Will lack of insurance coverage kill the used boat market?

[MarioG]

It seems to me that with few ins. companies willing to cover our boats in the gulf/florida region, the values of our boats may tank. No coverage = no financing.

what do ya think?

[Fanfare]

Well, I've always wanted to cruise the Great Lakes. Maybe it's time to move.
(But only after the 2007 Hatteras Bahamas Cruise.)

[luckydave215]

Or the cost of slips elsewhere is going to skyrocket. They already cost more than gold in SoCal.

[Liquid Asset]

The problem of insurance is a minor one. In the whole picture, does a few extra thousand drive people from owning a half million dollar yacht? Most people spend thousands in gas a year and maintaing their yacht is not inexpensive either. This may drive some people out of the yachting world, but I think that once things stabilize it will not matter.

I dont normally jump on my soapbox, but the problem is not with the insurance companies, it is with the government. The government has held insurance rates down for so long especially here in Florida that the companies would just rather not write a policy than take the risk for a low ammount of money. I work in an insurance agency and these problems that are coming up in the boating world are not limited to it. Rates are increasing in all aspects of the insurance world. Insurance rates have been held down by the governent for so long that it is now causing a problem because the companies can't take the risk at a low dollar. If it does not make business sense to write a policy you cant afford to insure. This is why the companies have had to raise rates. Everyone has to make their dollar and the insurance companies have to anser to their investors. An how they do that is by making money. We just have not had such large increases because the government has not allowed it untill now.

Some people will be driven out of boating by the increasing cost, but it will not be the insurance alone. It will be a combination of Fuel, Slip rent (or having to purchase one) and insurance along with all other items for boating that are going up as a result of increasing costs across the board.

[Maynard Rupp]

Well, I've always wanted to cruise the Great Lakes. Maybe it's time to move.
(But only after the 2007 Hatteras Bahamas Cruise.)

Bring warm clothes, some bonine for the choppy waters, and leave the bottled water home. The great lakes are the best water their is. Don't forget to make your winter hauling arrangements. Our insurance policies require the boat to be on the hard from Nov. 1 to April 1. And you either keep it inside heated $$$ or drain every drop of water out of every system. If you miss something you will buy new parts in spring. Oh well we do have fun up here, it is kinda pretty, and your boat can look like new forever between the short season and lack of salt in the water. aby the way our insurance is no more than 1/3 the cost of a similar policy in Florida. (Why am I moving our 36 to Florida; I must be nuts).

[yachtscape]

I'm on my fifth Hatteras,the smallest and oldest Hatteras I've owned, not my initial plan for the future when I bought my first (first Hat was 53 MY, later ones progressively smaller in size and price) as my next target after the 53 was to be a 56MY and up and up from there. My boating buds have always wondered why as I'm too young to be downsizing and they see me upgrading all of my other toys. More and more of them have said, "now I understand". My mantra to them was that an "insurance bomb" will hit this older boat market one day just like it did wooden boats, low to mid-priced high performance cars, crotch rockets, beachfront property, etc. IMHO, Katrina set off the bomb. Now, between insurance and fuel prices, they understand why I've been progressively downsizing in price and thusly, size.

The current mindset of the insurance companies is quite understandable, after the last few years of higher Hurricane losses partially due to irresponsible owners in hurricane prone areas. I'm in New Orleans and my Hat rode through 135mph Winds and a 12 foot Storm Surge on top of the Tide without a scratch. Many other nearby boats did not and nearly impacted my carefully prepared Hat. Yes, there had to be some luck involved, but there was also 2-3 days of intensive, thoughtful Storm preparation to my Hat in 95 degree heat which only a minority of nearby boaters did. Four miles east of my Hat, there's a Hat 65 LRC that was single-lines tied to a floating dock in a directly exposed marina about 30 miles west of Hurricane Katrina's path. This owner could not have chosen a worse plan for Katrina except to let her drift at sea. Many other much safer options were readily available, even the day before the storm. Of course, it was totally destroyed and it still sits there like a rotting whale on it's side half on land, half in the water, entangled with the floating dock and is slowly being picked clean by looters. Exactly what was this owner expecting to happen ..........? And how big of a check did the Owner expect the Insurer to write for him ..............? And how is this going to change this Insurer's mindset next year about old Hats ............? While the government has some controls over the insurance industry, the insurance industry controls the majority of the equation. I more directly blame the insurance industry for not properly configuring policies that mandate reasonable and responsible yacht management and eliminate irresponsible yacht management by their insured. It's lonely being a Boy Scout sometimes, but Boy Scouts ought to be highly preferred and encouraged by Insurers.

So, Yep, the Bankers will react to the insurance problem that the insurance industry enabled, and I do see the six-figure old boats depreciating more than the five-figure old boats. Cash Buyers will be more comfortable with a partially insured five-figure toy than a partially insured six-figure toy. Plus. there's still a good supply of Boaters in non-Hurricane risk areas who will probably be able to insure an old boat which will keep some bankers in the game and keep values from tanking.

Unless I move inland, my next boat will be a five-figures old Hat (plan A) OR a six-figures, less than 15 years old non Hat (plan B, sadly) because of Insurance and Hat's abandoning the mid-sized yacht market. I've been living plan A for the last few years with my current reality; she's an over 40 year old five-figure, Hat, "easier" than my larger Hats, parties better, gets 2 mpg at 6-7 knots on Diesel and full Insurance coverage is still currently available. When it's not, I'll still sleep at night.

Even with the Shipyard rates, the cost of Parts, the cost of Labor, the cost of Slips, the cost of Fuel, etc...... I'll figure out the best path to continue boating. Hope it's plan A, an old Hat, and I hope the Insurance Companies see the light.

[jim rosenthal]

I've commented on this before, I think, but it is worth revisiting: a significant number of boats that were destroyed by last season's hurricanes were boats that were for sale. As far as I am concerned, many of those owners decided to leave the boat in the path of the hurricane and let the insurance company buy it from them. And clean up the mess afterwards. People that did this are morally bankrupt, in my opinion, I am sorry to say. It is regrettable that the insurance companies are not able to go after these folks. Certainly some people were caught by bad planning, or bad luck, or ignorance, and did not intend to commit fraud, but I think more than a few did. This is part of the problem we now face. Not that anyone seems to be able to do much about it, except refuse to reinsure people who lost boats under suspicious circumstances. That's too complicated to sort out, so they just refuse to insure anyone.

I did check with Hagerty Marine. They are not writing new business in FL etc, although I don't think they are cancelling their old business. Their reinsurance carrier will not let them. If you think about it, their position makes sense. There is so much demand for insurance in the Gulf area that they could end up with a huge portion of their book in those states, with a loss risk that would put them under if they sustained it.

I do believe there is a place for a "boutique" carrier that would insure vintage Hatteras (and other high-quality well-maintained FRP boats) on a very selective basis. I think that the usual method of starting this up is to form a pool of owners and a mutual company and then reinsure with a wholesale carrier. Perhaps Pat can comment on this. I would be interested to know. So far BoatUS has not cancelled Blue Note, but I am always interested in options.

[Paul45c]

I dont normally jump on my soapbox, but the problem is not with the insurance companies, it is with the government. The government has held insurance rates down for so long especially here in Florida that the companies would just rather not write a policy than take the risk for a low ammount of money. I work in an insurance agency and these problems that are coming up in the boating world are not limited to it. Rates are increasing in all aspects of the insurance world. Insurance rates have been held down by the governent for so long that it is now causing a problem because the companies can't take the risk at a low dollar.

Pat, I'm totally ignorant of what is driving insurance costs other than the face value of risk and poorly maintained older boats say catching fire or sinking because of people who don't know how boats can sink (like never checking/changing hoses on raw water seacocks). What does the gov't have to do with it? What HAS the gov't done in the past to hold premiums down? And when did this change? Can you explain? It would be nice to hear an insider's perspective. Thanks.

[Walter P]

In my opinion, Jim is right on target with his analysis regarding how insurance companies are reacting to "legal" fraud. The temptation by too many boat owners who have their boats for sale to play games or worse is too great and as a result we are ALL paying for it either with unavailability or crazy rates.

A possible remedy may include some sort of provision whereby if your boat is currently listed for sale, certain conditions come into play such as proving your efforts to safeguard your boat or having it hauled before the storm hits.
I know it opens up a rather large can of worms but we need solutions.....


Walt

[Genesis]

Markel has an interesting take on this (the folks who wrote Gig's policy; Charter Lakes found them for me)

They want a written storm plan from you for named storm events and require that either (1) you have a paid captain on retainer to move the boat out of the danger zone at all times during hurricane season OR (2) you be present and able/willing to do so. They also require that your vessel remain able to move under her own power during storm season and that the fuel tanks remain adequately filled to get out of dodge.

If you're an "absent owner" you have to have someone on retainer - PAID retainer.

Actually getting Gigabite out of the cone of uncertainty was, where we are, almost impossible in virtually every case. This is not a good thing, but its reality living in the Panhandle. So my plan included sinking 4 pilings at a friend's home for storm tie-up (he's in a cove protected by two full 90 degree turns from open water, AND has condos on the east side that are taller than the boat) along with an "aw $%$#!!" plan including two BIG storm anchors (plus my working anchor) to be used in a bahamian moor if necessary. We also have the Ditch here, which has a "canyon" area between Destin and Panama City which is a "last ditch" thing - if necessary.

Giving them a plan that was satisfactory to them required most of a full written page.

Their policy also included a "materiality clause" which essentially gave them an out to not pay you if you misrepresented anything to them - material to the loss or not! That clause I REALLY don't like in insurance policies, as its a weasel word clause that is often used by companies with no intention to pay - but its showing up in marine insurance more and more, and the sort of problems firms had after Ivan is a big part of the reason.

BTW Markel's premium was slightly LESS than Boat/USs was - before the run of hurricanes around here starting with Ivan, and this year, when it renewed, there was zero increase - even though last year we had Dennis, Katrina, Rita and Wilma.

So apparently there is at least one insurance company that kinda "gets it", but whether they're still writing new business in Florida I don't know.