A guide to shipshape claims handling.
By Mary Wright , James Grimm
The appeal of the open water remains strong for boating enthusiasts, even though much of the United States has a short recreational boating season. According to the U.S. Coast Guard, there were more than 12 million recreational watercraft registered nationwide in 2012. During that year, there were 4,515 recreational boating accidents resulting in 651 deaths and $38 million of property damage.
That’s where claims professionals come in. When compared to more common vehicle claims, personal watercraft claims have notable and sometimes challenging differences. Claims professionals new to this specialty area must understand the goals of watercraft coverage and the challenges specific to settling these claims. To build skills in this product line, they also must receive hands-on training throughout their careers.
What Makes Watercraft Claims Different
The challenges associated with watercraft claims begin with the inherent nature of the insurance policies. Coverage for recreational watercraft largely is intended to cover sudden and accidental damage and problems rather than wear and tear. Plus, to compete, insurers are trending toward adding new coverages, such as latent defect coverage for problems caused during the manufacturing process.
Determining whether damages are the result of a sudden accidental event, lack of maintenance, or wear and tear can be difficult. A claims professional’s ability to demonstrate thorough knowledge of the marine policy builds confidence with the insured that the carrier will resolve the claim properly and provide quality customer service.
The majority of claims during the boating season, such as hitting a submerged object, are similar to a fender bender in a car. With auto insurance, people typically do not file a claim when they experience minor mechanical failures, such as when their engine overheats. However, some boat owners file claims for those types of problems. So it is the outlier claims like engine failure that challenge claims professionals. This is primarily due to the fact that, to determine the cause of the claim accurately, a more detailed inspection is needed, which can include tearing down the engine to examine the internal components. Once causation is accurately identified, coverage can be determined on a case-by-case basis.
Frequently, claims professionals assess losses that result from inadequate maintenance, which can present a coverage issue depending on the circumstances and policy language. The consequences can be challenging for both the insured and the claims professional. For example:
- The water pump impeller is an inexpensive part that should be changed every year but often is not. This can lead to costly damage.
- Bottom painting should be done every two years to extend the life of the boat’s hull. This helps to avoid blisters that can form in the paint and lead to damage. Unfortunately, boat owners often neglect to do this.
- Boats draw in water to cool the engine. If the water is not thoroughly flushed from the system before winter, it can freeze and crack the engine block or other systems that draw in water, such as the air conditioner or generator. Resulting damage can be both catastrophic and expensive, and it can even lead to the boat sinking.
Taken together, this means claims professionals must devote significant time in determining the cause of loss to establish coverage.
Building Credibility Is Essential
These issues are compounded by the fact that insureds do not always view their insurance claims professionals as experts in watercraft products. It is important to establish credibility with the insured by demonstrating a strong understanding of marine nomenclature to include the mechanical and structural components of the vessel and their functionality. The claims professional also should attempt to work directly with the person conducting the repair work to achieve an agreed scope and line-item estimate of repairs for damages related to the loss. When settling a claim, the insured should be made aware that the input of the repair specialist has been taken into consideration.
Subrogation recovery in watercraft claims can be challenging, too. Many claims involving a third party are due to a high occurrence of hit-and-run incidents; there is often no third party from which to seek recovery. When there is a question of manufacturer defects, claims professionals may struggle to prove cause.
The short length of the boating season can make insureds particularly anxious about turnaround time for determination of coverage and estimates for repairs. A backup of repairs at the insured’s marina carries the potential of missing the entire boating season due to one small loss. Developing product expertise ensures that the claims professional is able help expedite the repair process.
Effective Watercraft Resolution Requires Training
To be effective in this product area, claims professionals need a deep knowledge of not only coverage and claims issues, but also of boats and other recreational watercraft. When training claims professionals with backgrounds in other specialty areas, they’ll need to learn what makes a boat claim different. When an insurance company hires someone with a boating background for this product area, it can focus training on insurance and claims resolution.
It has proven to be a good specialty for people with prior experience with boats or for those with a mechanical background. If they do not have that experience, claims professionals must learn to speak the right language. For example, they should know what “port” means, how a propeller works, and the functions of various mechanical parts. Whether claims professionals are in the field or office, they must be able to talk to repair shops in a manner that demonstrates their product competency. Basic training should cover:
- Nomenclature for mechanical parts
- Causation and damageability
- Rules of the waterway
- Differences in propulsion systems, e.g., inboard, inboard/outboard, and outboard motors.
Hands-on training is the best way for claims professionals to learn. Such training conveys critical information by allowing trainees to work on a boat and gain firsthand knowledge to see, experience, and understand how different propulsion systems work, for example. The training also can be useful for introducing them to repairs unique to a boat, including fiberglass repair and canvas repair.
For claims professionals with experience in this product line, more advanced hands-on training should build on these competencies. Higher-level training can include rebuilding engines, replacing or repairing a prop shaft, and repairing damage to a fiberglass hull. It also can incorporate aspects of modern-day navigation that involve advanced electronics and system operations.
People Skills Are Also Important
One of the most important skills for watercraft claims handling is a soft skill—explaining information to lay people in a way they can understand. Many boat owners will file a claim when the boat stops suddenly, assuming they’ve hit something. This is a fair assumption, but blunt force isn’t always the cause. A boat can stop suddenly due to friction from water when the propeller stops for other reasons. This is not a cause that someone unaccustomed to boating would be familiar with, so the claims professional should take the time to explain it in detail.
Thoughtful communication also is important because insureds need to feel confident that their insurer understands the marine product. For many policyholders, their boat is a prized possession and not simply a vehicle. Claims professionals must be sensitive to the emotional attachment owners may have to their boats. When handling a claim, it is critical to explain to the insured clearly what the problem is and how you will help them to resolve it.
Keep the Customer Satisfied
A happy insured is one who receives a fair indemnity payment and empathetic customer service. For claims professionals to achieve this, they need an understanding of the unique circumstances surrounding watercraft claims, thorough hands-on training, and the ability to effectively communicate the details of the claims process.