Pleasurecraft insurance

There is a huge variety of boats on the market today, from spartan tinnies to yachts fitted out more lavishly than your average mansion. And their owners use them in innumerable ways, from fishing to watersports to transoceanic travel.

For brokers wanting to effectively service clients in the yacht and pleasure craft market, talking the talk is essential, and that means having a strong technical understanding of the vessels they are insuring.

As well as knowing their policies and exclusions back to front, understanding marine terminology is key.

For example, a broker who is working with a client to insure a yacht would need to be able to hold an intelligent conversation about the type of rig, its construction and other details.

It will help when dealing with marine insurers too.

For instance, Pantaenius Insurance Managing Director Jamie MacPhail says: “Our policies are written by boating people, for boating people. We believe that every person who deals with clients needs to have boating experience and be able to answer questions without having to refer to a cheat sheet.”

Getting seaworthy

The most common type of pleasure craft insurance is a comprehensive policy, which generally includes cover for loss, theft, damage or the unforseen effects of violent weather.

Most policies also extend to personal accident and legal liability for anyone operating the craft in Australian waters.

Depending on what the craft is used for, extensions can be vital. Common ones include cover for sports equipment on board, dinghies or tenders used with the vessel, loss or damage while racing or legal liability protection while performing a watersport that can be purchased at additional cost.

Brokers should assist their clients by encouraging them to keep records of all equipment on board as proof of ownership.

This could be as simple as taking a photo of fishing equipment up against the vessel and keeping a copy stored separately to the boat.

Generally vessels involved in high-risk activities, such as hi-tech racing yachts or trimarans, are undesirable to underwriters.

However, QBE Pleasure Craft Underwriting Manager Julie Jamieson says that often it will come down to factors such as the experience of the skipper or owner.

“We assess each risk on a case-by-case basis,” she says.

“This approach means we can ensure all factors are taken into account when assessing a risk, so those that may often seem poor risks on the surface but are operated by an owner with a wealth of experience or low claims history, can receive the cover and premium that’s appropriate.”

Staying afloat

Common exclusions include fines or penalties, wear and tear or losses due to lack of maintenance.

OAMPS Account Manager Dounia Ben Omar says policies are issued on the basis that vessels are properly maintained, seaworthy and compliant with statutory requirements in regards to safety, security and environmental protection.

Ben Omar says that as a broker, she can add value to the client’s insurance experience by assessing and explaining the client’s specific risk and providing risk mitigation strategies, particularly in challenging areas such as the hull sector. “Our goal is to make the client’s risk as desirable as possible for insurers in order to create a competitive insurance solution with the right cover,” she says.

“In addition, if our clients unfortunately suffer a claim, we will support and advocate for the clients.”

OAMPS is currently working closely with a leading insurer to create a quality pleasure craft facility that is tailored for OAMPS clients.

Talking the talk is essential, and that means having a strong understanding of the vessels they are insuring.

“We noticed clients had to shop around and place their cover with multiple insurers so we leveraged our technical knowledge and marine expertise to create a consistent, valuable and user-friendly offer,” says Ben Omar.

Top end of town

In percentage terms, the quickest-growing section of the market is the superyachts, often defined as those over 70 feet in length or $1 million in value. Trident Insurance are very active in this space and Managing Director Rick Wolozny says even the global financial crisis did little to dampen appetites for these craft, more and more of which are based in Australia.

A key difference with superyachts is the policy inclusions.

“We have bespoke specialists covers that have lots of additional benefits, as many superyachts have large tenders and assets, including artwork on board,” he says.

The larger craft are also far more likely to be used for open ocean crossings, changing the risk profile.

“If you’re crossing the Atlantic Ocean, there is no repairer sitting up on top deck, so you have to make sure the vessel and its crew are capable of undertaking this voyage,” Wolozny says.

“The voyage itself is also very important. For example, if a vessel is traveling via the Suez Canal, piracy in Somalia is a concern.”

Finer points

A vital part of the insurance process, be it for a personal watercraft, pleasure craft or superyacht, is determining the use and service history of the boat. Nautilus Marine Insurance’s Marketing Manager Mark Crockford says brokers should work through application forms with their clients question by question. “Brokers and clients need to be upfront and open about the exposure to risk,” he says.

“They need to tell us everything – the boat’s service history, previous claims, how often it comes out of the water and where it’s moored.

“This information is vital to accurately underwrite a craft and avoid issues down the track in the event of a claim.”

To avoid contention in the event of a claim, Crockford encourages brokers to insure a craft on an agreed fixed value.

“We would love to see as many policies as possible on an agreed value basis,” says Crockford.

“It helps avoid any disagreements over the perceived value of the boat at the time of loss.”

Policies often provide the option to itemise a sum insured for different parts of the boat, such as the motor trailer or radar.

Claims for these items can be settled on an agreed value basis or the insured can choose to leave the sum insured as a lump sum amount paid at market value at the time of loss.

When insuring a vessel at market value, Crockford says brokers should ensure the true value of the boat is reflected in the policy.

“If a boat has been kept at the same value for a couple of years, brokers must advise their clients that they need to have it re-evaluated,” he says.

To mitigate potential risks, brokers should advise their clients to carry out regular maintenance of their vessel.

Having a claim excluded for lack of maintenance makes for anything but smooth sailing.

Generally vessels in high-risk activities, such as hi-tech racing yachts or trimarans, are not desirable to underwriters.

Early in 2013, QBE settled a total loss claim that showed the importance of having salvage coverage. The very experienced boat owner and a friend had anchored the 15m ketch in a remote river in North Western Queensland. The insured was familiar with the area, having visited it 40 years earlier when he was a crocodile shooter.

Not long after midnight, the pair woke to find a well- established fire blazing, forcing them to abandon the boat for the much smaller tender vessel – setting off in a crocodile-infested river with only the clothes on their backs.

Get out on the water

NIBA College runs an online introduction to pleasure craft insurance. The Tier 2 program provides an overview of classes of boats, what is covered, general terms, exclusions, claims procedures and examples. It is worth one CPD point. The program code is CPDT2027.

To access any of NIBA College’s CPD courses, visit www.nibacollege.com.au and follow the links to CPD and CPD eLearning Programs. For more information, contact Caroline Campbell on (02) 9459 4313 or email cpd@ nibacollege.com.au