Headlines across the country are making it clear that consumers are watching their wallets closely, cutting back on discretionary spending and looking for ways to reduce ongoing expenses. The ripple effect is being felt already by agents and brokers in the form of reduced demand for any number of insurance products, and coverage for recreational boating is no exception. Despite below-average boat sales and cost-conscious weekend sailors, agents and brokers selling boat and yacht insurance should keep their focus on the same sales techniques that are effective in both calm seas and rough waters. Customer service is the key–and by following four tips, agents and brokers can demonstrate that they are equipped to help customers ride out the storm. How bad is it? Boat sales are taking a back seat to other consumer purchases in an economy that leaves many leery of big-ticket items with major upkeep expenses. Although the full statistics for boat sales in 2008 have not yet been compiled, the downward trend reflected in the 2007 numbers tells the story of an industry suffering from the economy's tailspin. According to the National Marine Manufacturers Assn.'s (NMMA) 2007 recreational boating statistical abstract, recreational boat sales of $37.5 billion were down 5 percent from 2006. Sales of power boats (inboards, outboards and stern drives) tracked the decline in consumer confidence, the NMMA reported, coming in at 267,300 boats and $9.5 billion, down 8 percent and 1 percent respectively from 2006. A spot check of partial results for 2008 shows the situation worsening. In August 2008, sales in California were down 51 percent from the same month in 2007. In fact, of the 50 states, only one saw an increase (Texas, as it recovered from Hurricane Ike). Nonetheless, highlights from the 2007 NMMA report indicate there is still no lack of interest in recreational boating and, therefore, a continuing market for boat insurance. These include:

• Sales of new boats in 2007 exceeded RV sales (395,200 units versus 308,800 units)
• Boat owners spent an average of 32 days on the water in 2007, a one-day increase over 2006
• Rising fuel prices did not discourage boaters–only 3 percent said they did not take their boats out in 2007 because of fuel prices
• Boat ownership increased slightly in 2007, with more than one in 10 U.S. households owning a boat
• Those who did buy new boats continued a trend toward larger and better-equipped ones, pushing the cost and value of purchases upward. The average price of a new outboard boat, motor and trailer package in 2007 was $29,398, a 7 percent increase over 2006.

What agents can do In any market, customer service is often the key factor that keeps a relationship strong despite the variations in pricing, coverage and other considerations. When it comes to boat insurance, customer service can be translated into four action tips.

1. Share knowledge The average boat owner looking for insurance coverage probably does not view it much differently from buying an auto or homeowner's policy. That gives the knowledgeable agent or broker an opportunity to demonstrate his value by providing insights about how specialized boating insurance is. For example, an auto policy customer would expect his damages to be covered by someone else's auto insurance if a vehicle parked on a hill breaks free, rolls down a street and hits the owner's car. The same person who owns a boat and a policy may similarly expect to be off the hook if a hurricane causes another vessel to smash into his. However, under "force majeure" provisions, the errant vessel's owner is excused from liability during conditions–such as hurricanes–that are beyond his control. That may leave an owner with an unexpected hit from his deductible, especially in windstorm- prone areas where a windstorm deductible, averaging 10 to 15 percent of the boat's value, could apply. Another example: Federal law that addresses oil pollution requires that boat owners must have the ability to cover up to a maximum of $800,000 in containment and cleanup costs for their own loss or one they cause to another boater. (Vessels over 300 gross tons require a federal Certificate of Financial Responsibility which provides a guaranty to the U.S. Coast Guard for expenses related to a spill.) Boat owners should be aware that most umbrella policies will not cover this type of loss. Instead, their boating insurance should provide specific coverage that meets the federal limits. Two other areas also are potential surprises for unwary boat owners: crew coverage and wreck removal. Under the federal Jones Act, if a boat owner employs a crew member who becomes injured, the owner is personally responsible for damages, including treatment, lost wages and repatriation. Someone without Jones Act coverage may have an expensive surprise. If your yacht sinks, governments at all levels hold owners responsible for the potentially costly process of "raising, removing or destroying" your boat if it sinks or otherwise is wrecked. These two examples demonstrate that comprehensive boat insurance is a critical need. By sharing the kind of knowledge detailed above about the special demands involved in managing risk for boat owners, agents and brokers become the trusted source for information that customers need and value. 2. Balance savings and risks Customers who are trying to find ways to lower their insurance costs need guidance to avoid costly mistakes. It does not take much math skill to show someone that going without any coverage is a bad bet when an asset worth thousands of dollars is at risk. However, the agent or broker who can point the way to safe reductions wins customer loyalty. Four areas can be explored: Lower value. As boats age, their market values may decline. Owners in this situation would be able to reduce their premiums by lowering the hull value on their policy. With documented values of production boats, this can be a simple process. For custom or semi-custom yachts, a professional marine surveyor may be required. Lower limits. The customer may consider lowering liability limits, although caution is advised. Undercutting limits should certainly be avoided, as lowering liability limits may void umbrella coverage. In addition, a marina or boatyard may also require that you carry a specific liability limit. In the end, any decision needs to make sense from an overall assessment of the customer's overall potential liability, and the value of asset holdings that would be at risk. Raise deductibles. If a customer is financing a boat, the lender may require a certain maximum deductible, such as 2 percent. In the absence of financing, a customer may choose to put him or herself at risk for a greater share of any loss. However, the savings from this increased exposure should be carefully balanced against the customer's capability for meeting the deductible cost if a loss occurs. Shrink territory. Depending on the insurer, a boat owner's insurance company may charge more premium for coverage of boating across larger navigational areas. For example, a person in Maine may have navigational coverage from Maine to North Carolina. By cutting back to New England only, an owner may reduce insurance costs. 3. Provide access to expertise In addition to providing specific guidance to their customers about boat insurance, agents or brokers can demonstrate that they are the gateway to expertise beyond themselves. This is particularly true for the agent or broker who is busy insuring a full line of autos, homes, commercial, umbrella and more. With many irons in the fire, it's important to be able to reach out to those who specialize in boating coverage to fill in any gaps in knowledge or to keep in touch with changing marketplace conditions. One tactic is to develop relationships with a number of underwriters or intermediaries who specialize in boat insurance. Often different underwriters look at the same potential customer and come up with different conclusions about coverage and premiums. By knowing the underwriters' yachting interests and business perspectives, agents and brokers can steer their customers to the best market. In addition, agents and brokers will want to guide their customers toward insurers that provide the most suitable and comprehensive suite of services. For instance, almost all yacht insurance claims are subject to admiralty law, an arcane and complex area that many claims processors, and even lawyers, are not familiar with. Insurers who offer specialized claims handling for boating coverage are more likely to have developed the expertise required to make appropriate and timely decisions. Another aspect to consider is the stability of an insurer, as well as the company's longevity in and commitment to the boating industry. In the wake of frequent storms across the Southeast, many companies have fled the business, either disappearing completely or declining to write boat coverage altogether. Selecting a highly rated insurer that backs its claims department with deep expertise and offers specialized risk management services for the boating community is an important service that an agent or broker can provide their customers. 4. Stay in touch The final tip is perhaps the most obvious. If the only time customers hear from an agent or broker is when they get an annual bill, there is little connection that can be cultivated to promote loyalty and longevity. Agents and brokers need to reach out to their clients throughout the year, with calls, newsletters, event sponsorship, community involvement and even marina visits. Checking in to make sure conditions have not changed, or that all needs are being met, is always a good business practice. And communication is a two-way street. Being accessible is important. When customers call with questions, they should be able to reach their agents quickly and easily, whether through an office assistant, a cell phone number or a monitored e-mail account. Finally, one of the best places to look for new business is the old business that was lost. An aggressive agent or broker will check back with customers immediately to see how they lost the business–and then again a year later to see if they can win it back. Although recreational boating is encountering some difficult times, agents and brokers can follow the four tips above to stay on top of the opportunities that remain. In the short term, agents can increase their values to their customers–and in the long term, agents can prepare for smooth sailing ahead when the economy picks up and boat buyers re-enter the market.

Peter Arndt is vice president, International Special Risks (ISR). He was a yacht broker for 10 years prior to becoming an insurance agent. He came to ISR in 2007, after 14 years working for Hinckley Marine Insurance and subsequently Marsh & McLennan as a marine insurance specialist.