The deep knowledge brokers and agents need to stay buoyant in the marine insurance market
Marine insurance is among the oldest forms of insurance, dating back to the 1400s. In fact, the term “underwriting” was born from the practice of “writing under” a contract for ocean cargo shipment.
Here in the 21st century, conditions in the marine marketplace are highly changeable. Swimming with the big fish in these waters takes specialized knowledge, skills, and access. That’s where experts like Erin Deaton, senior underwriter in the Marine Center of Excellence at Burns & Wilcox, can help. Here Deaton offers insight into the latest developments in the marine market.
Q. What are the strongest areas of opportunity for brokers and agents in the marine insurance marketplace?
Erin Deaton: The best areas of opportunity are always those that fit outside the standard box. You can spend all day trying to get the cheapest rate on a small boat policy that someone has added to their homeowners policy for subpar coverage and ridiculous pricing. The real opportunity comes with vessels that need a bit of expertise — those that can’t be quoted directly online. When good agent-client relationships are coupled with a marine specialist, your outcome can only be success.
Q. Have you seen any notable recent changes in underwriting?
ED: Overall, the increasing volatility of our weather is making underwriting a bit less cut-and-dried than it used to be. Hurricane Sandy really took some insurers by surprise, and accordingly they took large losses in an area that was fairly underpriced. That has impacted underwriting. For those on the East Coast, the level of underwriting scrutiny is as high as it’s ever been, while the rest of the country is under closer scrutiny from underwriters as well.
Q. With that in mind, what are some of the key underwriting considerations brokers and agents need to account for when marketing?
ED: On the pleasure vessel side, the key is always to understand the exposure. Is it an older boat? If so, is there a survey to help ascertain its condition and value? Is the boat being used for pleasure only? If in a corporate name, is it just for tax purposes? Are they living aboard the boat? Is it being used year-round or seasonally? Underwriters are asking more and more of those types of questions, so you need to be prepared. If you don’t know which questions to ask, the experts at the Marine Center of Excellence can help.
Q. Besides being prepared for greater underwriting scrutiny, what else do brokers and agents need to know to successfully write marine insurance?
ED: It starts with knowing boats. There are many facets to even an “average” marine account that lie outside the knowledge base of many retail brokers and agents: important questions to ask, knowing whether a boat needs a marine survey before insuring it, even recognizing whether a customer is qualified to operate a particular type of boat based on its characteristics. Region-specific knowledge is just as important. Complex situations are common. For instance, you might have a client in Chicago who owns a boat in Florida and wants to take it to the Bahamas. That’s something your average retail broker or agent doesn’t know how to handle, and if it’s not handled correctly you can have significant coverage gaps. Because we write country-wide and worldwide, we understand the differences among various regions and specialized coverages those regions may need. We help retail brokers and agents be experts to their customers and provide the products and services they need to maintain and build customer relationships.
Q. What are some of the common misconceptions retail brokers and agents have about marine insurance?
ED: Retailers tend to focus on one narrow area, such as pleasure boats or commercial cargo. However, there is a tremendous variety in marine coverage: personal and commercial, corporately titled boats, yachts and super yachts, barges, commercial fishing ships, and more. There’s property risk with marinas, marine artisan and boat repair operations, and dock operations with loading and unloading cargo. It’s a very diverse environment.
Q. What major trends are shaping today’s marine insurance marketplace?
ED: The biggest thing impacting the market right now is the Costa Concordia loss, which just crossed the $1 billion threshold. As the first protection and indemnity loss to cross the $1 billion line, it will definitely have an impact on reinsurance, and it is predicted to cross the $2 billion mark. It calls into question how prepared insurers collectively are for these big mega-liners, and if there are even salvage operations sufficient to respond when losses happen. That will continue to impact the market for the next couple of years.
Q. What are some of the more challenging accounts that cross your desk?
ED: When people come into money suddenly, they seem to want to buy a big boat, but there is a lot of training that is required for handling larger watercraft and rigor in the underwriting process. Likewise, high-performance boat owners often decide to make a dramatic jump in size or horsepower without realizing the new regulations they must adhere to. Occasionally we deal with “extreme use” cases, such as people who decide they want to sail around the world and take two years doing it. That’s where expertise and market access are essential to getting the job done.
