Colin Dawson says “Beware of what you are buying and from whom.”
The importance of understanding the insurance cover one has and the knowledge of those providing it rather than relying on price is something often spoken about. Yet we continue to see price being the primary deciding factor when owners or their delegated people choose insurance cover for their (often) multi million dollar asset. We find ourselves in an insurance market where insurers are shrinking away from risk and being ever more careful with what they underwrite. Its more important than ever to fully understand what you are buying, the ability of those you are buying from and the understanding of yacht risks the insurer has. There will always be a cheaper or more enticing option available but what are you really getting for this?
Those delegated to search for insurance options may be good at their core jobs but not necessarily experienced in the field of insurance. We have seen yachts of significant value move cover (frequently after many years with an insurer who has looked after them very well) for a premium difference which is a fraction of the annual operating cost while at the same time writing to thank us for years of excellent service. Its been stated by these clients that price has been the deciding factor. In reality, how much are you saving if a claim does not work for you or you find yourself dealing with a firm that does not understand your needs. Aside from the frustration involved the amount of additional time needed to deal with insurance will likely cost more than the saving in premium. Insurance is there to give you peace of mind. For example, with frequent lightning storms in Asia (and lightning is our most common claim) how well will you sleep with cheap insurance cover?
Another area we have noticed is the increasing emergence of yacht managers handling insurance for their clients, often with no insurance experience at all. Yacht management is relatively new in Asia and while the managers may know a lot about yachts, crew and maintenance mostly they do not understand insurance nor are they licenced and insured to advise on it. If buying or accepting advice on insurance from a non-registered insurance broker one should ask for proof that those advising you have Professional Indemnity cover that specifically includes insurance activities and also, in relevant countries, their licence number from the regulatory authority. In Hong Kong, for example, this will be issued by the Hong Kong Insurance Authority and one is required to display this on communication with clients. Is the manager taking a kick back from the people they are using to provide cover? Perhaps this the real reason they are handling insurance for you?
We have recently experienced a yacht broker enticing an owner to use his yacht for charter, actually asking the client if he is ok to charter his yacht out without the relevant survey and permission from the Marine Department in Hong Kong. Fortunately, the client consulted us and we were able to advise him of the insurance consequences of breaking the law, something that the charter broker (also a yacht manager) had not discussed with him. If that manager had advised the owner on insurance, the yacht had been used for charter and an accident happened the insurer would certainly have not paid a claim. Food for thought.
In conclusion, the consequences of using the wrong people for your insurance cover can be significant. The consequences of simply opting for a cheaper programme (always only saving a tiny fraction of the annual operating expenses of a yacht) without fully understanding the differences in cover and levels of service can cost an owner a lot more than the saving he gains. Proper insurance provided by specialists may not be the cheapest cover available but then its designed by experienced people to protect assets worth a significant amount of money and the lives of crew, family and friends - how to put a price on that?