A pleasure cruise on a private yacht sounds like a wonderful, relaxing way to spend the day. But for the owners of those watercraft, unexpected events can cause major headaches and lead to the stress of insurance claims. Sedgwick’s yacht practice is keeping a close eye on the trends affecting losses in this space and their ramifications for both insurers and their insureds. In this blog, let’s dive into three noteworthy shifts making a significant impact on yacht claims.
Rise of theft
In the past few years, we’ve seen an upturn in theft incidents associated with watercraft. This aligns with a broader societal trend of surging burglaries, as noted in many news stories on rampant break-ins in American city centers. The increase in crime can be attributed to a combination of factors, including inflation and other economic pressures, declining civility, political unrest, entitlement mentality and the breakdown of societal norms during the COVID pandemic.
Of course, it’s difficult to steal a whole boat without being detected. However, thieves are becoming more brazen in their attempts to take valuable items from yachts, such as engines, engine parts and electronic navigation systems. Regrettably, there is also an uptick in “inside jobs,” where employees of marinas, storage facilities, transport companies and other providers are part of the criminal activity. Insurers today are heavily focused on rooting out these bad actors, as well as fraudulent claims in which policyholders have played a dishonest part in the hopes of collecting a payment.
From the standpoint of compensability, the extent to which an owner took steps as a prudent policyholder to protect the vessel and its components comes into play. Was the boat kept out in the open driveway or behind a locked fence? Did they select a marina or storage facility with ample security controls (physical barriers, lighting, cameras, guards, etc.) to deter theft? Owners are responsible for knowing what their policy requires of them, applicable deductibles and what exclusions may take effect, depending on how and where a theft loss occurs; they also must accurately represent themselves and the use/storage location of their vessel to their insurer.
Evolving technology
In the yacht claims space, as with nearly every aspect of modern life, technological advances continue to move the needle. Both boat owners and service providers are making use of new technologies to mitigate losses. Marinas and storage facilities are employing increasingly high-tech surveillance and security systems to keep thieves away and immediately detect unwelcome activity. This is proving helpful to law enforcement and claims investigators alike.
Additionally, there are many new devices that can be wired into vessels to subtly detect everything from location to motion on board to taking on water. Such technologies deter incidents of theft and total loss, reduce the likelihood of perpetrators getting away with their crimes, and mitigate insurers’ exposures. Further, because the data from such devices can help carriers in investigating claims, some incentivize policyholders to install them by offering premium discounts or paying for the hardware and/or service subscription costs.
Parallel to the growing popularity of electric vehicles (EVs), specialty watercraft with electric propulsion are now on the market. This affects yacht claims in a few ways. First, these vessels are more susceptible to catastrophic loss from fire than traditional motorized boats due to the lithium ion batteries on board; they may also experience more issues due to lightning strikes and electrical surges. It can also be difficult to find repair shops with the right equipment and skilled labor to fix these specialty vessels. Replacement parts may be in short supply in some areas, leading to extended claim durations and potentially higher costs for insurers.
Impact of climate change
Slowly but surely, the world is coming to recognize that Earth’s climate is changing. As a result of these climatic changes, our planet is experiencing extreme temperature swings and consistently devastating weather-related catastrophes, including hurricanes, tornados, floods and droughts. These events seem to be striking with greater frequency and vengeance than ever before.
When disasters occur near bodies of water, boat owners are left scrambling for the same scarce storage and salvage resources in the surrounding area. To address this concern, many insurers are now opting to add claims adjusting partners to their networks. This enables them to leverage broader preparedness and proactive mitigation efforts, as well as established resource networks, so they’re better equipped to promptly help policyholders and claim investigations before, during and after a catastrophe. Many are working hand in hand with adjusting partners to solidify disaster response plans well in advance and to better communicate with policyholders when events can be preempted and monitored.
Another effect of climate change is an increase in wildfire outbreaks. Traditionally, boats stored at lake marinas have been considered lower risk than those near oceans, which are more likely to experience severe storms. However, we’ve recently seen several incidents of wildfires near lakes that wiped out entire fleets. These areas can no longer be considered safe zones for boats from the standpoint of risk. As a result, premiums are starting to go up; however, there is also greater appetite for insurance carriers to get into yacht coverage. We’ll be keeping an eye on what the market can sustain and other timely issues affecting the yacht claims space.
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Tags: Claims, marine, marine and transportation, Property, Property loss, Restoring property, Technology, theft, yacht