In today's crowded market for personal lines insurance, there are very few ways to grow profitably.
Some carriers engage in price wars to lure customers from competitors. Others focus on mergers and acquisitions.
More often that not, the architects of such strategies end up wondering in a few years whether the effort was worth it. Operating results rarely show much improvement, and often deteriorate.
A more reliable way to grow profitably is to sell more products to existing customers known to be good risks, provided your product development and maintenance costs do not cancel out gains that accrue from cross-selling.
For most carriers, the ideal personal lines account is a high net-worth household for whom the company writes auto, homeowners, and personal umbrella coverage.
Now, what if they own a boat? Are you prepared to offer your ideal accounts boatowners insurance, or do they have to go looking elsewhere for the coverage?
If you can provide a boat policy, you'll probably make a profitable account even more profitable.
While there is no definitive industry-wide data on personal boat insurance, indications are that the line generally produces better loss ratios and combined ratios than personal auto or homeowners. This is partly due to the fact that boat insurance rates are regulated less rigorously than rates for other personal lines.
If you have to send your accounts elsewhere for their boatowners insurance you create an opportunity for a competitor to seek their auto, homeowners, and umbrella business, too.
In short, every standard personal lines carrier should have an interest in writing boatowners insurance, even those with little interest in writing "marine" insurance as a specialty line.
Whether you seek to write boat insurance as an accommodation line or as the basis of a marine program, there is only one standardized program filed countrywide for doing so: The AAIS Boatowners Program, introduced in the early 1990s and recently revised for the third time for a filing that began in May 2008.
The AAIS Boatowners revision was developed by Pamela Nykaza, senior product development specialist, who spent years in claims and product management with American Family and Allstate before coming to AAIS in 2007.
"This program provides a standardized package policy with a simple rating plan for insuring the most common types of family boats," says Nykaza. "The intent of this program is to meet the needs of the average boater while providing a product that would be comfortable even to an underwriter with minimal exposure to boating or marine insurance."
For insurers, the AAIS Boatowners Program is designed to be a highly flexible program that allows carriers to insure property and liability exposures, property only, or liability only. An AAIS-based Boatowners policy can be written as a stand-alone policy or as an endorsement to a homeowners policy.
Eligibility under the program extends to privately owned watercraft 30 feet or less in length used for pleasure. Coverage under the base form automatically extends to personal watercraft, such as "Jet Skis," but these types of boats can be excluded using an endorsement provided.
To be eligible, watercraft must be valued at no more than $75,000, must be less than 20 years old, and cannot be able to attain a speed of greater than 50 miles per hour.
Property coverage under the program extends to eligible watercraft identified on the declarations, plus motors, trailers, and equipment used to operate insured boats.
The policy also provides built-in property coverage for newly-acquired boats for 30 days, up to a sublimit of $25,000. Coverage for personal effects can be added by endorsement.
The property coverage exclusions in the base form have been expanded and refined to exclude coverage for loss arising from criminal acts of the insured and any type of residential use, as well as from mold/wet rot/dry rot and from animals or insects, including marine life.
A new exclusion is introduced for loss due to "marring, bubbling, or delamination" The exclusion designed to help avoid having the boatowners policy pay for losses that arise from failure to perform maintenance and upkeep on an insured watercraft.
In addition to changes in property coverage, new higher deductible options will be introduced with the program. This offers an opportunity for a price-sensitive policyholder to lower their premium.
Perhaps the most significant changes to the new program are in the conditions and loss settlement terms.
"Particularly noteworthy is the fact that the latest revision covers property losses on an actual cash value basis, in contrast to the agreed value approach built into the previous version," says Nykaza.
"An agreed value coverage endorsement is available, however," she adds. "In addition, a new warranty has been included stipulating that no coverage is provided if an insured watercraft is not maintained in a seaworthy condition."
Nykaza notes that the revised Boatowners base form applies the deductible to each insured boat damaged as a part of one loss. Previously, not more than one deductible applied per loss, but the revised approach is taken to help companies reduce their exposure and moral hazard in catastrophe prone areas, where many boats can be damaged in one natural disaster.
Catastrophe exposure is reflected in the territories provided for rating property coverage. Eleven territories are provided, up from five in the previous version: Alaska coastal waters; Pacific North coastal waters Pacific South coastal waters; Inland - West; Inland - Central; Inland East; Great Lakes; Atlantic North; Atlantic South; Gulf West; and Florida and Puerto Rico (one territory).
Liability coverage under the base form extends to bodily injury and property damage arising from the ownership or operation of boats, motors, and trailers identified on the declarations, as well as non-owned boats. A base limit of $100,000 is included with program. Optional increased limits are available.
As with homeowners coverage, the medical payments coverage is built into the policy. Yet, the AAIS Boatowners base form operates more like personal auto med pay, in that medical payments coverage pays for medical costs arising out of covered property. The medical payments coverage under the AAIS Boatowners policy includes all permitted occupants of a watercraft, the most likely people to be injured in an accident.
Another distinctive element of the AAIS Boatowners Program is the built-in coverage provided for uninsured boaters.
Coverage is provided in the base form for bodily injury or property damage suffered by the insured and caused by another boater who has no applicable insurance.
Uninsured boater coverage is provided up to a limit of $10,000 for any boatowners policy that provides liability coverage. With the revised program, an option to increase the uninsured boater limit will be available.
In addition to the Agreed Value Settlement Provision endorsement and the Personal Effects Coverage endorsement, AAIS will introduce two additional options with the revised Boatowners program.A new endorsement will be introduced for Additional Insureds. This endorsement extends personal liability coverage to named parties for vicarious liability arising out of the covered property. This endorsement is being introduced in response to a growing demand from marinas and even governmental agencies.
A Named Storm Deductible endorsement will be made available with the revised program. This endorsement will provide an option for exposures in catastrophe prone areas. Not only will this allow a company to mitigate its catastrophe exposure but it will offer price sensitive policyholders an option to lower their premium.
As for underwriting the liability exposure, "you'll find that many of the predictors for boatowners risk are the same as those for auto and homeowners risks," says Nykaza. "For example, a boater's motor vehicle record will be a good predictor of his or her navigational abilities. As with autos, having youthful operators will increase the level of risk."
"When assessing the competence of the boater, it is important to consider not only his or her overall boating experience, but his or her experience with the types of craft being insured."
The revised rating procedure for the AAIS Boatowners Program includes a new premium credit to reflect the experience of the owners and operators.
"It's also important to determine if a boat is owned by one or more individuals or households," she says. "That's a situation you rarely encounter in auto underwriting but find much more commonly in boating."
Fortunately, formal training in boating safety is readily available, and the AAIS Boatowners Program provides premium credits for the completion of boating safety courses provided by the U.S. Coast Guard and state agencies.
Admittedly, with the slowing economy and rising cost of fuel, the next few years may not be boom times for boating. The market for boat insurance may continue to grow, however, because more and more states are imposing requirements that boaters carry boat insurance with minimum liability limits, much as they have imposed financial responsibility requirements on car owners.
Specialized marine insurers have long held a large share of the market for recreational boat coverage, and one could use the AAIS Boatowners Program as a platform to go after some of that business.
"But, our principal goal is to provide a complete, cost-effective, and relatively simple product that lets personal lines carriers offer boat insurance to their most desirable accounts," says Nykaza.
"There's no expectation that one needs to compete head-on with boat insurance specialists."
The 2008 Boatowners Program 
