Devin asked me to wage in on some insurance questions on here. I have to use my normal - non work - registration because I wasn't able to get a new username operational.
So you want to know about the insurance industry from an insider?
Welp, here I am. I am an underwriter. Couple of rules before I continue this: I am here for informational reasons only. For information concerning specific claims or how claims would be handled, I'm not your guy. Pricing? Nope. Regulations? I may be able to weigh in, but don't ask my opinion.
Second, I work for a modest sized company. Don't ask which one because I won't tell you. Why? Because my job here is to be objective as possible. Being anonymous permits me to do that. If you figure it out, good for you, but please don't divulge. Education is my goal and the better educated folks are, the easier my job as an underwriter is.
Finally, I'm not the enemy as many of you wish to categorize me. Why? Because I'm an insurance customer as well and have a MORE difficult time finding insurance on my boat than many of you. Why? Because I have an old steel hulled boat (1957 Inland Seas 39' Steel Clipper Flying Sedan Bridge) You think few companies insure cats? Fewer insure steel.
My initial post will be about two relatively hot topics on these boards: Exposed motors/over transom headers and cats. These items aren't unacceptable because they are "hated" or "misunderstood", they are excluded because of experience - which is the basis for insurance acceptability, pricing, and claims handling.
First, exposed engines and/or over transom pipes. Three things are fairly common reasons within the insurance marketplace:
-Burn
-Exposed moving parts
-Swamping. Some of these flatties have little to virtually no freeboard. Hit the hammer and - *glug*glug*glug*.
On to cats:
When a cat has an accident it's normally pretty catastrophic. In other words, when a cat digs a sponson, it barrel rolls and the occupants are flotsam. Ugly things, these deaths because they cause an excessive financial exposure on such a small portion of the overall boat marketplace. If you look at all the registered boats in the nation (and there are roughly 11 million of them) a minuscule portion belongs to cats.
I get the "you insure bass boats but not cats?" line of reasoning - which is flawed. There are vast numbers MORE bass boats than cats or flatties which causes economy of scale, per se. In other words, it's easier for bass boats to provide black ink to the bottom line.
Let's have some fun to prove a point. Let's say we have 500 cats on the books and average premium for each is $2,500. Total premium for the cat business is $1.25 million. Not bad premium dollars. Out of those 500, 3% have total loss features and another 5% have liability features. To be modest, each feature averages $25,000. 15 and 25 respectively or 40 total features. That's $1million in losses. I know what you're saying, "SEE, you're making a profit of $250,000!" Remember, 1mil is the paid losses only. You have to take into account the cost of handling the claim plus corporate costs which normally run about 30% (depending on company) of the written premium - which, in our example is $375,000. Your cat book is now running hot and you can't sustain the program for long. Heaven forbid if your severity (the $25,000 in our example) increases, you're even further in the toilet.
One could co-mingle cats with vees, but then the book of vees absorb those claims causing rates to go up on the total vee book. Now, your book of business could potentially shrink because of that rate increase.......causing an avoidable cycle.
So in order to maintain controlled pricing and market presence, the insurance company has to define its risk appetite.
To add, companies excel at different types of risk profile. There are companies such as Markel who are very good at underwriting performance boats. Other companies are great at territory pricing and are competent in hurricane prone zones. Other companies segment like a mother. All these companies do certain things well. I have yet to meet a company (mine included) which does everything well. These are the target markets they want and they excel at those target markets.
As a consumer, you have to find the company which gives you the coverage you want and at the price you want - that's how you can tell whether or not you are their target market.
It's not personal, it's only insurance.
Be peaceful,
SteelClipper
