The recent economic downturn in the U.S. and global economies has significantly impacted the recreational boating industry. Consumers, boat manufacturers, and managers of marinas have all felt the ripples. The recreational boating industry's slump has been the subject of countless articles documenting layoffs or closings of boat manufacturers and retail facilities, dwindling boat sales, and the growing problem of abandoned vessels. This current downturn and attendant financial hardships create a potential moral hazard that could drastically affect the boating community.
The economic crisis has compounded the usual issues facing recreational marine claim departments. Consequently, claim adjusters must fully understand many lines of insurance, including marine hull and machinery and protection and indemnity insurance. In fact, on any given day, an adjuster may review claims involving property damage, theft, grounding, salvage, wreck removal, fire, personal injury (including death), and towage.
A Case Study
In many instances, a single claim can trigger multiple coverage parts in a policy. The first step in handling any claim includes a careful review of the entire policy. For example, let's consider what happens when there is a collision between two large vessels operating off the coast of New Jersey with several passengers in each boat. Aside from the immediate hull damage to each vessel, there may be multiple personal injury claims that trigger medical-payments coverage and liability coverage for the resulting bodily injuries. Depending on the severity of the collision, claims for personal effects, towage, salvage, or wreck removal can materialize.
Once the claim department receives notice of the loss, the information is processed, and the company's claim number and contact information are promptly provided to the insured and his agent. The loss will be then be investigated. Depending on complexity of the claim, this may require the specialized expertise of marine surveyors and investigators. The importance of experienced claim representatives and qualified experts cannot be stressed enough, as they communicate directly with the insured and claimant and play a key role as the face of the insurance carrier.
After the claim department completes its investigation, the claim adjuster analyzes the reports and coverage. Assuming the adjuster has already confirmed that the vessel is covered under the policy, other coverage issues may arise, such as compliance with the lay-up and navigation warranties. Generally, the lay-up warranty identifies the length of time the vessel should be out of active service, whereas the navigation warranty identifies the geographical area in which the vessel can operate. The adjuster also reviews the covered peril and exclusion sections of the policy. When coverage issues exist, a reservation of rights or declination letter should be sent to the insured in a timely fashion. This will ensure that the insured has the ability to review the issues and respond accordingly. The insured's agent should also receive a copy of the letter. It is good practice to attempt to verbally communicate coverage issues with the insured's agent, since open communication with an agent can facilitate the prompt adjustment of claims.
In addition to identifying and addressing coverage issues, a marine claim adjuster also plays a central role in the loss adjustment process. The adjuster must review all coverages afforded under the policy in addition to limits and applicable deductibles. Most policies have multiple coverage sections, specific limits, and potentially separate deductibles per coverage part. Understanding the applicability of each limit and deductible is another reason why specialized marine loss adjusters are a necessity in the recreational marine industry.
If a surveyor advises that the claim is a total loss or a constructive total loss, then it is time to engage a consultant responsible for the sale of damaged boats and yachts. It is important to foster an excellent working relationship with a reputable company specializing in the disposal of damaged watercraft. Often, a salvor who specializes in watercraft may be able suggest specific mitigation or restoration actions to increase the net return.
Clear Communication
Claim adjusters should maintain an open dialogue with the underwriting department. The claim team reviews loss trends before anyone else, and communicates those trends to the underwriting and loss control departments. In the fast-paced, high-volume world of boating claims, it may not take long for loss patterns to develop, and a claim team cognizant of developing trends can be more successful in assisting the entire organization. Clear channels of communication must also be established with agents and producers in order to achieve the goal of reducing risk and expediting claim handling. The principle of utmost good faith -- uberrimae fidei -- is an underlying premise in all marine insurance contracts. This principle is best exemplified with direct, clear, and concise communication between all parties.
A critical time for communication between claims and underwriting is during the catastrophe season. To help prepare for it each spring, the claim team can review its catastrophe readiness plan and decide whether changes need to be made. Once the plan is updated, other impacted departments should be contacted for their input. The entire organization should have an understanding of the plan and what corresponding roles they play in its execution. Successful implementation can be critical to long-term business relationships, including the end customer.
Prior to a catastrophe, the channels of communication between claims and underwriting should be strong. The paths of named storms should be monitored closely, as any change in direction can have a drastic effect on the company's exposure. Once the path of the storm has been accurately tracked and the landfall has been identified, it's important to review the company's exposure in that region. The size of the exposure may have a direct effect as to how much onsite presence is required in the catastrophe zone. Travel to a catastrophe zone can be difficult, so field agents may have to find an appropriate location to set up their base operations.
Open communication should be established between your on-site claim team, retained experts, marine salvage and ship wreck removal companies, and in-house adjusters. There is a tremendous amount of information that is disseminated between all parties, and the in-house adjusters can effectively serve as the custodians of the information. One of the most accessible and economical ways to handle this is by setting up an intranet site. Online tools of this type allow new information to be quickly conveyed between claims, loss control, and underwriting.
A key ingredient in the success of any insurance organization is minimizing and mitigating loss. Yet, we all recognize the potential for accidents, so addressing marine risks in an effective and proactive manner is very important. If your adjusters work closely with your loss control department to properly analyze the loss trends, then they can communicate what they are seeing to the consumer in the form of boating safety tips and consumer education materials. Information about theft/fire prevention, boating basics, navigational aids, and vessel upkeep can help prevent losses. They can also keep your customers safe and sound so they continue to enjoy the great leisure activity of boating.
An end customer who is satisfied with the claim process may rave to his agent about the prompt and professional treatment received in a time of need. This feedback can resonate clearly with an agent or broker. An agent who hears the same message repeatedly from his customers is likely to cite this benefit when comparing carriers to future prospects. Thus, a proficient claim organization -- one that is skilled in the handling of recreational marine claims and catastrophe management -- can serve as a great marketing tool for a carrier.
