Boat Values: the insurance pros weigh in
Importance of boat values
It’s that glorious time again; boat owners are getting busy with a variety of tasks to ready their vessels for the 2022 spring and summer boating seasons. Along with de-winterizing their boats, boat owners should also sharpen their pencils: chances are good their boat’s value has changed since the last insurance policy renewal.
Times they are still a-changing: supply chain issues
Practically every aspect of the boating industry is still at the mercy of a variety of shortages, whether it be raw materials, replacement parts, or employee/labour shortages that are slowing down production. And it seems the huge consumer demand for boats versus a shrinking supply won’t be balanced out any time soon.
Not one part of a boat is unaffected by shortages and logistical nightmares currently upsetting the world’s marine market. Before last year, did anyone give the foam inside the captain’s seat much thought? Anybody? Bueller? It’s no longer just a comfortable place to perch whilst steering a pleasure craft.
That chunk of foam is now a more expensive, precious, and rare commodity fought over by the furniture, mattress, auto, and marine industries. If a boat owner has to replace the foam seating due to damage from fire, rodents, or vandalism, it’s going to cost more than it did a few years ago. If the boat owner’s current insurance policy hasn’t caught up to the price of foam for seating and the many other parts required in the event of a total replacement, boat owners will be losing out. This is where those sharpened pencils come in.
Talk to your broker about your boat value
Rola Nasser,VP Quebec of Pacific Marine Underwriters has some advice for boat owners and insurance brokers alike for determining a boat’s value:
“ Getting your boat evaluated should include verifying the current market value for the boat and what would be the current replacement cost in case of a total loss. This will involve checking parts availability in case of a claim, what would be the potential increase in value on these parts and labour costs due to a claim, and how this can influence the total claim payout vs the vessel value stated on the policy declaration page. And we can’t forget to add the taxes to the boat’s value, too.”
A good broker will be up to speed on the ever-changing landscape that the boating industry is navigating including boat value, and Rola says:
“Brokers need to advise their clients of the potential change in their boat value and help prepare them for upcoming renewals. Brokers should recommend to clients an additional increase in values, varying from 15-20%, even without verifying the above, covering in part the inflation factor.”
Nowadays, to be a smart boat owner, one has to become well-versed in parts, raw materials, production, shortages, and logistics in addition to achieving a high-level understanding of safety equipment and basic navigation on board. Long story short: now we really have to care about seat foam among other things.
Just over a year ago, the massive electrical grid failure in Texas contributed to the seat foam shortage. The failure shut down oil refineries, limiting the processing of chemical by-products like propylene oxide, which is used to produce polyurethane foam for all kinds of seating. In North America, there are five plants that produce propylene oxide, four in Texas, and one in Louisiana… see where this is going? The loss of power at these plants was devastating. And this happened AFTER a particular global event that was already straining the foam industry. It appeared everyone decided to purchase new beds and sofas for themselves and their pets during the pandemic.
Claims examiner, Ian Donald of Coast Claims Insurance Services breaks down the Pandemic causes and effects on the boating industry, and provides an almost startling number that should be considered when updating the value of a boat :
“THE COVID EFFECT! With the global shutdown experienced at the beginning of Covid, we have seen two effects. First, the supply of materials and labor to repair vessels is in an extreme deficit. This means we have seen labor rates increase by as much as 30 percent over the last two years and similar increases in materials. Secondly, as people were unable to travel, boats became a safe way to socially distance and still have fun. Therefore, the demand increased for vessels, and supply dropped causing a large spike to vessel pricing. There has never been a better time to re-evaluate the insured value of the vessel and ensure there are enough funds to place an insured back in a pre-loss position. A safe starting point for insured values is an increase of 30 percent.”
A boat survey is worth every penny to determine correct boat value
A thirty percent increase; coming from a claim’s examiner, you can take that to the bank. As Ian described, even just the overwhelming demand for “pandemic” friendly boats contributed to price increases before even factoring in the various shortages affecting the numbers. Prospective boat owners may have trouble finding a brand-new boat for the upcoming season and may turn their attention to the used boat market. Before wading into the used boat market, MaryKate Townsend, VP of Pacific Marine Underwriters, Central Canada has some specific advice for used boat shoppers:
“When buying a used boat, spend the money on the marine survey. It’s a worthwhile investment that can save you money and reduce potential headaches in the long run. A marine survey will identify deficiencies that could be costly to repair, or even worse…could be dangerous. Surveyors know what to look for to ensure the vessel is seaworthy, and safe to operate in the open water. They will also be able to provide a current market value, based on the current vessel condition and market values of similar boats of that year and model. Bolster your boat-buying strategy with a marine survey.”
While we are still mired in these unprecedented market conditions, boat owners, whether seasoned or new, are encouraged to add UPDATE BOAT VALUE to their pre-season boating checklist. Getting that value right, then adjusting the insurance policy as needed with their broker, will give boaters a little extra peace of mind while enjoying the waters this upcoming season.
Resources for boat values
Pacific Marine Underwriters
Business insider: Boat shortage, shipping delays, rising prices
Marlin Mag: Supply issues in the marine industry
Car and Driver: Seat foam shortage
Woodworking Network: Foam shortage explained
Safe Harbour Insurance: Find a surveyor
Safe Harbour Insurance: Tips for buying a boat