Specialization Sweeps Over Personal Marine

In the absence of any major catastrophes since Superstorm Sandy, the personal marine insurance market has settled into a stable pricing period.

But as marine insurers continue to turn a profit, “the market will become more competitive,” says Brad Seeley, marine product lead at Foremost Insurance. “That will lead to strategic price decreases in certain segments over the next 12-18 months and highlighting of coverages that are being demanded more and more in the marketplace.”

“What we’re seeing now is it’s gone from where boat insurance was kind of an afterthought to where you can get all these a la carte options,” agrees Jim Grimm, technical supervisor and examiner in the watercraft claims group at American Modern. “The industry is starting to segment based on type of boat because from the manufacturing side you’re seeing more specialization.”

What segments are gaining in popularity? And what coverage options will be required to address the associated risks?

Emerging Classes

Ski boats, wakeboard boats, different types of fishing boats and more are “dictating to the insurance companies that they need to come up with product offerings that meet the needs of specific types of boats,” Grimm explains. “Instead of just ‘Here’s your boat policy,’ we’re seeing a move toward all these different specialized coverages, depending on what they’re using the boat for.”

Specific coverages to address specialization are starting to gain traction in the marine market, Seeley says. For example, “customers with boat lifts/hoists may not have had coverage for those items in the past,” he says. “Now, customers are proactively asking to make sure these structures—whose values are easily in the $1,000s—are covered to ensure they’re protected.”

Seeley has also observed more marinas requiring half a million in liability coverage, which he says “is driving a shift overall to higher liability limits in the market.” And as the larger boat market grows, pollution liability coverage is also picking up steam.

Similar to the personal auto segment, where telematics are complicating and expanding insurance needs, personal boats now feature accessories worth upwards of $20,000 in areas like stereo equipment, wakeboard racks and complex drive systems, Grimm says. For fishing boats, advances in electronics involve high-tech GPS systems that can run $2,000 apiece.

“Some of these boats you’ve got three units mounted on them,” Grimm says. “You’re not dealing with just the boat anymore. The coverages are still catching up to that as far as the dollar amounts available.”

On the Horizon

As the “sharing society” continues to infiltrate all corners of insurance, the line between what constitutes a personal vs. a commercial risk in marine has blurred. “We are seeing a lot of multiple owners of a boat—you’ll see three or four people or families who all go in together and purchase a boat,” says Bill Gatewood, corporate vice president and director of personal insurance for Burns & Wilcox. “They all have exposures, they all need to be covered and that does create a challenge, particularly in a standard market.”

The same goes for corporately owned boats. “If I own a business of any kind and I buy the boat, mostly it’s just for me and my family, but occasionally I’ll entertain clients on it,” Gatewood says. “Is it a business exposure? And are the business exposures covered as well as when you’re taking your family out?”

In the houseboat segment, “it’s almost developing like a timeshare kind of thing where the boat is insured under an LLC and there could be upwards of 19 or 20 owners,” Grimm says, noting boaters may pursue this option as a way to defray the costs of ownership. “They pick certain weeks for their vacation and they get use of the boat during that time period. They all share in the cost.”

The practice mirrors homeowners who purchase a secondary home and rent it out for portions of the year. But Grimm points out it’s a tricky arrangement from a coverage standpoint. “Not everyone is listed on the policy, and generally a lot of insurance companies will have limits because your risk increases as you have the number of owners that increases,” he explains. “You’re looking to track these people based on experience because that’s the major issue for boats.”

The client who decides to charter their boat out six times a year doesn’t have to get a commercial marine policy—“they can have a recreational boat policy that will allow for a minimum number of charters a year without throwing them into a full-blown commercial policy,” Gatewood says. “There’s just subtle nuances to it.”

Want tips on securing the right personal marine coverage for your clients? Keep an eye on IAmagazine.com and upcoming issues of the Markets Pulse e-newsletter.

Jacquelyn Connelly is IA senior editor.