A Proper Understanding of Insurance: Colin Dawson

It has long been an unfortunate difficulty with the yacht industry in the Asia Pacific that many yachts (of all sizes) are not maintained at an appropriate level, and are often inadequately crewed. Of course, coupled with this is the importance of an owner understanding as to why it is so important to have fully experienced and qualified crew, as well as a proper maintenance schedule. Aside from the danger to the yacht and crew, this is also an important matter for insurance covers. In a soft insurance market where insurers are hungry for business, they are more likely to turn a blind eye to such issues, especially if an accident is not clearly related to such a problem and the claim is relatively small.

Today, we are no longer in a soft market. All insurers are tightening up significantly on these issues, amongst others. I have recently noted several cases where insurers have declined to offer renewal of cover due to inadequate crewing, the poor condition of the vessel due to a lack of maintenance, and the owner declaring the truth that he is keeping his boat on an illegal mooring. This makes it extremely hard to find any other insurer willing to take on the risk. It should be remembered that this becomes a Material Fact, and therefore one which must be disclosed to any future insurer - if a Material Fact is not disclosed, insurers can deny cover at any time. It’s not just a case of going to another broker to obtain cover because he does not ask questions. It is the obligation of the insured to disclose any information which may affect the underwriting decisions of an insurer (Material Fact) and the broker to act on that Disclosure, not the broker or insurer to find out. Having said which, it is the duty of a broker to ask all reasonable and pertinent questions of an owner seeking to obtain terms from insurers. After all, the broker is there to assist the owner, not just win his business by the easiest possible route.

It is understandable that a manager or skipper will not wish to provide tough facts to an owner, especially if this results in him having to spend money. It is also the case that many insurance brokers do not ask tough questions when looking to secure an account in the hope that making life easier for the decision maker by not asking hard questions will help them win the business. Sadly, this is what actually and all too often. However, none of these situations actually helps an owner, and that is what these parties are there to do: act in an owner’s best interests. An insurance broker, a manager and/or a captain has been put in a position of trust by an owner, and it is reasonable that the owner expects that person to tell him the truth, be this good or bad news. Of course, the owner has to be open and willing to discuss these matters (and prepared to spend the right amount of money on his yacht annually to ensure that it is run properly) but the people an owner trusts to run his yacht should be professional enough to be able to bring such matters up in a way that its seen to be to the owners benefit to do it right. Frankly, if one of these parties is not doing so, then he is pulling the wool over an owner’s eyes. If a yacht is not run in a way that keeps it in tip-top condition then it will likely to cost an owner far more in the long run, and possibly put the lives of his family, friends and crew in danger

A vessel must always be seaworthy, and this includes when it is in port as well as at sea. Seaworthiness is not only the physical condition of a yacht, but it is also the sufficiency of the crew on board; something that is not always realised. Running a yacht privately means certain issues do not need to be addressed as strictly as if she was being run commercially - crewing arrangements for example. However, just because one is not told to do something does not mean it does not have to be done to ensure the yacht is seaworthy. If a yacht is found not to be seaworthy, an insurer can deny a claim. In fact, they can deny cover at any time this is discovered; insurance covers carry a Warranty that a yacht must be seaworthy at all times.

The issue of crew is altogether much harder, as it remains very difficult to obtain suitably qualified and experienced crew in Asia. Yachts are becoming ever larger, and there is very little opportunity for crew to gain sea miles on similar vessels, and receive proper training by internationally recognised entities. This is not the problem of the insurer, although it quickly  becomes the problem of the insured in the event of a loss.

There are very few regulations in Asia regarding crew, and it would in everyone’s interests to have regulations regarding training, experience and qualifications put into place that are internationally recognised and follow global standards. There exists in Asia a huge opportunity for the creation of international-standard crew training centres, certifying  crew to look after a yacht better and also greater opportunities globally in an expanding market place. Going one step further I would advocate that Continuing Professional Development programmes be introduced for crew (and owners if they have no crew) to allow for a licence to be renewed.

This is in place for most other professions, why not the yacht industry? Owners really need to be supportive of this as it’s designed to protect their assets and, ultimately, the lives of their family and crew. For this to happen any CPD needs to be relevant and up to date, therefore giving genuine and clear advantages for owners and crew alike. It will also demonstrate to insurers that loss prevention and good risk management is in place. Finally, to properly assist an owner, it needs to be remembered that working as a team is always better than working individually, purely pushing one’s own goals, possibly to the detriment of the client. Unfortunately insurance is often seen as the enemy and therefore one to be beaten wherever possible. In fact, insurance should be seen as a partner to the successful and safe operation of a yacht. If seen as such an owner will be happy in the outcome of his cover as and when it’s needed.

There are few regulations in Asia regarding crew. It would be in everyone’s interests if some basic internationally-recognised regulations regarding training, experience and qualifications were put into place. It follows that there exists in Asia an opportunity for the establishment of maritime academies to train and certify crew to full international standards, thereby opening up further employment opportunities in a globally expanding market place. And going one step further, I would advocate that mandatory Continuing Professional Development Programmes be introduced for yacht crew (and owners if they have no crew) to allow for licences to be renewed.

This is in place for most other professions, why not the yacht industry? Owners really need to be supportive of this as it is designed to protect their assets and, ultimately, the lives of their family and crew. For this to happen any CPD needs to be relevant and up to date, therefore giving genuine and clear advantages for owners and crew alike. It will also demonstrate to insurers that loss prevention and good risk management is in place.

Finally, to properly assist an owner, it needs to be remembered that working as a team is always better than working individually, purely pushing one’s own goals, possibly to the detriment of the client. Unfortunately, insurance is often seen as the enemy and therefore one to be beaten wherever possible. In fact, insurance should be seen as a partner to the successful and safe operation of a yacht. If seen as such, an owner will be happy in the outcome of his cover as and when it’s needed.

By Colin Dawson Expat Marine Ltd.