As summer approaches, boat owners look forward to spendingweekends cruising lakes and waterways. However, this past winterserved as a reminder that a boat doesn't have to be at sea to be atrisk: January snows collapsed docks and boat slip roofs at marinasin Kentucky, severely damaging hundreds of boats and even pushingseveral craft past the point of reclamation.

Fortunately for insurers, these types of claims have not beenenough to turn the tide of profitability they have enjoyed inrecent years. “We had just a phenomenal season [in 2015] forboating, with no significant catastrophes,” says Todd Shasha,managing director of Travelers' personal insurance boat and yachtunit.

“Overall, we have seen a very manageable amount of claimactivity,” says Mike Pellerin, vice president of underwriting atBoatUS, a boat-owners' association that underwrites insurance forits members through Geico Marine Insurance Co. “We are seeing moreusage-type claims because more people are on the water — hitting anobject, running aground, road accidents from trailering, and soon,” he adds.

Boat sales, which hit rock bottom in 2009, are up. Watercraftshorter than 26 feet in length make up 95% of the sales market. Assales in that sector have picked up, insurance demand hasgrown.

“Low gas prices are having a very positive impact on therecreational market,” notes Bill Gatewood, corporate vice presidentand director of personal insurance for Burns & Wilcox. “Theunemployment rate is going down, consumer confidence is going up —and it's going to be a good year for boating.”

Indeed, the recreational boating industry saw a 7.6% increase insales in 2015 and finished the year with two consecutive months ofdouble-digit growth, according to Statistical Surveys, a providerof market intelligence to the marine industry. The small-to-midsizeoutboard fiberglass boat segment saw the most growth.

“Early months indicate it could easily be a record 2016,”Gatewood adds. “We're definitely seeing more submissions forcoverage.”

Healthy appetite

Greater demand for recreational watercraft has been met withincreased competition among carriers, which has led to single-digitpremium declines in the recreational sector. Gatewood has been ableto secure coverage for more difficult risks, such as boaters wholike to venture into international waters. “We have capacity intothe Bahamas, Mexico, and now Cuba,” he says.

Sean Blue, global head of watercraft for AIG, notes that highreinsurance capacity has enabled more competitors and aided incontinued rate softening. An additional contributor to thiscompetitive market is a catastrophe-free experience in southeastFlorida over the last 10 years, which he regards as unprecedented —and potentially deceiving for underwriters not looking back farenough. “Some carriers seem to have short memories, and havepositioned themselves to grow quickly in what is still a verycatastrophe-prone region,” he says.

With the current soft-market conditions and downward trend inpricing, it is now more important than ever for clients to have aclear understanding of what they're buying, says Blue: “Know yourpolicy and make sure that it meets your needs and expectations.Make sure you understand its warranties. Policies that are within10% of each other on price may offer very different protection andflexibility.”

Related: Top 15 boating insurance coverage issues agents andbrokers need to know

Like with lodging and automobiles, peer-to-peer rentals ofboats is growing in popularity. 

Recreational boats are commonly written as part of a Homeowners'package, but agents and owners need to be aware of the limitationsof that approach. Specialized Marine forms offer additionalcoverage such as salvage removal and pollution that can come intoplay in a loss.

Jim Holler, senior vice president, planning and analysis forBoatUS, notes that over the past few years, more boaters areneeding higher coverage limits for both General Liability andpollution when docked at municipal or private marinas.

Additionally, “It is important that people look for a policythat has a standalone limit for pollution,” says Thomas Conroy,managing director at Markel Marine insurance. In December 2015, thefederal Oil Pollution Act (OPA) liability limit was raised, puttingrecreational boaters on the hook for up to $938,800 in damages inthe event of an oil spill before federal cleanup funds kick in.

“You don't have to be operating in coastal waterways to besubject to OPA,” he adds. “If somebody is on navigable federalwaters, which can be inland rivers or lakes, they can be atrisk.”

Another trend that is surfacing in the Marine marketplace ispeer-to-peer rentals, following similar developments seen in thelodging and Automobile markets. Boatbound, Boatsetter and Cruzinall provide online listing services for boat owners and prospectiverenters to connect.

As most watercraft policies exclude rental, this is achallenging exposure to insure. “It's difficult to get all of theinformation on the renter-operator, and even if you obtaininformation on the primary renter, you can never be certain thatthey don't have a friend on board that they turn the wheel overto,” says Holler.

Despite this challenge, in August 2015 BoatUS introduced itsPeer-to-Peer Boat Rental Policy for Boatbound, underwritten byGeico Marine. The policy covers the period of time that the boat isbeing rented and is available for all non-commercially insuredboats. The policy provides coverage for hull and equipment, boatingliability, fuel spill liability, medical payments, boat trailerdamage and uninsured-boater liability.

Coverage is underwritten on a master policy for Boatbound, witha charge applied automatically each time a rental is made. Boatowners and renters are provided a certificate of insurance viae-mail providing the coverage details for a specific rental; thereare restrictions on the type of craft that is eligible, and BoatUSencourages boat owners to follow best practices to reduce risk.

“We do rely on the boat owner to vet the renter,” says Pellerin.“We encourage them to set up a time to meet, go over the systems onthe boat, take the perspective renter on a cruise around the harborand make sure they are comfortable with the skills of the user.Even though boat owners are insured, they are obviously concernedthat their craft is taken care of by the renter.”

Other watercraft trends inspired by the sharing economy includejoint ownership of boats by multiple individuals or families, andUber-esque “ride-on-demand” services provided by non-commercialboat owners. “In Florida, I can pull up an app and in five minutesbe on a sunset cruise on someone's boat,” Gatewood says.

Although boat owners are in control of their craft with aride-on-demand arrangement, they could be still putting themselvesat risk, he adds. “It's easy for boat owners to run into policyexclusions if they are providing cruises for a fee,” says Gatewood.“Nobody should just start renting out their boat or providingcommercial-type services without making sure that they haveadequate coverage, because that's a catastrophe waiting tohappen.”

Burns & Wilcox covers charter exposures with a commercialpolicy, but that solution can be cost-prohibitive for some. “Often,owners decide they don't want to pay the additional cost, or theymay simply not qualify for coverage because the whole charter boatand water taxi market is very tightly underwritten,” Gatewoodexplains. “There are Coast Guard regulations to comply with aswell. There is not a real clear solution to the 'occasionalcharter' exposure yet.”

Related: 6 things all agents should know about insuringsuper yachts

The 'white glove' experience

There is both a responsibility and an opportunity for agents toeducate clients on all the risks they face as boat owners. “Youdon't want somebody to find out they don't have coverage after theyhave a loss. There is a duty on the part of agents to counsel theirclients,” says Gatewood.

John Beachley, yacht product line director for InternationalMarine Underwriters, stresses that in a competitive market agentsshould promote their Marine industry expertise and personalizedservice experience. “Agents should think about how to use digitalresources to improve the customer experience, such as offeringsafety tips or making it easy for insureds to upload photos oftheir vessels or claims incidents,” he adds.

Another way for agents to seize opportunity is by looking forcompanies that are expanding into this market. For instance,Travelers plans on moving into the personal watercraft market in2016.

“We are seeing more generalist agents get into the marinebusiness in general, and insuring small personal watercraft can bea good start,” Shasha says. “For agents initially looking to offermarine coverage, we can help them get comfortable with thecoverages and start writing business.”

The “personal touch” aspect of making this type of sale is key:Luxury yacht owners look for more than price and coverage. “It'sabout the white-glove experience,” says Lisbeth Ryan, managingdirector of Travelers' ocean marine luxury yacht group.

“Recently, one of our sport fishing yachts was traveling in theFlorida Intracoastal Waterway, making its way to a fishingtournament, when it experienced mechanical issues,” she adds.“Within 30 minutes, we had a surveyor on board the yacht assessingthe issues. That's the type of service yacht owners expect.”

Related: Come sail away: The boat and yachtmarket

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