When asked to define a boat dealer and marina, is your answer something like, "I can't describe it exactly--but I'll know it when I see it"?
CLASSIFYING RISKS
Boat dealers and marinas are similar--
but different--classifications
By Linda D. Ferguson, CPCU
When asked to define a boat dealer and marina, is your answer something like, "I can't describe it exactly--but I'll know it when I see it"?
Marina operations are not easily categorized because most good marina operators have learned to diversify in order to survive the good times and the bad times. Anyone who wants to write in this arena needs to pay particular attention to all operations and the classifications that are available.
There are two classifications to consider:
Boat Yards or Marina - Public - 10107
This classification includes the sale of boats and accessories, gasoline and oil, boat building and repair. So when this classification is used, the policy SHOULD NOT contain any classification for boat dealers, boat or ship building, boat repair or gasoline sales. This classification requires that these operations must be combined. Other operations must be separately classified, such as boat storage and moorage, restaurant, accommodations and boat rental.
Boat Dealers - 10101
This classification includes the sale of boats and accessories and gasoline and oil. It does not include boat building, boat repair, or boat storage and moorage.
Do the two classifications seem a little close? Both include the sale of boats and accessories and both include the sale of gasoline and oil. However, the boat dealer does NOT include repair and boat building while the marina does.
Neither code includes boat storage or moorage. However, the marina code identifies that boat rental, accommodations and boat rental must be separately classified while no such reference is made in the Boat Dealers code. Since ISO does not list items to be separately rated, whimsically it must be assumed that these references are to operations that could be found regularly at the classification.
Therefore a marina/boatyard builds, sells and repairs boats and sells gasoline and oil. In addition, some marinas provide storage facilities, restaurants, boats for rent and rooms for rent.
A boat dealer sells boats, gasoline and oil. In addition, some boat dealers also provide storage facilities, boat repair and boat building.
An interesting note is that neither classification discusses the location of the risk as being on or off water. We can make decisions based on pre-conceived ideas but the classifications must speak for themselves and water is not part of the discussion.
Based on the classifications, marinas would appear to be oriented to complete service for the boat-owning customer. Boat dealers appear to be similar to car dealers with a primary orientation to the selling of boats and then providing service necessary to bring a customer back to buy additional boats.
The following classifications would apply to operations incidental to the primary codes of Marinas or Boat Dealers:
* Boat or Ship Building - inboard and inboard/outboard - 51400
* Boat or Ship Building Without Motors - 51401
* Boat Repair or Servicing - 91235
* Boats - Canoes or Rowboats - not equipped with motors - not for rent - 40111
* Boats - Canoes or Rowboats - not equipped with motors - rented to others - 10110
* Boats - Motor or Sail - Not for Rent - 40115
* Boats - Motor or Sail - Rented to others - 10117
* Boats - Not for Rent - 40117
* Boats - Not Owned - over 26 feet - 40140
* Boats - Rented to Others - 10119
* Boats - Storage or Moorage - 10105
In addition, restaurant classifications, groceries sales and other customer-oriented marina operations must be considered. Since marinas tend to diversify in order to provide excellent customer service, the list could grow significantly.
The first step in classifying this risk is to analyze the operations taking place both on and off premises. This is an interesting, but time-consuming enterprise--more time-consuming than would be anticipated. Insureds may never stop to think about the insurance implications as they start to sharpen blades just to help a customer, or when they start accepting mail deliveries just to help another customer and so on.
Next, these operations should be divided into specific classifications. The separation of classifications can save the insured money since combined operations are required to be rated in the highest-rated classification applicable.
One comment about the separation of classification, and this would apply to any multi-classification risk:
The insured must be aware of the classification split and must maintain records so that the premium auditor can easily find the split. The worst-case situation would be for the insured to be rated and charged a premium based on premium splits and then, because of his or her own bookkeeping practices, be charged a significant additional premium because of not separating the classification receipts during the year.
The premium auditor is required to assign ALL nonseparated receipts or payroll to the highest-rated classification for the risk. The insured must weigh the insurance savings against the time used to keep accurate records. This must be done prior to setting up the policy.
Although the main classifications use published rates, many of the extras are "subject to rate." The agent should provide details on those codes so that the best rate can be assigned for the actual exposure. Information that could be helpful in the setting of rates would include:
* Horsepower of the engines--the more high-powered the engine, the higher the charge should be due to potential severity of a "slight error." Cigarette boats do not have the same potential for damage as a pontoon.
* Seasonal usage always should be considered due to more limited exposure time period.
* Age of participants--child-oriented water areas demand a higher rate due to liability potential and age of accountability
* Dry storage and wet storage each represent different hazards. Percentage of type of storage and responsibility of removing and returning the boat to water must be taken into consideration if the information is provided.
Marinas and boat dealer operations continue to grow as the population ages and the fascination with water continues to attract. Proper analysis and classification can ensure that these operations are properly priced today and in the future. *
The author
Linda D. Ferguson, CPCU, has 30 years of underwriting experience with national commercial lines carriers. She now operates a consulting business, Pleasant Street Consulting Company, in West Union, Ohio.