Pantaenius-Co-Managing Director and Head of Marketing Anna Baum on initial sceptics, boom and crisis years, old and new challenges and how the company is currently being made fit for the future
YACHT: Mrs Baum, when your father joined Pantaenius in the seventies, how many private individuals had already insured a sailing boat there?
Anna Baum: When my father started at Pantaenius in 1963, not a single sailing boat was insured there. At the time, Pantaenius was purely an insurance broker that mainly provided commercial and industrial insurance on the Hamburg stock exchange. The first sailing boat insured with Pantaenius was his own - an approximately six metre long catboat from Holland, the "Elbblume". This quickly changed when many of his friends from the harbour in Teufelsbrück lost their boat in a barn fire in 1969 and did not receive adequate compensation. At the time, it was common practice to insure your boat through your household contents insurance, for example. My father then developed his yacht hull and liability conditions with two lawyer friends and turned them into a separate product at Pantaenius, which initially continued to be underwritten via the insurers on the Hamburg stock exchange. The centrepiece at the time was the fixed rate, a revolution in boat insurance.
Do you know how many employees sold boat insurance and handled claims at Pantaenius back then? And how many are there today?
In the beginning, there were only five employees together with my father, two of whom took over the increasingly rapidly developing area of yacht insurance. At that time, claims were still handled by the underwriting agent who wrote the insurance policies on the stock exchange. However, this also changed after just a few years, as the number of customers grew so rapidly that a more effective form of processing became necessary in order to really do justice to the individual. As a result, my father endeavoured to obtain underwriting powers from the insurers involved and set up an in-house claims department. Today, Pantaenius Yacht Insurance employs around 200 people in Europe, North America and Australia.
You recently sold your 100,000th boat insurance policy. How do you think business has developed over the past 40 to 50 years? Has it always been consistent or was it easier - or more difficult - in the past to arrange a policy for a yachtsman's boat?
It wasn't necessarily easier back then, but the initial situation was completely different. Fifty years ago, my father first had to convince insurers of his product who had little or no contact with water sports. Ten years later, the biggest challenge was to develop an efficient system for portfolio management and claims processing, as almost 10,000 customers had already insured their boats with Pantaenius. This was ensured by specially developed software, a novelty at the time and at the same time an important part of the recipe for success. Customer service was thus sustainably improved and, of course, accelerated.
In the 1980s, Pantaenius' business became increasingly international, as sailors from Denmark, Sweden and the UK gradually contacted Pantaenius to take out their insurance. Word of mouth was a very important factor for growth at that time. The whole market was developing very dynamically at that time - more boats and also more competition. In the nineties, the Pantaenius subsidiary MCS - Marine Claims Service was founded. The successes of the General Average Commission in tracking down stolen boats brought us a lot of attention and thus another boost of new customers. Today, our growing internationalisation is one of our biggest and most exciting challenges. Every country has its own individual requirements, and our customers in Hamburg are also increasingly travelling in international waters. Our aim is to offer them the same service as a sailor on the Baltic Sea. That is why we have built up a worldwide service network that we are constantly expanding.
What was the boom in the eighties based on, and why is it so much harder to win new customers today?
At that time, boats became relatively affordable thanks to advances in the manufacturing process and material development. This turned many sailors into owners of a new boat, mostly series-produced. Today, we can see the effects of this "boom" on the used boat market. In addition, the type of sailors who have grown up on the water are now gradually leaving water sports. The next generation is coming, but they don't always want to be tied to their own boat. There are simply more opportunities for young people today. Despite this visible change, we are still experiencing healthy growth and continue to observe temporary trends. Until recently, it was mainly small trailerable boats, but in the last three years, in our experience, larger and very high-quality boats and catamarans over 40 feet in particular have been attracting new owners. The number of sailing catamarans in our portfolio alone has doubled in the last six years. We have also observed brisk growth in the charter sector.
If you were to describe him in a few words, what did the typical Pantaenius customer look like thirty or forty years ago - and how can we imagine him today?
With over 100,000 owners, our range is naturally quite wide. Thirty years ago, our sailors were definitely a good ten years younger on average. The average customer we insure in Hamburg today is 51, male and sailing a 36-foot keelboat on the Baltic Sea, the Croatian Adriatic or around Mallorca. The average boat of our owners has grown by around three to four feet over the past twenty years. The average insurance value of this reference has increased by almost 25 per cent during this period. This is due to more modern technology, expensive accessories and, of course, the general price trend.
You no longer just offer policies for boats. Rather, you also offer countless insurance solutions for sailors themselves, whether owners or charterers - from skipper liability to various travel and cruise insurance policies to legal protection for boat owners. What is the reason for this, a lack of skill on the part of sailors, a general increase in risk awareness or the need for safety, or simply increasingly clever marketing on the part of insurance providers?
Yacht owners and water sports enthusiasts are becoming increasingly diverse. This means that the range of their income, family or professional situation and use of a boat is much greater today than it was 30 years ago. Nevertheless, the core of our business remains hull and liability products as well as insurance for skippers and charterers, which we consider to be very important.
Has the ability, the seamanship skills of sailors actually declined in recent decades, as is always claimed? And if so, how is this reflected in your figures?
Skills have not necessarily declined, but technical understanding has sometimes not kept pace with the development of new technologies on board. The quality of training today is generally at a high level. Nevertheless, less time is spent on the water overall. Some people therefore lack the routine that my father's generation still took for granted. We try to sensitise our customers here and pass on direct feedback based on our experience in claims processing. That pays off. Accumulation losses, i.e. major loss events involving several boats at once, have a really significant impact on the loss ratios.
How has the nature of the damage changed?
Individual claims are usually much more expensive today than they were 20 years ago because the technology on board is more sophisticated and complex. The causes of damage themselves are also changing. For example, we are seeing more frequent navigation errors due to the incorrect use of electronic navigation systems. Groundings are usually the result, which now account for around twelve per cent of damage and have thus replaced the classic collision with another yacht as the top cause.
Although fire damage occurs ten times less frequently, it is usually so devastating that the volume of damage is disproportionately high. Berlin, Neustadt and Norderney are some of the best-known examples of such accumulation losses in recent years. The situation is similar with mast breakages, which also occur less frequently than collisions or groundings, but at around ten per cent account for an equally large proportion of the total loss volume. This is mainly due to rising prices for materials and labour.
However, storms in particular have also increased. The autumn storms Herwart and Xavier alone caused a whole series of accumulation losses in 2017. The phenomenon of climate change has perhaps not yet been fully analysed and the consequences may be felt more clearly in more distant regions than here. However, we are also registering changes here. The number of lightning strikes, for example, has doubled in the last ten years.
Pantaenius is active internationally. Are there significant differences between German sailors and sailors from other countries in terms of customers on the one hand and claims on the other? And if so, how does this manifest itself?
Of course, there are regional differences in the mentality of sailors and in the way water sports are practised. In the UK, sailing has a very sporty and traditional flavour in many places. In the Mediterranean, there are countless boats, but many owners do not see themselves primarily as sailors or would even take part in a regatta; the boat is part of their lifestyle. In some parts of Scandinavia, on the other hand, boats still have a very practical use as an everyday means of transport. But of course these are just a few stereotypes.
The causes of damage also differ from region to region, albeit only significantly in a few cases. Narrow and sometimes overcrowded marinas in the Mediterranean cause a lot of collision damage, albeit mostly minor. Sweden and Denmark record an above-average number of groundings due to the rocky areas, and North America is particularly frequently affected by lightning damage due to the weather. In the Netherlands, on the other hand, we recorded an increase in thefts of smaller motorboats for a while.
Competition in the boat insurance industry is notoriously fierce - so fierce, in fact, that unlike car insurance, for example, insurance premiums from many providers for yachtsmen have virtually not risen for years. How long can this continue in view of rising loss ratios? Or to put it another way: will your customers have to prepare for rising premiums in the near future?
First of all, the competitive pressure in the boat insurance industry is certainly no greater than in the boating industry itself. The problem is rather the comparability of the products. Even for most laypeople, it is quite obvious to distinguish a high-quality boat from an inferior one. In the case of insurance, the main differences are unfortunately not always obvious at first glance. The idea that all insurance policies are the same still circulates and distorts competition accordingly.
Like some of our competitors, we adjusted our rates a few years ago. After around twelve years of unchanged rates, this was an important and necessary step to ensure the quality of our work and ultimately the long-term satisfaction of our customers in the face of sharply rising claims costs. We have succeeded very well. Other providers did not manage this step and had to leave the business. Overall, the industry is seeing significantly more market exits than new entrants, both in terms of the insurers involved and the brokerage houses themselves. Only recently, two of the major generalists withdrew from the yacht insurance business.
Major loss events such as hurricanes in the Caribbean or severe autumn storms in this country, as well as various major fires in winter storage facilities, have certainly had a negative impact on the Pantaenius balance sheet in recent years. Apart from possible increases in premiums, will this have consequences at some point, i.e. will sailors who want to leave their boat in the Caribbean during the hurricane season, for example, or in this country during the winter in the water or in outdoor storage on land, have to expect stricter conditions or even exclusions on the part of the insurers?
The assessment of such specific risks as tropical storms and hurricanes is not the sole responsibility of insurance providers on the German market, but is closely linked to developments on the global insurance market, where these risks are placed. The screws have been tightened considerably here. The world's largest reinsurer, Münchner RE, recently spoke of a "new normality" in connection with the increasing frequency and intensity of storms worldwide. Similar weather events are therefore also expected in the future.
We developed our hurricane clause after the devastating damage caused by Hurricane Ivan in 2004 and now, after Hurricanes Irma & Maria have once again raised the bar for hurricane damage, we have had to adapt it accordingly. In concrete terms, this means more specific regulations for the storage of insured yachts.
Even though we are pleased to be one of the few providers that can continue to offer cover for the hurricane season, this ultimately only affects a single-digit percentage of our customers. There are no new requirements or exclusions for owners whose boats spend the winter in outdoor storage or in the water in this country. However, in view of the increasingly severe autumn and winter storms, we would like our customers who spend the winter in the water to take particular care.
How important is personal contact with the customer in the digital age, in which many insurance policies can be taken out online? And do sailors tick differently than someone who is "only" looking for a cheap household or car insurance policy, for example?
Even if sailing itself is an everyday activity for some thoroughbred water sports enthusiasts, the sailing boats themselves are almost never perceived as everyday objects. Whether it's hours or euros invested, for almost all our customers the boat is a matter close to their hearts. On average, our head office in Hamburg still receives a good 60 calls a day from customers. In the high season, the record is 250, so personalised advice is still an essential part of our corporate philosophy. Many of our customers also seek personal contact, ask questions and give us feedback on service or products at water sports trade fairs or sailing events.
Let's look ahead: your redesigned and modernised homepage will soon go online. How important is it today for boat insurance providers not only to have some kind of presence on the web, but also to be virtually permanently active on social networks? And does this really bring you new customers?
We see the expansion of our online presence as an additional service, not as a replacement for our customer advisors on the phone. We mainly use platforms such as Facebook to give interested parties an insight into current topics from the Pantaenius world. We can only guess whether it brings us new customers. However, we are noticing regional differences. In other countries, such as Denmark, the usage behaviour of water sports enthusiasts with regard to social media is actually more pronounced than in Germany.
The sailing industry is subject to constant change. Whether it's that young people no longer want to be tied to just one hobby, sailing, or that sailing itself is becoming ever more radical and fast-paced, keyword foiling technology. How are you responding to this and what do you think are the next really big milestones in the boat insurance business?
Pantaenius is rightly regarded as a pioneer in the market and we are working flat out to continue to earn this title in the future. Radical racing yachts are also covered within the Pantaenius Group, but through our sister company Pantaenius Unternehmensversicherungen. This arrangement ensures that there are no unfavourable interactions between cruising yachts and professional crews. We have never closed our minds to this and have accompanied technological innovations with great interest and passion. However, the insurance of a pure racing yacht, such as an Open 60 with foils, is hardly comparable with a classic yacht hull and includes many exclusions.
Boatsharing and alternative owner models will certainly be a major topic in the coming years. In addition, advancing digitalisation naturally offers a whole range of opportunities to make insurance products available at short notice and to adapt them to individual needs. We will be launching a number of innovations on the market in the coming months. You can stay tuned.
And - the question has to be asked at the end - who actually causes more or greater damage in relative terms, sailors or motor boaters?
In a nutshell: sailors are ahead when it comes to rigging and mast damage. No, seriously. Even if there are various clichés about different types of water sports enthusiasts, we can statistically refute the common prejudices. Both parties almost always balance each other out. Good seamanship is a matter of course for most of our customers, whether under motor or sail. And we are prepared for anyone who does have bad luck. Come what may!
Pantaenius - The company In 1899, Johann C. Pantaenius has the company he founded entered in the commercial register in Hamburg. In the decades that followed, "the name became synonymous with marine hull and transport insurance", as the company's chronicle states. Harald Baum joins the company in 1963 and takes over Pantaenius seven years later. Baum continues to operate the industrial insurance business. At the same time, however, he developed yacht insurance customised for sailors. With great success, Pantaenius is now the leading broker of boat hull and liability policies in Germany. It is now run by the next generation, Anna, Daniel and Martin Baum.
