I HAVE been around boats since I was very young, learning how towater ski on Lake Mead. My parents always owned a boat when I wasgrowing up, and today I have my own. I've brought my interest inboating into my insurance agency by selling boat owners policies.As the popularity of boating has grown, my agency's book ofbusiness has grown with it.

Boat owners value relationships as much as insurance agents do,and providing them with the proper coverage for their boats canlead to long-term relationships. They are often affluent and mayown multiple vehicles, including for off-road use, and sometimesmultiple homes. Some own their own businesses and have special lifeinsurance needs. We write insurance for approximately 250 boats;for the clients who own those boats, we have written nearly 1,000additional policies. In this article, I'll describe how writinginsurance in this niche has helped us tack in the direction ofgreater success.

Toe in the water

Before I began my career as an insurance agent, I worked as asales rep for a popular boating directory that was seen assomething like the Yellow Pages of the boating world. This jobbrought me into contact with people from all corners of theindustry. I worked with dealers who sold all types of boats, aswell as related materials, mechanical parts and electronics.

While working for the boating directory, I called a familyfriend, Jim Osgood, who owned a Farmers Insurance agency, to talkabout a career in insurance. He put me in touch with a districtmanager in my area, who helped me get started sellingpersonal-lines coverages. I began my transition into insurance byworking part-time, focusing on cold-calling and searching forhomeowners prospects.

I had kept in touch with my boating-directory contacts, and whenI told them the new direction I was taking they began sendingreferrals my way. I also started getting some boat-insurancereferrals from a good friend, Jason Glasser, who worked for twodifferent boat dealerships. Many of the homeowners prospects I metthrough cold-calling also owned boats.

Realizing that my personal experience with boats could be avaluable marketing tool, I decided to gain more expertise inwriting coverage for them. As a result, I'm not only able to writepolicies for boats, but I also can use my expertise to buildrapport with many prospects. A lot of boat owners have really nicehomes and cars, but talking about their boats is what gets themexcited. Some prospects sound uncommitted when I first speak withthem about personal-lines coverage; when they mention a boat andthen realize I'm a boater too, some of them have said, “In thatcase, let me fax you all my policies right now.”

The boat's the thing

All of our marketing efforts are focused on boat dealerships andpositioning ourselves to write insurance for their customers. Iestimate that 85% of new-boat purchases are financed through a bankor other lending institution. These institutions require evidenceof insurance from boat owners before they will release a check to aboat dealer. Thus it helps the dealers to have a reliable source ofinsurance to which they can refer their customers.

Our marketing area includes Southern California, home to ourmain office, and Lake Havasu, Ariz., where we have a satelliteoffice. We target all the dealerships in these areas with regularmailings, such as a type of marketing postcard called “keep 'emcards.” The cards include my photo, contact information for bothour offices and other useful information that might lead thedealership to post the card somewhere handy. For instance, the mostrecent mailing included the 2005 PGA tour schedule, complete withtelevision listings for each event. I'm also starting to send outsome new marketing fliers that take advantage of my name, with thephrase, “Insure your craft with Wozencraft.”

We have begun hosting a booth at the annual Los Angeles BoatShow, an 11-day event that is one of the largest such shows inCalifornia. The show, held near the beginning of February,unofficially kicks off the boating season, which is our peak seasonfor writing new policies. After the show, we sometimes have toscale back our cross-selling efforts, just to handle the volume ofcalls we get for new boat policies.

A boat by any other name

We have developed a specialty within the boatingniche-custom-built, high-performance boats-but we work with severalinsurance companies to write coverage for all types of watercraft.The variety of programs and classifications for different boatsdemonstrates the need for agents to understand the uniquecharacteristics of the niche. All carriers classify boats accordingto their length, with 26 feet serving as the industry-standarddividing line. Many make an additional distinction based on maximumspeed. For example: For boats up to 26 feet long, we usually writeboat owners policies through Foremost Insurance Co., which is ownedby Farmers. We use Farmers yacht owners program for most largeboats with a maximum speed of 65 miles per hour, and Markel'shigh-performance boat program for boats that exceed that speed. Wealso cover some boats with programs from Zurich.

The majority of boats we insure are relatively higher-valuecraft, often high-performance ski boats, that are built to theirowners' specifications and usually delivered one to two monthsafter ordering. The owners participate in a number of aspects ofthe boat's design. They may choose either a v-hull (single hull) orcat-hull (bi-hull) design. Most select a V-8 engine, either aMercruiser or a Volvo Penta. The lowest power engine we see isusually the base, 265-horsepower model, and many insureds choosebigger engines. Some owners will leave the boat's color scheme anddesign to the manufacturer, but others will create their owndesign. These boats have gelcoat hulls, which means that the colorson the hull are actually poured into the hull mold with thefiberglass. An object such as a nail might leave a gouge in thehull, but it will not scratch the color off.

As an example, we recently wrote coverage for a 38-foot-longv-hull boat called a Hustler. This model featured Mercruiser's twinHP 500 engines, each with 470 horsepower. Such a boat has a topspeed of 80 mph and can cruise at 50 to 60 mph. The v-hull designincludes an area near the front of the boat that came furnishedwith a rest room, a small kitchen area, a bed and a couch.

Coverage details

Annual premiums range from as low as $300 for a small Baylineror Sea-Ray craft to more than $8,000 for a $250,000 boat that canhit 120 mph. Most of the boats we insure have premiums between $800and $2,000. We make a consistent effort to educate our clientsabout the unique aspects of boat insurance. This is importantbecause some agents try to compete for boat accounts by offering alower premium. Boat owners who choose such policies often don'trealize that they're also getting less coverage. A few of thesignificant aspects of coverage are summarized below:

o Liability coverage: We start with $300,000 ofprotection and indemnity coverage (the term for boating liabilityinsurance) for most of our clients. If we write the coveragethrough Farmers and we also have the client's personal autobusiness, the client is eligible for umbrella coverage as well. Inthose cases in which clients choose the umbrella coverage, they arerequired to have a $500,000 P&I limit.

Some carriers are unwilling to provide standard P&I limitsfor inexperienced boaters or those with a poor driving record. Wejust worked with a client in his early 20s who had an accident andtwo traffic violations on his driving record. I eventually foundhim coverage through ACE, but they provided a limit of only$25,000.

o Hull coverage: Hull coverage is the term for a boat'sphysical damage insurance. This coverage insures the craft itselfand any items that are permanently attached to the boat. Thevaluation basis is an important consideration for clients, sincethe boats can have such high values. This is an area in whichclients sometimes are tempted to choose less expensive coverage tosave on premium. I point out to these clients that in the event ofa claim, no one seems to talk about premium-only about how muchcoverage they have. Sometimes owners don't have a choice. Forinstance, all the carriers we work with offer only agreed-valuecoverage on boats over 26 feet in length. For smaller boats, someinsurers offers a choice of valuation, whereas others offer onlyactual cash value.

o Personal effects coverage: Personal effects coverageis usually available in $100 increments, and is often subject to amaximum limit of around $5,000. This coverage insures any personalproperty on board, such as a fishing rod, water skis, ropes or avideo camera that is dropped overboard. I usually recommend that myclients purchase at least a $2,500 limit. This is almost alwayswritten on an ACV basis.

o Geographic restrictions: Most carriers make adistinction between “inland” and “coastal” policies. Inlandpolicies generally have lower premiums, for boats used exclusivelyon inland lakes and waterways. Such policies provide no coveragefor claims occurring in saltwater or coastal areas. Coastalpolicies cover both coastal, or saltwater, use and inland use.

o Uninsured and underinsured boaters coverage: Unlikewith personal auto policies, this coverage is not a standardfeature of most boat owners policies. In fact, many carriers don'toffer it at all. It can be especially important for boaters invacation areas, sharing the water with smaller craft such asjet-skis, that are notorious for sudden, unsignalled turns. It hasbeen estimated that between 75% and 85% of people using thesewatercraft have no insurance coverage at all.

o Named operator endorsement: This endorsement's purpose is toprevent individuals with poor driving histories from operating aboat, not to increase premium. As long as everyone on an insured'slist has an acceptable record, carriers will approve the list forno additional premium; if an operator has a poor driving history, Idon't know of any carrier that will accept the person, even foradditional premium.

Boat owners sometimes ignore this provision or forget about it,which can lead to serious problems. We've just learned of a tragicsituation in which one of our insureds let his father use his boat,although his father was not an approved operator. The boat turnedtoo suddenly, all three people on board fell overboard, and oneperson drowned. In addition to dealing with the personal tragedy,this insured may not have coverage for the incident.

Anchors aweigh

We collect and submit much of the same information from boatowners that we need for personal auto policies. We ask about themake, model and year of the boat, as well as the length, hulldesign, horsepower and maximum speed. We visually inspect theboats, paying particular attention to older boats (most that weinsure have been purchased new), and send photos with theapplication if we think it will help. We ask clients about theirmotor-vehicle driving record for the past five years, telling themin advance that we're obtaining their MVR as part of theapplication.

We've also created a “boat resume” form that we ask all ourclients and prospects to fill out, and we send this to carrierswith their applications. It includes questions about the personalboating history of anyone who might operate the boat-any claimsthey've had, for instance, and a list of all the other boats theyhave owned. If we think it will make a difference to anunderwriter's decision, we may supplement the resume with a letterexplaining why we think an insured is a good risk. If the insuredhas a good record and the boat is less than 10 years old, we canusually write a policy within a single day.

Servicing our boat insureds consists mostly of helping withclaims and providing evidence of insurance. Being able to furnishcertificates quickly is especially valuable to insureds whenlending institutions notify them that they never received evidenceof insurance, and that they're about to choose force-placedcoverage-which usually costs the insured four times as much asstandard coverage.

Thankfully, the majority of the claims are for such things asminor hull damage caused by hitting a rock, or for engine damagecaused by the intake of sand. We occasionally have had totallosses, such as a boat that caught fire and sank in Lake Havasu.This also required the insured to pay for the cleanup, includingthe gasoline. The insured's policy included pollution insurance inthat case, though some policies don't.

Since we obtain driving records for all our boating clients,we've already taken a step toward writing other coverage for them.We ask if they'd like us to review their auto and homeownerspolicies, explaining that building long-lasting relationships withclients is more important to us than simply writing as many newboat policies as we can. As I've mentioned, many send us theirpolicies when they realize we share their enthusiasm forboating.

To judge by the sales at boat dealerships in our area, interestin boating is a poor indicator of general economic conditions.Regardless of other financial forecasts, it seems boat ownershipjust continues to grow. Even if you don't own your own boat,demonstrating interest and expertise in the insurance needs of boatowners can help you build solid relationships with valuableclients. When it's written correctly, you might say that boatinginsurance is a rising tide that can lift the fortunes of manyinsurance agencies.

Devin Wozencraft is president of Wozencraft Insurance Agency. Hehas worked in the insurance industry for seven years and is amember of the Southern California Marine Association. Mr.Wozencraft earned a bachelor's degree in music from the Universityof California-Riverside. He can be reached at [email protected].