A seasoned startup CEO, Naval Officer and Naval Academy instructor in the Israeli Navy, Amit is currently the CEO of Ahoy!
Not many people realize this, but modern insurance was invented for boat shipping in the 1600s. So insurers for sure understand boats, right? Unfortunately, this couldn’t be more wrong, with boating insurance, and even more so recreational boating insurance, rarely receiving the due specialized attention warranted when insuring something so special as a boat. Case in point, the insurance industry has long thought of boats as “like cars, but on water.”
It’s an understandable frame of reference, considering that automotive insurance is the most widespread and readily understood framework for insuring a high-value, roaming, risk-prone item. And for incumbent insurers, it seems natural to rope boats in with preexisting coverage models rather than crafting new offerings.
However, the assumption that cars and boats pose comparable risks is inherently flawed. Despite the proliferation of new-age insurtechs, recreational boating insurance remains underdeveloped, as most of these industry disruptors have opted to focus their innovation on the “big prizes:” home, auto, business, life, P&C.
Fortunately, a rising tide lifts all ships—the insurtech boom generated a new wave of digitization throughout the insurance industry, redefining how we approach yet-undisrupted, overlooked and many times niche subsectors.
The time has come to leverage these innovative best practices, digital processes and future-facing technologies to overhaul the way we insure the recreational boating industry, a subsector that deserves tailored offerings for its unique maintenance and protection needs.
Realities And Risks Of Boating
Any asset risks are specifically tied to their operating environment, and that’s true for boats as well: For example, unlike a car, boats traverse a frictionless surface, so you cannot perform sudden maneuvers, i.e., coming to a hard stop. With boats, inertia and drift play out differently, not to mention the unpredictable force of currents and waves. Additionally, external parameters, particularly weather conditions, pose different hazards. While driving a car through a rainstorm raises certain risk factors, the threats of manning a boat through similar conditions are entirely different.
Unlike cars, boats are always risk-prone, whether in motion or docked. Cars are totally covered and can be stored in garages or under wraps during harsh weather conditions; a boat, even in the marina, is still susceptible to flooding or damage. Therefore, a usage-based insurance policy—typical for cars—while still relevant in the boating space, requires a much more nuanced and situation-specific approach.
Boating liabilities also vary based on the type of boat and how it is used. The potential dangers of a zippy, aggressively driven speedboat are inherently different than a sailboat or luxury yacht, which traverses the water more steadily. It is not as simple as higher or lower risk, just different. While the risk of hitting submerged obstacles might be greater for the speedboat, a yacht with a tall mast is at risk of lightning strikes.
To drive the point home, let me pose a question to you: Where is it more dangerous for a boat to be? At sea or at bay? No need to answer but rest assured, the answer is not as with cars.
These only begin to address the array of unique boating risks, highlighting the need for specialized insurance. But to fill this gap effectively, the actuarial side of recreational boating insurance must be reconceived in ways that account for the myriad of singular hazards.
The Automotive Tech And Insurance Have Raced Ahead Revolution
A recent trend in the auto-insurance industry is the rise of telematics, integrated and aftermarket sensors that relay data from the road to insurers, allowing them to create policies tailored to specific cars or driver profiles. While tech features are being increasingly integrated into boats and recreational boating equipment, the tech revolution in this sector lags behind the automotive tech revolution by at least a decade. Respectively, tech-driven, parametric, boating insurance has yet to take hold, leaving insurance companies ill-equipped to craft appropriate maritime policies.
The auto industry has raced ahead technologically—not only insurance tech—in part due to the ongoing autonomous driving revolution. This next frontier of driving has given rise to new sensors, software and other technology that, while geared toward autonomous driving, have also helped innovate the realm of auto insurance.
Without a comparable industry upheaval, will boating, and boating insurance, ever catch up?
Full Steam Ahead
Close to 80% of boating accidents are the result of human error, so it stands to reason that the boating industry—and those tasked to insure it—could benefit greatly from the introduction of some additional automated and telematics capabilities to increase safety in high-risk areas or situations.
To a degree, autonomous boating is already making great strides, yet the technology has, by and large, so far only been implemented in commercial applications and shipping. Several technologies have begun to make waves among boaters, and this tech revolution offers a prime opportunity for updating how the boating industry is insured.
The challenge for insurers, however, comes with recreational boaters, who are not looking to pass off control to autopilot and cherish the control and the entire experience of piloting their boats. But boaters should be more ready to accept tools that increase the protection of their vessels and their passengers while not drastically altering the experience of boating they love.
Insurance companies need to champion the tools that achieve that balance, finding, partnering with and promoting the right technological innovations so that their use becomes universal, or at least more standard, within the boating community.
To do that, though, insurance expertise is only half of the equation, and the involvement of those with a deep understanding of what makes boaters love boating as well as what the risks are will prove to be key. Boaters will be hesitant to strap a new system onto their boats, but when the recommendation comes from a boater who already loves it, their tune will change. Only then can the benefits of the tech revolution start to be felt by insurers.
Forbes Technology Council is an invitation-only community for world-class CIOs, CTOs and technology executives. Do I qualify?