Coverage is Key as Boat Owners Hit the Waterways

May 21, 2001

More than 76 million Americans take to the water each year, according to figures released by the National Marine Manufacturers Association. And they spend more than $23 billion annually on marine products and services.

While boating has always been a fixture of the American recreation scene, gains in the last 40 years in both motor and boat design have pushed the number of people hitting the waterways to new heights. Today more than 16 million boats are put to use, and one out of every three Americans takes part in some form of boating each year.

One of the most popular aquatic pastimes is the use of a personal watercraft (PWC), including jet skis, waverunners, waterbikes and waterscooters, representing a market that has ballooned in the last couple of decades.

In California, which has more than 3,400 miles of coastline and tidal shoreline, state boating studies for 1999 involving PWCs show that there were 264 accidents related to the crafts. Collisions with vessels accounted for 69 percent of the mishaps. Out of those 264 accidents, 66 percent were related to operator inexperience. Excessive speed (52 percent) and operator inattention (51 percent) were also major factors.

Taking all precautions
Despite such sobering statistics, getting a PWC insurance policy is relatively easy, according to most insurance industry experts.

Erin Burns, a customer service representative with Snapp & Associates in San Diego, said, “We generally see big summer weekends as a busy time. Most of our clients who already have a boat seek this type of insurance. You can get seasonal insurance for a boat like six months or even just a three-month policy.”

Burns added that when working on a PWC policy, “We want to know someone’s driving record, who will be driving [the PWC], whether it will be used in inland or coastal areas.”

Where the craft is stored and where it is used can also factor into the final price. The cost to insure a boat is usually but not always higher in coastal waters as opposed to inland and rivers—especially in locales vulnerable to hurricanes—and even higher if the boat is used year-round.

Tammy Cooper, a personal lines customer service representative with Keelson Partners in Portland, Ore., an insurance and risk management company, noted that several insurers come to the company specifically to sell PWC insurance.

“In general, I think the PWC insurance market has slowed down a bit,” Cooper said. “One thing I would like to see become mandatory is that boating education be required for those using PWCs. Most companies have a policy where if you take a safety course, you get a credit.”

As is true for many other vehicles, laws regarding when PWCs can be operated and by whom vary from state to state.

The state of Washington requires that operators of PWCs must be at least 14 years of age, and lifejackets are required. PWC users are allowed to operate the crafts from sunrise to sunset.

In California, according to the state’s Department of Boating and Waterways, PWC users under the age of 16 may not operate a craft if it offers more than 15 horsepower. Operators 12 to 15 years of age who wish to operate a PWC with more than a 15 horsepower must have someone at least 18 years old on board.

PWC market rises
The U.S. Coast Guard (USCG) defines personal watercraft as Class A inboard boats, making the vehicle subject to the majority of rules and requirements which other powerboats follow.

The Personal Watercraft Industry reports that based on recent research, the normal purchaser of a new PWC is about 41 years old with a household income of just over $95,000. Statistics indicate that roughly 85 percent are male, 71 percent are married, and 69 percent have owned a powerboat before purchasing a PWC.

While some PWC models can hit 60 mph or more, recent studies indicate that most owners do not race or make aggressive moves. More than 80 percent are simply riding with family and friends for short ventures, towing skiers, discovering new areas and entertaining friends. Not even one percent of those studied indicated that they use their craft for racing purposes.

When PWC accidents do occur, however, they can be severe. According to U.S. Coast Guard figures, nearly 50 percent of all boating accidents are PWC-related. Almost half of those lead to injuries; some 75 percent of severe, collision-related PWC injuries occur with two or more PWCs; and deaths related to PWC accidents generally are from blunt trauma, such as a hit to the head, not from drowning.

All too often, alcohol plays a role in waterway accidents. Statistics released through the USCG to the Insurance Information Institute show that over the last decade, accidents related to alcohol use by recreational boat users accounted for 7.5 percent of all cumulative boating mishaps. Even more frightening to those using the waterways is that eight out of every 10 victims in fatal boating accidents were not wearing a life jacket.

On a positive note, the USCG reports that recreational boating fatalities are decreasing. The study notes that fatalities have dropped from more than 800 five years ago, to 678 fatalities through mid-December of 2000.

Meeting boaters’ needs
When it comes to PWCs, the majority of Jet Ski, Sea-Doo, and other jet-powered craft aren’t covered by homeowners policies.

Tony Alcala, marketing and operations manager for Sun Coast General Insurance Agency Inc., which has been writing PWC policies for six years, notes that there can be confusion with customers regarding just what is and isn’t covered.

“There’s about a 50 percent ratio of consumers that think their homeowners policy covers their PWC,” Alcala commented from the Laguna Hills, Calif., office. As for hauling the PWC, Alcala noted that there is another 50 percent who think their auto policy covers the trailer. According to Alcala, PWC policies make up about 10 percent of the insurance business for Sun Coast. “Most people don’t utilize their PWC year-round, so some [wonder] why should they keep paying,” Alcala said. “Thus, cancellations and return premiums are always an issue.”

Virginia-based BoatU.S. Marine Insurance, with offices across the U.S., offers a PWC program underwritten by CNA or Seaworthy Insurance Company. Aimed at the safe driver, the PWC policy presents broad coverage, a complete package policy and 24-hour emergency assistance.

BoatU.S. has four different policies directed towards the need of boaters, ranging from yachts to personal watercraft. Coverage is available in all 50 states, along with Canada, Mexico, the Bahamas and Bermuda.

Sales of personal watercraft are basically flat at the moment, according to Becky Squires, spokeswoman for BoatU.S.

“I don’t see any major changes in the underwriting market for PWCs in the near future. One thing people need to know is that the rate of theft of PWCs is higher than any other boat, due to the fact that they are smaller and easier to move around.”

Looking for coverage
In figures released highlighting the North American market, the PWC business has experienced a slowdown normally associated with cyclical consumer products. According to information released by Bombardier, a leading PWC manufacturer, that market appears to be slowing down for the moment in terms of the sales of new units.

In the selling season ending Sept. 30, 1999, North American retail sales totaled 112,000 units, a 17.6 percent drop from 136,000 units sold during the previous year. The retail sales of PWCs in the international market were estimated at 22,000 units for the selling season concluded Sept. 30, 1999, a 12 percent decrease compared with 25,000 units sold in the previous season.

Another potential major problem for the California PWC industry would be a bill which gained approval by a 10-9 vote May 7 in the California Assembly Committee on Transportation. AB 759 would allow local governments to ban personal watercraft, permitting any city or county to adopt an ordinance to forbid the use of personal watercraft in any navigable water which resides in its jurisdiction. The legislation is an attempt to regulate inappropriate behavior on California’s waterways by some PWC users, which has led to accidents and environmental pollution.

However, according to a number of industry insiders, underwriting PWCs is seen as good business overall, and the policies are considered easy to write. But one misconception that agents can help their customers overcome is that they don’t need PWC insurance if the crafts are not being put to use. Insureds often fail to consider such problems as theft and damage as a result of storage location.

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