Insurance or not?

[barnakiel]

I have sailed maybe two dozen bigger boats. All of them were fully insured (covering boats, crews, guests/passengers, etc.).

Our own boat is not insured. It is very small though.

Boat at 700k, I would insure.

b.

[hellosailor]

Insurance companies each have their own trade-secret algorithms and they try to find actuarial systems that will give them the least risk and greatest profit. If the best IMIS could find was similar to the $10k that Panateus (and Panateus-US isn't the same company as Panateus in the UK) asked, it may simply be reflecting the differences between Dockhead and Hobie.

Different waters. Different season. Different vessel, perhaps steel versus plastic. Different credentials? Different sailing history? More years in the same class of vessel? Any automotive insurance claims in the past ten years? Any criminal convictions, foreclosures, credit card history, employment history, retirement status? Restrictions on the number of crew? Vessel age?

You name it, and SOME insurer is out there using it as a rate adjustment factor. If you compared Dockhead's details to Hobie's, and asked the folks at IMIS (or Beth, if she's allowed to talk and knows what her insurer does to rate) and I expect the answer will come back in black and white.

No, it isn't always fair. That's why rates vary so highly though. The insurer is always using some kind of logic that *they* have found relevant to the individual as a risk.

Or, there's a difference in coverage. A Youtube couple (s/v Ruby Rose) recently lost their boat due to an accident that the hired transport captain--required by their insurer!--had with it. They found out the hard way, insurance is not all the same. Perhaps one policy is for "agreed value", which omits any improvements, work, new sails, etc. you've put into it, while the other is for "replacement" or pays additional expenses including hauls, surveys, accommodations, and so on. There are reasons why insurance contracts use pages of tiny print, to intentionally make them hard to read.

[valhalla360]

Originally Posted by Zven

There is really no point speculating about premiums versus damages, and if insurance pays off in general. The insurance companies and syndicates are already doing this exercise on our behalf... and they are very, very good at it.

....


Oh and about that hard grounding? An owner of a $700k boat is likely to be able to pay $10k for sorting that out, or even $50k for a rough encounter with a jetty. That should be a non-issue. It goes on the credit card. Perhaps not so many restaurant meals for the next month then.

My point wasn't to speculate but to ask the insurance company what happens if you ask for a $10k deductible. As you say, they've already run the numbers. You may find it's a significant drop in premiums.

As far as shrugging off a $50k claim...even most multi-millionaires won't be happy even if they can take the hit. Of course, that was just an example. If the grounding involved a protected reef or sea grass, it could be $50k just for the environmental impact mitigation.

Yeah, if you are worth $100million, self insuring is an option but if $700k represents a large percentage of your net worth, it's an iffy proposition.

[belizesailor]

Its not necessarily a binary choice. A compromise option is to under insure. This lets you balance the cost/risk.

Only u can ultimately answer the question. If you can take the full hit (a big one in the case of the OP) then why not. May be a bit sobering to actually take that big of a hit though...even if you can afford it. If comfortable with less than a potential full loss then under insure (of course...insurance companies dont always pay up).

My perspective is never buy/invest (a boat is not an investment of course) more in any one thing than you can afford to lose...especially not a boat.

[jimrjohnson5325]

I researched Insurance recently for Atlantic Crossing. Went with IMIS Jackline Insurance Program. They cater to cruisers and had less restrictions. Check it out.

[DumnMad]

Can you trust the skipper of a fully insured boat?

Big deductible or 3rd party only (including environmental cleanup) does leave the owner with a decent incentive for conscientious boat management. Furthermore large premiums or refusal to fully insure suggests many underwriters don't have so much trust in the fully insured either.

[barnakiel]

BTW how does one insure against their insurer's risk?

I mean: can I just walk into company B and tell them that I want to insure the risk of my insurance held with insurer company A?

Insurance companies are just companies. They too fall and fail to various reasons. How do you insure against this fact?

b.

[hellosailor]

"many underwriters don't have so much trust in the fully insured either."
Insurers don't TRUST anyone. It would be irresponsible of them to do so. Insurers base their ratings on actuarial data, plain solid numbers. If the numbers say that "folks like you" have a bad claims history? You're gonna pay through the nose.
The only difference between insurers, is how they determine "folks like you". Whether they think everyone who has filed for a bankruptcy is irresponsible, or perhaps, just unlucky. Trust plays no part in the decisions.

[estarzinger]

Originally Posted by barnakiel

BTW how does one insure against their insurer's risk?

Well the primary way is to look at their AMBest rating, and only go with one with strong rating. That is a metric which directly attempts to assess the insurer's stability/risk.

You can in theory do what you are asking about (insuring against the possibility of your primary insurers failure), and is done in large risk cases, but I dont know many who would want to mess around with a small yacht case . . . . they would just tell you what I said above - go with a strong AMBest.

Just as a factoid related to this thread . . . .30 year old boats have 3x the loss rate of 5 year old boats. So there is a pretty good reason the companies are reluctant. And it is quite expensive for them to look deeply enough into each specific application to see if one particular 30 year old boat is enough of a better risk than average to be worth taking.

And BoatUS does sell liability only (for US boats in US waters), if anyone is looking for it. They dont make much money on it and prefer to "up sell" you more complete coverage, but they will sell liability only if you insist that is what you want.

[barnakiel]

Originally Posted by estarzinger

Well the primary way is to look at their AMBest rating, and only go with one with strong rating. That is a metric which directly attempts to assess the insurer's stability/risk.

You can in theory do what you are asking about (insuring against the possibility of your primary insurers failure), and is done in large risk cases, but I dont know many who would want to mess around with a small yacht case . . . . they would just tell you what I said above - go with a strong AMBest.

(...)

Yes. Just what I meant.

You read my question right. We buy insurance and believe that we are covered while actually we are still exposed to the risk of our insurer's failure.

I have measured/managed various risks, earlier, professionally, financial ones; now I often study and apply various risk measures to stuff like weather or software. So I tend to look at things in somewhat masochistic deterministic academic way. Not that I think it truly concerns the average sailor.

BTW. I think OP's case the boat is about 700k so small by US American standards perhaps but huge by EU standards or otherwise. We see Oysters and Swans of 65-75ft build before 2000 go at this price here.

Best regards,
barnakiel

[hellosailor]

"30 year old boats have 3x the loss rate of 5 year old boats"
That's an attention-getter.

Is there any more context, any other correlation, that can be shared about that?

Like, are the 30 yo boats being lost because of through-hulls and rudders failing? Simply old age and maintenance related? Or, from mysterious circumstances, the way that many boats are rumored to have been "encouraged" to sink at the dock when their owners didn't want to keep paying the finance bill? Or the cruising area, i.e. new boats are perhaps either raced or kept in home waters 50 weeks of the year, versus the old boats being boat by inexperienced newcomers, who set off on their dreams to cruise, without being prepared?

I don't doubt the comparative loss rate, I just can't help wonder what else isn't being painted by that broad brush.

At one time the chairman of Geico used to drive a bright red Ferrari Testarossa, when that was a hot new supercar. Of course, he swore he never broke the speed limit in it.(G)

[Mike OReilly]

Originally Posted by hellosailor

"30 year old boats have 3x the loss rate of 5 year old boats"
That's an attention-getter.

Is there any more context, any other correlation, that can be shared about that?

Yes, good question. This brings to mind a typical fear-based insurance TV ad from many years ago scarily noting that the vast majority of vehicle accidents happen close to home .

Is the loss rate for older boats higher b/c there are a lot more older boats out there compared to new ones? Estarzinger, when you say “rate”, what is the unit of this rating? What is the actual comparison?

I’m sure age fosters greater risk of system degradation; basic entropy. So it makes sense that older boats are lost sooner than newer ones. But it’s kinda like saying more old people die than young people.

[Zven]

This reminds me of what's become the single most annoying part of buying flight tickets these days: The pressure to buy insurance.
As in, there is no way to proceed to pay for my one-way ticket from London to Amsterdam without confirming multiple times that I will not buy insurance, WHICH MEANS I'LL HAVE TO PAY MILLIONS OUT OF POCKET IF I GET CANCER... or something else really scary to that effect.
It's always worth keeping in mind that insurance companies (and anyone acting on their behalf) do not have our best interest in mind.

[boatpoker]

Insurance is simply a bet.
You are betting that you will have a loss bigger than your premium and deductible, they are betting that you will not.

They are better at calculating those odds than any of us will ever be and just like the casinos will always come out ahead. If they could not come out ahead they'd take their money elsewhere.

[estarzinger]

Originally Posted by Mike OReilly

Is the loss rate for older boats higher b/c there are a lot more older boats out there compared to new ones?

No, it is the actuarial loss rate per boat - eg the likelihood that individual boat will suffer a loss.

Originally Posted by hellosailor

"30 year old boats have 3x the loss rate of 5 year old boats"

That's an attention-getter.

Is there any more context, any other correlation, that can be shared about that?

Most of the older boats in the portfolio have been covered a long time, and not had bad loss histories (otherwise they would again have been washed out at some point).

And there are some some gross screens (like boats that have been obviously abandoned/maintained by the owner, and those which the owner refuses to resurvey after some time period, etc) which are washed out of the portfolio (and so those are not even in the 3x higher rate).

Beyond that . . . . If they could figure the out key things to look for they could make way more money by picking out the ones that were a better risk. But it unfortunately basically requires too much expense and skill/knowledge to assess which of the individual boats are better/worse risk.


As Mike said, it is not a surprise that older boats have higher risk, but I found the magnitude of the difference to be 'interesting'