Forum-Based Cooperative Insurance . . .

[wolfaroo]

Sorry if this has been aired before but... seems to me like insurance premiums are on the march again (aren't they always?) and loss adjusters are driving even fancier cars than ever before (the last one I met, in South Australia, drove a Ferrari, and thats the truth).

So with premiums rising, payouts reducing, terms tightening and profits soaring, would it be such a bad idea to launch a cooperative amongst the community on this forum with the aim of providing a fairer, more economical product for us all?

I'm guessing yes (as there isn't one) but can't work out why.

Or has this bottle of Rioja turned me into a damn communist?

[GordMay]

You want to form an insurance company?

[David_Old_Jersey]

I always like new business ideas but I don't see this as a flyer due simply to CF being such a small pool of premium payers.

That's leaving aside that for some folk who appear on CF I wouldn't get on any boat they were in command of - I certainly would not want to risk paying for there learning curve / stupidity

[wolfaroo]

Originally Posted by GordMay

You want to form an insurance company?

Well a co-operative, but why not? Reading through the related threads on this site and others reveal marine insurance is very much hit & miss and I very much doubt whether cruisers are actually getting good value for money, let alone a decent product. So I was just thinking out aloud really, floating the idea of a Co-operative - afterall, there are more than enough members on here to form one.

A co-operative is a business, but more than this, it acts together to meet the common needs and aspirations of its members, sharing ownership and making decisions democratically. Co‑operatives are not about making big profits for shareholders, but creating value for their members. Their top priority is to provide the best possible services for their members and to invest in their community.

I'm convinced it would lead to much cheaper insurance for cruisers & generate reasonable dividends for us all too...

[David_Old_Jersey]

Are you already in the insurance industry?

[wolfaroo]

Originally Posted by David_Old_Jersey

Are you already in the insurance industry?

Nope. But thats just detail If the overall goal is there, details are easy to work out given a group of capable folk.

[osirissail]

About as close as you will come to a "co-op" type insurance for cruisers is I.M.I.S. and that is not very close. But they have insurance products specifically tailored to cruising couples on cruising boats. Historically other marine insurance outfits required more than 2 people on a cruising boat for passages.
- - On the other hand, you could start up an Edward Williams type clone which has dirt cheap premiums and even writes for ferro-cement . . .

[denverd0n]

The "why not?" is pretty simple: too small of a pool of investors.

Insurance companies spread their overhead and underwriting across thousands upon thousands of policy-holders. Here on CF (heck, even if you included all of the other cruising forums on the internet!) you would probably not get more than a couple of thousand at most. How high would the premiums have to be in order to cover one member suffering one catastrophic loss during the first year?

Sorry, but the numbers just do not add up.

There's also a bit of a chicken and egg problem. Who is going to commit to paying the premium unless they know how much it will be, exactly what it would cover, and are certain that the co-op will have the resources to pay off a claim? And how will the co-op be able to determine how much premiums will be, what sort of coverage it can offer, and guarantee that it has enough members to pay off claims until a substantial number of people commit to paying the premiums?

[wolfaroo]

Admittedly it would be a very ambitious goal!



And yep, there would be a number of significant hurdles to overcome - the chicken & egg being a major one of those. But none of them are insurmountable, with the exception of the numbers involved as you pointed out.



I guess we're not there yet. But I don't believe we are a million miles away either... 65,000 members on CF and counting, >10% with boats?? I don't know. But, very crudely*, 10% would be enough to sustain at least 90 total losses per year at an annual premium of 1.5% boat value, and produce a fund easily able to generate a revenue stream in excess of 10 further total losses per year. 100 total losses /6500 boats (1.53%) is a massive safety margin... I would suggest the actual data shows <0.1% total losses. In any case, anything less than 1.5% total losses is sustainable & profitable.


*before pulling these numbers to bits please note this is just a crude/simplistic model to demonstrate that the numbers involved may not be as far away as one might suspect! Assuming >10% CF members have boats that is...

[David_Old_Jersey]

Originally Posted by wolfaroo

Nope. But thats just detail If the overall goal is there, details are easy to work out given a group of capable folk.

Just a detail? A man after me own heart

[Cheechako]

I think what you're talking is a group. You can then negotiate insurance rates and terms yearly. Groups get better rates and terms. (tried to buy individual health insurance lately?) Most businesses in the country do this already. Many change companies every couple years to the best bidder when they go out for bids. There are in-between entities who handle it for smaller companies. One of those might even handle a group like CF... dont know. Trouble is, someone would have to be the CF person and it would be a full time job.

[avb3]

Co-op insurance is a great idea.

One would have to define the underwriting requirements, and if there are 20,000 participants, I bet there would be 123 different requirements or wants.

Basic liability is an easy one.

Insuring for property is tougher.

One probably could off-set policies through a re-insurance company such as Swiss Re, which mitigates the co-ops risks.

It would be interesting to hear from insurance pro's on this one.

[martinjrichter]

The biggest hurdle besides the massive amount of money you need in "reserve" is getting lenders to accept the company's products. Lenders set up a series of requirements insurance policies must meet and I am sure there is some sort of insurance rating you must attain before the policy is accepted.

[avb3]

Originally Posted by martinjrichter

The biggest hurdle besides the massive amount of money you need in "reserve" is getting lenders to accept the company's products. Lenders set up a series of requirements insurance policies must meet and I am sure there is some sort of insurance rating you must attain before the policy is accepted.

Hence the Re-insurance.

[BillAU]

Originally Posted by Cheechako

I think what you're talking is a group. You can then negotiate insurance rates and terms yearly. Groups get better rates and terms. (tried to buy individual health insurance lately?) Most businesses in the country do this already. Many change companies every couple years to the best bidder when they go out for bids. There are in-between entities who handle it for smaller companies. One of those might even handle a group like CF... dont know. Trouble is, someone would have to be the CF person and it would be a full time job.

I'm guessing Cheechako has hit the nail right on the head with his post.
Group insurance is working well for groups here in Australia. The bloke/s with the idea form the group in their neighbourhood get others to join (it's free to join) Once the group grows to, say a thousand members or more, the group puts out a tender for the supply to members for electricity, gas, solar, phone/internet service or whatever, and by all accounts, as reported on Australian TV programs, the group is saving major bucks as they get great deals, much better deals than individual negotiated deals for the same service. I see no reason why the same idea would not work for boat owners but...I could be wrong

Bill
Australia