shared exercise between broker and client rather than something the policyholder is left to work out alone from a renewal form. We would rather spend twenty minutes on this conversation every year than have a client discover a gap during a claim.

A Word on Multi-Policy Businesses

Larger operations running several related entities — a training business, a separate events business, a retail or apparel arm sometimes end up with insurance spread across several policies arranged at different times, occasionally with different insurers, without anyone holding a complete picture of how the pieces fit together. This structure is not inherently wrong, but it does raise the risk of a gap forming at the boundary between policies an activity that each individual policy holder assumed was covered under one of the others. Businesses operating this way benefit particularly from a broker who reviews the whole structure together rather than one policy in isolation.

Treating This as an Ongoing Conversation

The wrong policy problem is, ultimately, a problem of communication drifting out of sync with a growing business over time. It is rarely caused by carelessness on anyone's part and almost always caused by change happening gradually enough that nobody paused to ask whether the paperwork still matched reality. Treating your insurance arrangement as a living relationship, revisited actively rather than filed away and forgotten, is the single most effective protection against ever discovering, at the worst possible moment, that the policy in place was the wrong one all along.