Marine agents should look beyond price in prolonged soft market: Markel

Two quiet hurricane seasons and a softening market are driving intense price competition across personal marine insurance. But as carriers re-enter the sector and loosen underwriting standards, Markel’s director of marine underwriting, Robert Varnell, is warning agents against moving clients to lower-cost cover on price alone.

The shift is being compounded by changing boat-owner behaviour. Slower new-boat sales and broader economic pressures, including fuel costs, tariffs and interest rates, are keeping pandemic-era vessels with their original owners and reducing the flow of new premium into the market.

“We’re feeling real economic pressure from fuel costs, tariffs and interest rates,” said Varnell. Click here to watch the full interview.

“None of that is unique to marine. It certainly lands on a boat owner’s budget and shapes whether they’re going to upgrade their boat, keep their boat, cut back on coverage or cut back on usage.”

Varnell expects the soft market to persist, but warned that conditions can change quickly.

When the market turns, he said, it can happen suddenly, leaving agents and carriers little time to adjust.

For agents tempted to move clients to cheaper cover, Varnell said the consequences can extend beyond the immediate premium saving.

“Moving to a lower-priced carrier could erode agents’ profitability, not only from decreasing commissions, but also poor claims experiences, either driving costs up or customers away,” he said.

He said agents need marine expertise and market knowledge to judge where a risk should be placed when insurers are competing heavily on price. That includes considering whether a carrier will remain committed at renewal and how it handles claims, an area he believes is too often overlooked.

Underwriters, meanwhile, need to look beyond hull value when assessing a risk. The declared value establishes what a boat is worth, but says little about how it is actually used.

“It’s very rare that these risks fit neatly into a box, so it’s the attributes that matter: the vessel type, how it’s being used, where it’s being used and navigated, where it’s being stored, who owns it and what their experience looks like,” Varnell said.

In a soft market, he argued, that experience becomes even more important.

“When everybody is competing on price, the differentiator is knowing where the risk actually belongs and who will be there at renewal. Equally important, and often overlooked, is claims.

This is where the carrier–agent relationship earns its keep.”

Underwriting discipline also remains critical to long-term sustainability for customers, agents and carriers, he added. A book that is priced correctly, Varnell said, is more likely to remain viable when market conditions change.

“Deep marine expertise is exactly what a competitive market undervalues, right up until the point that they need it.”

Fires are ‘biggest concern’

Fire remains one of the most severe losses a marine policyholder can face, according to Varnell. Beyond the loss of the insured vessel, a fire can injure people, damage neighbouring boats and generate liability defence and pollution clean-up costs.

Varnell said he sees three to five reports of boat fires in the US each week. In their aftermath, recurring issues include expired fire extinguishers, poorly maintained suppression systems and ageing equipment.

“The construction matters too. Fibreglass accelerates the fire once it takes hold, which is a big part of why severity is running so high.

“As I read these posts, the cause seems simple and avoidable. Proper ventilation during fuelling and starting, regular and routine maintenance, and current safety equipment mitigate these losses when they occur.”

With price competition expected to continue, Varnell urged agents placing unusual or complex marine risks to engage directly with underwriters rather than selecting carriers on rate alone.

“Marine risks are unusual, and when an agent and underwriter have a real working relationship, the odd risks can get solved,” he said.