Originally Posted by Sandero
Does anyone care to explain WHY different companies would charge different amounts for the same level of coverage?
Intuitively this makes no sense... aside from each company having different operating cost and profit margins... or actuarial stats.
I find insurance a sort of "scam"... because of the variable rates for the same coverage.
The big driver is risk. From the insurance companies point of view, how likely is it that they will have pay a claim. The other factor is size of the claim. A boat worth $20K is obviously going to cost them less than a boat worth $100K.
A third less important factor is how big the insurance companies reserves are and what the re-insurance rates are. Right after a large hurricane
where many boats are damaged and claims are high we all see a rate increase in order for the company to rebuild
Risk factors are based on the type of boat, where the boat is located, and the policy holder. There are probably a few other factors too. Policy holder risk factors are big. Boaters with clean driving records, excellent credit ratings, and a history
of few or no claims get the best rates. Throw in a DWI, a bankruptcy, or lots of claims and the perceived risk goes up along with the premiums.
A company also looks at its pool of insured boaters. Some companies are willing to take greater risks and as a result they have higher premiums. Others are more restrictive, chasing "safer bets" that no claim will be filed and their premiums are lower. One of the ways BoatUS manages this is by reducing the deductible for those who do not file claims. This rewards good boaters by minimizing their expenses when they do file a claim, helps to reduce the number of small claims, and builds loyalty.
How well a company understands the market is also a factor. Insuring with a company or through an agency that specializes in yacht insurance means that you are working with a company that better understands the risks involved and can better understand the risk they are taking when you are insured.
Its not a scam, so much as a complex business. Actuarial, the folks who figure this stuff out make a lot of money