We are now well into Autumn and many vessels are being laid-up for the Winter ahead. The Yacht Insurance business is very seasonal as many craft change hands between March and October and this is when most potential customers seek their insurance cover, and the months from November to February tend to be quieter which does, at least, enable us to catch up on those things we postponed during the busy Summer!
We have also just completed our financial year which has led me to consider how we as an industry spend the funds paid to us by our customers. As you would expect, the majority of such funds are spent in paying for policyholder claims, as we are trying to put each policyholder back into the same position he was in prior to his incident. Of necessity this will include payments to marinas, boatyards, marine engineers, sailmakers, chandlers, and the many people and businesses that are involved in the marine trade, which, hopefully, helps to keep those traders in business, during these somewhat difficult financial times.
The second area of cost for us is the staff salaries – we have to have enough staff to be able to answer all the correspondence, emails and ‘phone calls to give all customers and potential customers a level of service that will attract them to us rather than any competitor.
Thirdly, and fairly obviously, there are all the office costs, the building we work from, a range of sophisticated computer equipment to enable us to operate efficiently, including the external specialists that ensure such equipment operates in a proper manner and is free from viruses and other malicious attacks. The improvement in computer systems is perhaps the most significant aspect of the modernisation of the insurance industry over the last 30 years or so.
Then there are some less obvious expenses. The main ones are the charges imposed on us by the Financial Services Authority (FSA). As Brokers, in addition to having to contribute to the cost of actually running the FSA, we are also required to make a substantial contribution to the cost of the Financial Services Compensation Scheme. This scheme is in place to compensate policyholders who have been subjected to some kind of miss-selling or other disagreement with their insurers, but is almost entirely involved with the miss-selling of Payment Protection Insurance (PPI).
You might ask “what has the miss-selling of PPI got to do with Yacht Insurance?” Well, nothing actually, as far as we are concerned, as we have never been involved with selling PPI at all and we only offer pleasurecraft and marine trade insurances, but to try to convince the FSA that we should not be asked to help fund the compensation for miss-selling by other much larger insurers and banks has fallen on deaf ears!
As an old colleague of mine used to say, “nobody ever said life would be fair!” However despite all this we have generally managed to keep premiums at a fairly constant level.
D. Long - 18/10/2011
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