Safety

5 Things You Need to Know About Insurance During the Pandemic

29 April 2021 By Kate Lardy
iStock/LIgorko

Based in Fort Lauderdale, freelance writer Kate Lardy got her start in the yachting industry working as crew. She spent five years cruising the Bahamas, Caribbean, New England, and Central America, then segued that experience into a career in marine journalism, which has included stints as editor of Dockwalk and ShowBoats International.

This past year has kept both marine and health insurance companies scrambling in uncharted territory. There was the extra windstorm risk when yachts were unable to move out of hurricane-prone areas last summer, the question of liability when owners entertain on board and expose their crew to COVID-19, and the coverage of COVID testing and treatment when no one knew exactly how contagious or deadly the virus was. To use an overused phrase, it has been an unprecedented time for insurers, who were forced to make decisions when they didn’t have all the data. A year in and the known risks are finally outweighing the unknowns. Here is the situation as we know it.

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1/ All health insurance plans are not created equal in a pandemic

“We very quickly learned in March (last year) how the insurance policies would react to COVID: who was reacting the right way and who was reacting the wrong way,” says Mark Bononi, director of the Yacht division at MHG. Being that crew health plans are generally international policies, not subject to the laws of any one nation, they have the option of excluding coverage. Some insurers that took major losses in other areas of business, like travel or events, were a lot less interested in covering people for COVID-related conditions, says Bononi. “What we have been working on is trying to get the best responses as possible for our clients,” he says.

Both Bononi and independent broker Maria Karlsson, head of Superyacht Insurance Group, point to GeoBlue as a company that has responded very well. “It has worldwide coverage, but it’s kind of a U.S. plan so they don’t have exclusions like most international plans do,” Bononi says. 

Some insurers that took major losses in other areas of business, like travel or events, were a lot less interested in covering people for COVID-related conditions, says Bononi.

“It’s top-of-the-line insurance,” says Karlsson. “On the group plan, you have coverage from day one. You can even be infected and hospitalized and you’re covered with no questions asked because there is no medical underwriting — meaning crew are just added on; there’s no medical questions they have to answer.” For individual policies, “you have to qualify medically, so you can’t be ill when you get on the plan.” During the whole of 2020, GeoBlue covered all treatment and medically necessary testing (determined per U.S. Centers for Disease Control and Prevention guidelines) without the individual having any cost-sharing responsibility. This has changed a bit for 2021…read on. 

Other companies weren’t so straightforward. Karlsson explains that IMG’s coverage initially depended on where a crewmember was traveling from and to, and she had to work out with crew on a one-to-one basis whether COVID-19 coverage was in place or not. Then the CDC issued a warning level 3 “avoid nonessential travel” on March 27 last year and the insurance carrier changed its tune. As IMG put it: “Any person who purchased coverage on or after March 27, 2020, or has not entered their destination country by March 27, 2020, will NOT be eligible for benefits directly or indirectly related to COVID-19.” That was the case for all of 2020, but in 2021 IMG switched underwriters and now provides COVID-19-related benefits for its group plans under the new underwriter. Individual policies still have an exclusion rider. 

iStock/Drazen Zigic

Bononi also represents a Latitudes group plan whose benefits related to COVID-19 testing depend on what benefits package is purchased. “If someone has symptoms, then testing is covered regardless of the level of plan they purchased. But if it is simply precautionary or necessary for international travel, then that’s where some groups may not have the optional benefit package needed to cover the test,” he says. Regardless of the level of coverage purchased with Latitudes, COVID-19 is considered a pre-existing condition, which means there would be no benefits relating to treatment of the virus until the crewmember has gone six months without any issues.  

Some countries are obliging entrants to have health insurance that covers COVID-19 treatment.

2/ A travel medical plan can fill any gaps in COVID-19 coverage

“When I talk to new clients, one of the first questions I ask is ‘How do you feel about COVID?’” says Karlsson. “They might be young and say, ‘Oh, I’d be fine,’ but it’s not just about them. There are requirements to enter certain countries.”

Some countries are obliging entrants to have health insurance that covers COVID-19 treatment. Karlsson names the Turks & Caicos, the BVI, and Costa Rica as some examples, but emphasizes that the list is not inclusive and is subject to change. She can provide her clients with a proof-of-coverage letter, but for anyone whose health insurance excludes COVID-19, Karlsson has found a great solution: a new travel medical plan with Seven Corners called Liaison Travel Plus. “Within 24 hours, you have $100,000 of COVID testing and treatment benefits. You can sign up for as little as five days and you can keep it up to a year,” she says.

More than just travel insurance, this is a rich medical plan that covers doctor visits, prescriptions, hospitalizations, and air evacuation. But like all travel insurance, it only covers crew outside of their home country, and they have to be healthy when they sign up because it doesn’t cover pre-existing conditions. 

iStock/LordHenriVoton

3/ The pandemic left a hole in the yacht insurance market

A few years ago, a large number of underwriters — overwhelmed by hurricanes and fires — pulled out of the marine insurance market. This created what’s known as a “hard market” where demand exceeds supply. Premiums rose and in some cases even doubled. While the dramatic increases have leveled off some since, the pandemic has not helped the situation. It actually made it temporarily worse, says John Jarvie, vice president of Oversea Yacht Insurance. 

“COVID prevented the ability for people to get together, and in the insurance world, being kind of ancient, these high-level discussions are typically conducted in person,” says Jarvie. “So if you’re an insurance company trying to start up a new product, you have to have meetings with reinsurers and partners. A lot of these insurers have a foot in Europe, which is mostly still locked down. Without the ability to have these meetings in person, it really slows the pace for any of this to happen.” 

But not all business is good business. It’s an underwriter’s market now — they get to choose. 

Spencer Lloyd of Assured Partners (formerly named Alliance Marine Risk Managers) describes the state of the market as a mixed bag right now, favoring boats with full-time captains: “The London market is still tight; they’re not looking at yachts under ten million bucks. The domestics (U.S. companies) are wide open. They want fully crewed boats and they’re looking to write good business.”

But not all business is good business. It’s an underwriter’s market now — they get to choose. An owner wanting to move his captain from a 50-footer to a 125-footer or someone with five prior claims is not the business insurers are clamoring for. Prior to last spring, there was a safety net of sorts for these boats that are more difficult to place, Jarvie says. “Of that handful of insurance companies, they all went out of business last year, so the safety net vanished. In quarter four of last year, we were in a concerning position,” he says. “This same thing happened to homeowners’ insurance, and in 2002 the (U.S.) government had to step in. This is boating; these aren’t houses. The government probably wasn’t going to step in and help people with their toys.” 

Then in January 2021, two of these companies resurfaced. “Now we have a little more breathing room,” says Jarvie. “I think because of COVID, the insurers couldn’t get together and fill this big gap as quickly as they usually would have.”

iStock/Andrei Sauko

4/ It matters where the yacht ends up this summer

Last spring when the world was fresh into the pandemic, marinas and fuel docks closed, cruising plans were scrapped, and yachts hunkered down in place or used the downtime for yard periods. Then came hurricane season.

“When boats were unable to move around last year, a lot of them stuck around South Florida. When we went through hurricane season, there were a lot more boats exposed to windstorm than any insurance company ever predicted would be here,” says North American Yacht Practice Leader Nancy Poppe for Willis Marine Superyachts. That presented what’s called a “capacity issue” she explains — too many boats exposed to a risk.  

Underwriters dodged a bullet last summer as South Florida didn’t take any direct storm hits, but this summer they are paying closer attention. “What we’re being told this year is for the summer coming up, they’re going to be looking much more closely at who’s here in the summer, and you can expect to see windstorm deductibles, which we don’t normally see on big yachts,” says Poppe. “There was a lot of unknown last year, whereas this year they’re trying to get out ahead of it.”

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5/ Insurers are always changing

Now that insurers have more information, they’re making some changes. When renewals come due, you’ll likely notice some new verbiage. Jarvie says larger yachts may see a “communicable diseases exclusion” on the boat policy, covering not only COVID-19, but also any future biological diseases. This means the insurance may not cover any liability arising from a communicable disease, for instance a charter guest suing the owner for exposing them to COVID-19. “The exclusion will likely apply even if the claims against any owner/vessel allege negligence or other wrongdoing in hiring, supervising, training, monitoring, testing (or failure to test), failure to prevent spread, or failure to report to authorities,” says Jarvie, adding that captains should check their policy to confirm the exclusion does not apply to crew.

Jarvie says larger yachts may see a “communicable diseases exclusion” on the boat policy, covering not only COVID-19, but also any future biological diseases.

Health insurance policies are in flux as well. GeoBlue, which had been covering all medically necessary testing and treatment for free, changed its tune this year. “As of January 1, 2021, testing and treatment is still covered under the policy; however, cost-sharing features apply and are subject to plan deductible, co-insurance, and co-payments,” says Karlsson.

As previously mentioned, IMG has made a change for the better after excluding all COVID-19 coverage for new business from late March last year. Under its new underwriter Crum, group plans for new customers will cover COVID-19 testing and treatment, and existing customers have the option to renew early to get these benefits, with a premium increase of around nine percent, according to Karlsson.

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Final advice

If a yacht currently does not offer health insurance, this is a good time to reconsider. While vaccines are offering hope, the pandemic is far from over, and with the new virus strains the future is uncertain. Health insurance is the first layer of defense. The yacht’s P&I insurance can cover medical expenses relating to illnesses arising from crew being in service to the vessel but proving COVID-19 was contracted on the vessel and not on someone’s day off is tricky, to say the least. And, as Jarvie puts it, “Health insurance policies expect you to make claims, yacht insurance policies don’t.

“I think one of the biggest types of payouts that marine insurance companies have to make is crew claims, whether for illness or injury,” Jarvie continues. “And so to go the extra step and take extra precautions, whether that means extra hand sanitizer, testing, advanced air filtration systems, or just making sure your crew are being smart and safe on and off the boat, is probably one of the best things you can do.

“Do you get an insurance discount for that? No. That’s just being a good captain,” says Jarvie. “But you do keep your insurance rates down by preventing these issues.” 

This feature originally ran in the April 2021 issue of Dockwalk.

 

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