The Degredation of the Insurance Triangle

Imagine a triangle with one leg being marine surveyors and the other two being underwriters and policy holders. All are connected and supporting each other. The surveyors supply the information to the policy holders and underwriters in order that both can enter into a good faith contract. Try to hold that picture of connected and supporting equal legs of an equilateral triangle, each dependent and connected to each other.

The foundation of this triangle is the integrity, honesty and knowledge of the surveyors. If this degrades, the two other legs will disconnect and the structure will collapse.

I have been privileged to be a marine surveyor for 24 years and believe that my perspective is unique. If one ascends to the masthead often enough, and escapes the clamor and emotion of buyers, sellers, brokers, lenders and insurers, the view allows an altogether different perspective.

Having handled marine claims for many different insurance companies, the degradation of the system has become alarmingly evident. As the number of boats and an expanding marine industry has increased rapidly over the last two decades, so too has the number of marine surveyors who fill the needs of the industry. The number of surveyors at present is staggering. The way they handle their responsibility to the public, both present and future, is the crux of the industry as a whole.

What is alarming to me is the ethical side of my chosen profession and its approach to the public.

Here is my take, admittedly a cynical one, but not unjustified by experience and example. A boat, be it power or sail, gets a survey for condition and evaluation; either for purchase or insurance purposes. The surveyor, in an attempt to curry favor with brokers and insurance agents, does less than a thorough job. This survey – let’s say the valuation is wildly exaggerated – then gets passed along to underwriters who are often guilty of not taking even a scant few minutes to check the values against published sources. Another flag is an old boat with few, if any, recommendations. A similar flag is a four or five page survey with fill-in- the blank formats that offers no substantive information about the vessel. An astute underwriter, seeing inflated values and little or no recommendations, would immediately know that the value was overstated and the condition was under reported. The marine insurance industry is very competitive, but to issue a policy based on scant or no real description of condition, puts all policy holders at risk. We see more and more claims made against policies issued on recently surveyed vessels that clearly were not an acceptable risk. Some are in such a bad state of repair as to put lives at risk.

We all make mistakes. That is part of the human condition. But when you see the volume of rubber- stamping of vessels for brokers, agents, lenders and insurers, this business-as-usual and get- the- bucks attitude will eventually drag us all down. It is up to the survey organizations to hold their members to the highest ethical standard and police the ranks of their frontline soldiers. If they are simply trading bad paper for money, they need to be treated like a sentry caught sleeping on watch and discharged; our safety is in their derelict hands. It’s also incumbent for insurance underwriters not to accept drive- by or skeletal surveys that read like a brokers listing, because that is probably where it was plagiarized. It has no value in the underwriting process. If the claims department handles a claim on a vessel that was grossly misrepresented, the insurance company should take the surveyor to task.

The marine community as a whole deserves better. If we want our children to be able to enjoy what gain or pleasure we have known from boating, we all have to make some sacrifice. Simply telling it as it is and fighting mediocrity on all fronts are the two best weapons in our arsenal against a growing enemy within our ranks as an industry.

There needs to be more personal interaction between surveyors and underwriters. Procuring a name of a surveyor from a list does not currently guarantee competence or integrity. Anyone should know and be able to trust the people they do business with. There is a vast disconnect in the present system that can only be bridged by education, closer interaction, and by the surveyor organizations enforcing strict ethical codes.

Blue Water Surveys, Inc.

©Neil K. Haynes CMS/AMS/CMI

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