Insurance - What are you actually buying?

In these changing times, with increased premiums, higher excesses and more restrictive terms for pleasure craft insurance, the temptation is to often look around for a cheaper option for your insurance cover, if you don’t like what you are being offered, and don’t consider it “affordable”.   And this is where you can run in to trouble.  

Insurance is truly unique, because unlike other “products” you buy, you don’t actually get to see what you’ve bought until much later.    It’s not like comparing a tin of Watties baked beans at New World vs Countdown.  

Often you will pay your premium each year and nothing happens, everyone is happy – your insurance policy is the best and most reasonable in the world!   But when the s**t hits the fan, that’s where you find out what you’ve got.  It is at this point you’ll forget about the “good deal” you got when you looked around for a cheaper option the year before, and your attention will turn to “what does my policy actually say”?   And it’s often too late.    Insurance should not be taken lightly, it is not just a commodity, you don’t buy it just to say “I have insurance”.  You buy it for peace of mind, to ensure your financial stability and so you can sleep well at night when it’s howling outside - whether you are at home or on board.

Over 36 years in the insurance business, we think we’ve seen it all – until we see or hear of yet another situation where a boat owner has been short changed by their Insurance Company.  Remember an Insurance Company is a business like anyone else.  Yes, they are there to provide the promised insurance cover, but they also need to make a profit, otherwise they wouldn’t exist.  When you think about the principle of insurance (which is a good one), we are all contributing a little bit, so that those that suffer a loss can receive reimbursement for any losses incurred.  So the Insurer is merely administering this pool of money and deciding who gets paid and how much, under certain circumstances.  You are therefore relying on someone’s interpretation of what the policy says and how it should be applied.  It can often come down to the meaning of one word!

So the questions are:

How competent is the person making that decision?
How well did they do at English at school?  
Did they in fact go to school?  
How well do they know boats and all the vagaries that go with them?

What’s their attitude towards trying to actually help me?

If you don’t agree with them, what do you do?

Will you need to incur legal costs to get your point of view across?

These are not the questions we ask when we’re taking out pleasure craft insurance – but they should be.  Often the 2 key questions we ask are: “how much is the premium” and “what is my excess”?

A lower premium and excess may make the policy look attractive up front.  It’s been made easy to buy.  But as noted above, that’s all fine if nothing happens.   

Insurance policies differ markedly.   Let’s look at one example:   Your boat is well maintained and you have everything checked as you should, but a crucial part of the boat has deteriorated through wear and tear unbeknown to you, resulting in the failure of that part, and the boat sinks as a result.  Thankfully the boat is re-floated but the damage is extensive.   Are you covered?  In most cases the answer would be “No”.  But in a few others the answer would be “yes”.  Which policy do you have?  

These differences can mean many thousands of dollars in a claim settlement, or whether a claim is paid at all.  The attitude of Insurers also differs – some look for ways to pay a claim, others look for a way not to, or look at ways to minimise the payment.  Remember the Insurer is holding the purse strings, so they are looking for ways to minimise what they pay out.

Contrast this with dealing with a specialist marine insurance broker.  One that actually knows boats, knows the right people, knows how to get this done and has a bit of “nous” when it comes to legal issues and contracts of insurance.  An insurance broker is on your side, and if a claim arises they are looking to maximise your claim entitlements, not minimise them.   A good one can often save you substantial legal costs.   Yes, there are rogues out there also, as there are in any industry, so you do need to choose who you deal with carefully.  Best to ask around for a recommendation.

The other benefit you get in dealing with a broker who specialises in the marine area, and has a large portfolio, is that you will be seen as part of this larger group when an Insurer looks at you and your claim.  So they are taking in to account the overall relationship they have with the Broker and their total premium pool, rather than just you as one individual.

Our advice:

1. Always use an independent, specialist marine insurance broker
2. Use a good one, recommended by others
3. Ask lots of questions
4. Look beyond just the premium and excess