Expat Marine Insurance Series
Brokers, Agents, and Insurers. Colin Dawson explains why not all insurance is equal.
In our third visit to some questions we regularly receive about the state of the yacht insurance market, we look at some difficult areas where an owner has as much responsibility to make his insurance work for him as does his broker. Often this comes down to an understanding of how insurance works;
the differences between a broker, an agent and an insurer where each has a different responsibility to an owner, and each works in a different way to have cover put in place, and (very importantly) that yacht insurance is not the same as motor insurance with covers varying from insurer to insurer. We will welcome any feedback from this and previous pieces, and we will also be happy to include any of your questions in upcoming articles. Please do not hesitate to get in touch.
I have found cheaper insurance that is exactly the same as yours...
Is it really? It is natural to want to search around for a better deal, in anything we are involved with. The above statement is one I hear a lot of times when an owner decides to place his cover with a new insurer through a different channel. Unlike motor insurance there are very few yacht insurance covers that are identical. Many insurers have their own policy wordings, tailor-made to that insurer’s specific requirements. There are various insurance brokers and agents out there who will say precisely what is needed to win business in the hope - usually well-founded - that the buyer is not really reading the policy wording, or going through it with a fine-toothed comb to check it against renewal options provided to him by his existing provider. Often the decision is based on price, and at best a cursory look at what’s on offer.
Aside from cover and price, there are two other vital aspects of yacht insurance - the insurer, and the broker or agent. Most people don’t understand the differences between these three: it is important to note that an insurance broker works for the owner (where his legal obligations lie) and an agent works for the insurer. This becomes confusing if a broker has a facility with an insurer as he is then acting as a broker and an agent. While a genuine broker will present a number of options from different insurers to an owner, one with a facility will often present only one. Attached to this facility is often a profit commission provided by the insurer on top of commission on premium. One has to ask, in those circumstances, where the interests of that broker lie in the event of a claim. This is better, however, than an agent whose sole responsibility lies with the insurer, and is in fact not required to assist an owner at all in the event of a claim.
Furthermore, there is added confusion as more and more yacht managers / brokers offer insurance cover. Some of them have insurance professionals within their office and are properly qualified to offer insurance advice; many do not, and will present an offer to an owner only from the insurance broker that offers them a commission for doing so. Again, whose interests are really being looked after here?
It is vital to check out who it is that is offering you the insurance, understand the differences between a broker and an agent, and to make sure that the person advising you on insurance is experienced in the field, is licenced to do so, and is professionally insured for providing you with that advice.
Then there is the insurer. Many companies offer yacht insurance but is this a field they really understand? To what extent does the actual underwriter understand what a yacht is and how it works? How long have they been involved with yacht insurance, and what is their reputation in the market place for service and claims handling?
Insurance is in fact a very cheap aspect of the annual operation costs of your yacht – and there is no insurance more expensive than a cheap insurance that does not pay. Even when it is more expensive, it’s well worth opting for a cover that comes from a known, reputable provider with cover you understand – which means you have to have read it. Of course, and just to add to the confusion, sometimes even the most reputable insurers behave badly… And that’s when your friendly and experienced broker really earns his biscuits!
Why is it talking so long to get an answer?
In the past 20 years or so yacht insurance had been easy to procure and quick to put in place. This has led to complacency in many areas, one of which is the tendency to arrange insurance at the last possible minute. Mostly this is not intentional; it’s simply forgotten until your insurance broker reminds you that your cover expires tomorrow, or your yacht broker asks you for a certificate of insurance for various formalities once the yacht is delivered. However, increasingly it is because owners are shopping around for a cheaper option, and only at the very last minute will they confirm cover - sometimes even after the expiry date of existing cover. This does not allow for further discussion if needed, and inevitably leads to problems (Bank Holidays, for example).
For obvious reasons, the last thing anyone wants is for a yacht to be uninsured. In the current market, cover is often subject to various pieces of information which need to be approved by insurers before cover is confirmed, and frequently this is not forthcoming at the time cover is required. In an insurance market where almost everything needs to be approved by a higher authority than the first line of contact at the insurer’s office, everything takes time. What if insurers have further questions? All this results in everything taking a lot longer than it has before. The advent of Covid-19 hasn’t helped, with people working from home, reduced staffing levels in offices, and the subsequent difficulties in obtaining information, sometimes from several different sets of people. Meanwhile the yacht sits there, uninsured.
A broker should make it very plain what’s required in order to confirm cover at the time of quoting, and should be confident enough to ask questions early in the process. Sometimes, they are difficult questions. Today, an owner must expect a more complicated process in putting together cover, and should not shy away from a broker just because a lot of questions are being asked. Most often, issues being resolved early will avoid problems later on. A good broker will try to stress the importance of getting everything done in good time.
You have left no time for me to make a decision: I feel that I have been pushed into a corner...
We have heard this comment a number of times over the past 12 months. Most often it is not because a renewal has been forgotten or intentionally left to the last minute: a late-notice set of renewal terms often comes about because it has been difficult to obtain terms for a client. Sometimes a broker does not wish to admit this for fear of the owner seeking cover elsewhere. However, it is also found when owners take a long time to reach a decision as to how they wish cover arranged, or fail to provide information needed in order to have terms set by insurers; then they find they have run out of options and time. In a perfect world, your broker should be discussing the renewal of your cover around a month in advance of its expiry date, thereby allowing for cover to be confirmed at least a week in advance of the expiry of cover.
As in almost everything, there should be trust and flexibility on all sides. An owner should provide all the information requested, and trust his broker to approach the market on his behalf: a broker should have the confidence to discuss cover well in advance of when it is needed. An owner should definitely discuss the renewal process with his broker, and ask him who he is intending to approach for terms. Relevant information can be discussed at an early stage, and open dialogue can take place, thus ensuring better communication on all sides.
At present there seems to be no let-up in the changing market, and we will continue to see changes in insurers’ appetites. We predict that arranging yacht insurance cover is going to get harder before it gets easier, meaning that it is even more important to work as a team with your insurance broker to ensure the best results for your insurance covers. We advise to be extremely wary of anyone saying it will be easy to put cover in place, and don’t be afraid to ask searching questions of your insurance provider (be it the broker or insurer) to ensure you are being looked after by someone who really does understand your risk and your requirements.