The New Norm

Forget what you’ve learned about pleasure craft insurance over the years – it has been turned on its ear.  Increased claims costs, particularly as a result of severe storms in the US and Australia has meant several withdrawals of Insurers from the Lloyds market, in turn resulting in reduced capacity for risk and increased prices with more restrictive terms.

In reality, the current market pricing is getting closer to where it should be.  Too much capacity in the market over the past 10 years has meant premiums have been driven down to unsustainable levels.   That’s all fine as long as there are no major losses, but  this unsustainability has been proven with the massive losses incurred as a result of these weather events alone.   Throw in some chunky losses incurred from “everyday” events and you get the picture… a boat lost at sea costing $500,000 sucks up a lot of premiums.  That’s 100 boat insurance policies at $5,000 each just to pay that one claim.

Whatever you have paid in premiums in the past will not apply now.  Insurance companies are a business, just like anyone else, and they need to make a profit to survive.  The claims statistics don’t lie, so this is not Insurers “fleecing” their clients, they are having to do it to survive.  

The principal of insurance is a good one.   A famous quote from Winston Churchill springs to mind:

If I had my way, I would write the word ‘insure’ over every door of every cottage and upon the blotting pad of every public man, because I am convinced that, for sacrifices that are conceivably small, families can be secured against catastrophes which otherwise would smash them forever.

— Winston Churchill

 That pretty much sums it up.  We pay an affordable premium each year, for the peace of mind it gives us knowing that if we suffer a severe loss, we will be protected from financial ruin.

The term “affordable” is obviously an expectation that differs for many.   This is where you need to ensure you’re dealing with someone you trust, and is independent in the market, so you can be assured you are paying a reasonable premium in the current environment – not necessarily the cheapest option, but a reasonable premium for the risk involved, and a policy that will respond as expected.

The Nut Behind The Wheel

 This is really what the Insurers are covering.  They’re now paying more attention to the nut behind the wheel.  That’s you!  How good is he/she at avoiding loss, or if unavoidable, minimising it?   How well prepared is the vessel and the crew to handle heavy weather or an emergency situation?  

If you find you’re being asked for more information in this area, including crew CV’s, don’t be perturbed.  Treat this as an additional assessment of your capabilities, and provide as much concise information as you can to present yourself and your vessel to the Insurer as a “good risk”.  A competent, careful and experienced skipper normally translates to a well prepared and well maintained vessel and competent crew.  Just like in a company, the culture starts at the top and filters down.

Remember the old days? - when to find your position at sea you’d need to be standing on a pitching deck , trying to shoot the angle of the sun to the horizon with a funny looking contraption called a sextant.  Then you’d have to struggle below and work through the most complicated maths equation ever devised by man (probably on drugs), while searching through tables of tiny figures and formulas, all the while trying to hold down your lunch.  Then you’d find out you’re somewhere in the middle of Australia!    Has the ease of navigation these days “dummed down” our skills somewhat?   That’s a whole new topic in itself…

Neil S Bailey