Living the dream: A boat enthusiast finds his niche

IN A PERFECT world, we could all make a living doing what we love to do. It took quite a few years, but recently I was able to make what I like to do and what I need to do finally dovetail: I'm a boating enthusiast who sells boat and yacht insurance-exclusively.

In 2001,1 left an executive position

with a multilines carrier in California and returned to New York for family reasons. By then I'd had 30 years' experience in the insurance industry, ranging from life to specialty property-casualty. Rather than take another executive job, I wanted to devise a way to spend more time doing what I liked-and what I like is thinking and talking about boats. I determined that there was a need for high-end boat and yacht insurance that wasn't being met, so I started a marine insurance agency from scratch.

Four-and-a-half years later, Keenan Marine Insurance Agency LLC has $2 million in premium volume. We have four employees and do business in 26 states. Our headquarters is in Ardsley, NY., but I work from my home in Mount Pleasant, S.C, about a mile from Charleston Harbor. Things have worked out pretty well.

Boats and nothing but

When we decided to specialize in boat and yacht insurance, we meant it literally. Except for an incidental amount of commercial marine, we sell nothing else, even when asked. I'm aware that many agents use a specialty niche-particularly one featuring high-income clientele, as this one does-as a springboard for capturing all of a client's lines, but we pride ourselves on our level of expertise and don't want to risk diluting it. If we offered homeowners or auto insurance, for example, we'd feel obligated to maintain the same level of quality service we provide for boats and yachts. That would stretch us too thin, so we've chosen to keep our focus fixed.

I had no previous experience with boat and yacht insurance in my career, but I had sufficient experience with boating. I was raised on the East Coast and sailed as a child and an adult. I'm a U.S. Coast Guard-licensed captain, and also have a master's license. I presently own a 40-foot racer/cruiser sailboat, which I raced on Long Island Sound and now race here in South Carolina.

Having an intimate knowledge of boats and yachts, of course, is an immense advantage when attempting to sell insurance for them. In most cases, a boat is the owner's favorite "toy," and so he or she is only too eager to talk about it. If an agent can demonstrate expertise with marine matters, the relationship is much more likely to catch fire. When I ask a client where he intends to use the boat, it usually leads to a discussion of various navigation issues, which is always an engaging topic for boaters. That gets both my feet in the door.

We have about 1,300 clients. Such rapid growth may suggest that we had elaborate marketing plans, but the process was deceptively simple. We decided to approach existing boat owners, and our pitch was giving them an easy way to shop for boat insurance. Most owners don't shop around each time they renew, because it can be cumbersome and time-consuming. Our goal was to streamline the process as much as possible. Since we represent most of the quality boat and yacht insurers, we can quickly come up with a competitive and comprehensive solution to any boater's needs. We don't always win the business, but we're rarely far off the mark.

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Boat owners, perhaps contrary to expectation, do tend to focus on price as much as any other type of insurance buyer. We have no intention of competing on price alone, so we also strive to demonstrate expertise and provide excellent service.

Our Web site offers a good example of how we try to make it easy for boat owners to do business with us. It isn't loaded with bells and whistles, but it is very easy to use, which is one reason that about 60% of our relationships began as online quote requests. Our marketing materials direct people to the site, and once they get there they quickly find what they're looking for. Our site stresses functionality, and it pays off.

We do some networking with our existing customers, as well as with boat dealers. In the course of providing them with proof of insurance for new purchases, we've developed some relationships that have resulted in referrals.

About 80% of the boats we insure are powerboats, with an average value of $225,000. The average length is around 38 feet, which skews us more toward "yachts," as opposed to "boats." (A vessel longer than 26 or 27 feet is generally considered a yacht.) It may be more prestigious for our owners to say they own a yacht, but from our perspective boat and yacht coverage is not fundamentally different. The latter offers more flexibility with navigation issues to meet the specific needs of the customer, and there are usually some ancillary benefits like options for adding crew or captain coverage, but usually regardless of size, it's still very much "boat" insurance.

The request-for-quote form is generally two pages long, and we really need it to be completely filled out to do a proper job for a prospect. We examine all the boat's characteristics and determine how and where it's going to be used. For example, if a yacht spends the entire hurricane season in Florida, coverage will be more expensive and difficult to find. Perhaps the most important issue is who will be operating the vessel. We need to know the extent of the operators' boating experience, and a complete history of the boats they've owned and operated. Underwriters also check operators' motor vehicle records, since poor drivers almost always tend to be poor boat operators, too. Some even check credit scores, as some insurers believe there's a correlation between weak credit scores and incurred losses.

When determining a boat's value for insurance purposes, we go with market value. If the boat is brand-new, then obviously it's worth whatever the owner paid for it. If it's a few years old, we determine, via a boating "blue book," how much value it's kept, taking into account, for instance, whether it's a fresh- or salt-water boat. (Hulls and engines deteriorate more rapidly in salt water.) For an older vessel-10 to 15 years-we use a marine surveyor to gauge value and seaworthiness, and we can help prospects and clients find surveyors in their area. Fortunately, we don't need a survey to quote, although we may need one to bind.

The vast majority of our fresh-water boats are on the Great Lakes. We've made a point to market in that region, since from an insurance standpoint it's a superior risk area. The boating season is relatively short, and you don't see too many hurricanes on Lake Michigan. It's fairly uncommon for an owner to use a boat in both fresh and salt water-say, summers in the Great Lakes and winters in the Gulf of Mexico-but we can arrange coverage for such use, if needed. It's not unusual for our clients in the Northeast to take their boats to Florida for the winter, and it's easy to arrange a navigational endorsement for that.

In fact, pretty much any exposure can be covered, either as part of the basic policy, as a standard option, or as a manuscripted endorsement. Some of the typical property endorsements provide coverage for personal effects, fishing gear or dinghies, or lower the electronics deductible in the event of a lightning strike. Most of our business is placed with domestic insurers, such as ACE, Zurich, Travelers, Progressive and Old United Casualty. Naturally, all our carriers have different appetites for risk, so having a wide selection to choose from allows us to almost always fulfill a client's specific needs and to do so at a competitive price.

Red flags

The protection and indemnity liability limits our customers choose are usually between $300,000 and $2 million, although they often opt for lower limits in conjunction with umbrella policies. Liability coverage, however, accounts for only a small part of the premium, since most of the policy will address damage to the owner's boat. A $2,000 premium may consist of $1,600 for hull coverage and $400 for liability. Premiums typically range from $500 to $25,000. Most claims we see tend to be for first-party property damage-a boat catches on fire, scrapes a dock, is stolen, or sometimes sinks-and the number of claims is usually quite manageable. In 2007, we had about 40 total claims from our 1,300 clients. We don't "officially" handle claims through our office, but we will step in and assist resolution when necessary. Since we pride ourselves on our level of service, making sure the client is taken care of is always a priority for us.

There are a couple of red flags we stay alert for when underwriting. One is lack of experience. Sometimes, for example, boat owners approaching retirement age may decide to engage in charter fishing to help defray operating costs. But they often have no experience with chartering operations, so it can sometimes be a challenge to provide coverage for such arrangements.

Moving to a much larger boat is another red flag, although perhaps surprisingly, an operator's age is not necessarily a factor. Let's say a client with experience with a runabout decides he wants a 40-foot, 50-ton yacht that travels 35 m.p.h. We would take a very close look at his plan for getting the necessary coaching and experience, since obviously that would be quite a jump. Sometimes, we'll even require a captain on a temporary basis until the owner is more familiar with the boat.

Waterskiing presents greater liability risk, as does personal watercraft like Jet Skis, which tend to be more dangerous. We insure these largely as a courtesy to clients. We don't seek out such business.

Underwriters use various methods to control exposure. For example, some carriers will not insure a boat south of Cape Hatteras during hurricane season. But even if a boat owner happens to live year-round in Florida, and cannot or will not pull the boat out of the water during the danger months, he still can usually obtain coverage, albeit at a higher premium.

Yacht insurers rely upon a boat owner to be prudent and responsible in protecting his boat. For example, most programs include a permissive-use clause that provides the owner wide latitude in allowing others to operate the boat. If an owner wants to let his 17-year-old son "drive" for a while, it's up to him to place the appropriate limits on such use. Performance boats, however, require named operators.

Our first few years have been good to our agency, and we believe the future will be even better. Baby boomers have already begun buying their "retirement toys" and the Gen Xers aren't far behind, so I believe this industry niche is poised for a long growth period. It looks like nothing but smooth sailing ahead.

SIDEBAR

After 30 years in the business, I decided to start a marine insurance agency from scratch.

SIDEBAR

For oldervessels-10 to 15 years-we use a marine surveyor to gauge value and seaworthiness.

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By JOHN KEENAN, CLU

Keenan Marine Insurance Agency LLC / Ardsley, New York

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John Keenan is CEO of Keenan Marine Insurance LLC. Prior to founding his present company in 2003, Mr. Keenan spent 31 years in the insurance industry in various sales and management positions with Prudential, Crocker Bank, Progressive, Assurant Group and Balboa Life & Casualty. Keenan Marine had $2 million premium volume in 2007, exclusively from more than 1,300 boat and yacht clients.