(July, 2018)
Underwriting the American Association of Insurance Services (AAIS) Boatowner Special Coverage Form is straightforward, involving a few, critical areas, such as the named insured, craft information, operation area, driver information, loss history, tailoring coverage and deductibles.
Insurance policies are designed to protect the named insured's assets via protecting against direct loss to owned property or via defending against and paying legal claims and lawsuits. Naturally an insurer’s exposure to loss stems primarily from how an insured handles his or her boatownership responsibilities, so underwriting boat owners and operators should be done by examining their loss history and driving records. Underwriting attention may be given to other, additional interests, but typically such parties are not operators. Requests for certain limits and/or optional coverages may provide clues to additional underwriting concerns.
Where the named insured operates a boat is, typically, strongly correlated to the boat’s use, such as cruises, recreational/sporting activity, fishing, etc. Underwriters familiar with their boating market should be aware when there are mismatches, such as an application with a new or inexperienced boater operating in an area of difficult navigation, high boating traffic or owning a boat which is way beyond his or her skill level.
Properly underwriting Boatowner coverage requires careful consideration of these factors:
Routinely performing regular and scheduled watercraft maintenance is of great interest and extremely important to the agent and underwriters. Protection and safety devices installed or kept on the watercraft are other important factors.
The operator is the critical factor in boatowner underwriting. His or her ability to handle any covered craft is the key factor in determining the likelihood of an accident, regardless of the craft’s equipment. The policy should have a current operators list that includes the name, date of birth, driver's license number, and boats or personal watercraft operated by all regular potential operates. It is used to order periodic motor vehicle records for each operator.
Mismatches involving operators should be watched for red flags. Consider a single operator having a boat that has a large passenger capacity. Or a boater who claims his primary activity is fishing but the application includes a large inventory of recreational equipment and/or personal watercraft.
Loss history is critically important. It should include the date, time of day, driver, vehicle involved and type or description of each accident or loss in addition to the amount of loss and whether it is open, closed, reserved or in suit. Loss frequency predicts the possibility of a severe loss occurring in the future. Naturally, any mitigating factors should be given full consideration; as should aggravating factors.
Underwriting considerations must include determining if a specific insured needs every coverage available or provided. If not, some can be deleted by endorsement. In some cases, the basic coverages provided may not be sufficient for a given boatowner and endorsements are needed to broaden coverage or delete exclusions. These may or may not be subject to additional or return premiums at the insurance company's discretion. Other endorsements add additional insureds (usually without substantially affecting the exposures).
Related Article: AAIS Boatowner Program Optional Endorsements and Their Uses
Deductibles are another underwriting consideration and should be reasonable in comparison to the applicable policy limits. Deductibles may be used to, slightly reduce premium costs but are not typically a major underwriting concern.