Pantaenius co-managing director and head of marketing AnnBaum on initial skeptics, boom and crisis years, old and new challenges and how the company is currently being made fit for the future
YACHT: Ms. Baum, when your father started at Pantaenius in the seventies, how many private individuals had already insured a sailing boat there?
AnnBaum: 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 who mainly supplied trade and industry with insurance on the Hamburg stock exchange. The first sailing boat insured with Pantaenius was his own - a catboat about six meters long from Holland, the "Elbblume". That changed quickly when, in a barn fire in 1969, many of his friends from the port in Teufelsbrück lost their boats and were now unable to receive adequate compensation. Back then it was common practice to insure your boat with household insurance, for example. As a result, my father and two lawyer friends developed his yacht comprehensive insurance and liability conditions and made them a separate product at Pantaenius, which was initially still subscribed via the insurers on the Hamburg stock exchange. At the time, the centerpiece was the fixed tax, a revolution in boat insurance.
Do you know how many Pantaenius employees sold boat insurance and handled claims at that time? And how many are there today?
At the beginning there were only five employees together with my father, two of whom took over the ever faster developing area of yacht insurance. At this point in time, the claims were still being handled by the underwriter who signed the insurance on the stock exchange. That changed after just a few years, however, as the number of customers grew so rapidly that a more effective form of processing was necessary in order to really do justice to the individual. My father then tried to obtain authorization to sign 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.
Well you recently got the 100,000. Boat insurance contract brought to the man. How should one imagine business development over the past 40 to 50 years? Was it always the same or was it easier - or more difficult - to get a sailor into a policy for his boat?
It wasn't necessarily easier back then, but the starting point was completely different. Fifty years ago, my father first had to convince insurers of his product that had previously had little or no contact with water sports. Ten years later, the biggest challenge was to develop an efficient system for inventory maintenance and claims processing, which almost 10,000 customers had already insured their boats with Pantaenius. This was guaranteed by specially developed software, which was a novelty at the time and at the same time an important part of the recipe for success. The customer service could be sustainably improved and of course accelerated. In the eighties, the business at Pantaenius became increasingly international, gradually sailors from Denmark, Sweden and Great Britain reported who wanted to take out their insurance with Pantaenius. Word of mouth was a very important factor in growth back then. The entire market was developing very dynamically at this point - more boats and more competition. The Pantaenius subsidiary MCS - Marine Claims Service was founded in the 1990s. The success of the average commissioner's office in tracking down stolen boats brought us some attention and thus another boost of new customers. Today the growing internationality is one of our biggest and most exciting challenges. Every country has its individual requirements, and our customers in Hamburg are increasingly traveling in international areas. It is our aim to offer them the same service as a sailor on the Baltic Sea. That is why we have built up a global service network that we are constantly expanding.
What was the boom in the 1980s based on, and why is it so much harder to attract new customers today?
At that time, ships became relatively affordable thanks to advances in the manufacturing process and material development. This has made many sailors the owners of a new boat, mostly series productions. Today we can see the effects of this "boom" on the used boat market. In addition, the type of sailor who grew up on the water is now slowly saying goodbye to water sports. The offspring come, but they don't always want to be tied to their own ship. The opportunities for young people today are simply more diverse. Despite this visible change, we are still seeing healthy growth and are constantly observing temporary trends. Until recently it was mostly small trailerable boats, but in our experience, in the last three years, larger and very high-quality boats and catamarans over 40 feet have also been attracting new owners. The number of sailing cats in our portfolio alone has doubled in the last six years. According to our observation, the charter industry is also experiencing brisk growth.
If you had to describe him in a few words, what did the typical Pantaenius customer look like thirty or forty years ago - and how can you imagine him today?
With over 100,000 owners, our bandwidth is of course quite large. Thirty years ago, our sailors were on average a good ten years younger. An average customer that we insure in Hamburg is now 51, male and on the move with a 36-foot keelboat on the Baltic Sea, the Croatian Adriatic, or around Mallorca. Our owners' average boats have grown by around three to four feet over the past twenty years. The average insurance value of this reference has increased by almost 25 percent during this period. This is due to more modern technology, expensive accessories and of course the general price trend.
For a long time now, you no longer only offer pure policies for boats. Rather, you also have dozens of insurance solutions for the sailor himself, whether owner or charterer, on offer - from skipper liability to various travel and cruise insurances to legal protection for boat owners. What is the reason for this, a lack of skill on the part of the sailors, a generally increased risk awareness or need for security or simply because the insurance providers have simply become increasingly clever marketing?
Yacht owners and water sports enthusiasts are becoming more and more diverse. This means that the range in terms of income, family or professional situation and the use of a boat is much greater today than it was 30 years ago. Nonetheless, the core of our business remains comprehensive and liability products as well as insurance for skippers and charterers, which we consider to be very important.
Has the ability and the nautical skills of the sailors actually decreased in the past decades, as is always claimed? And if so, how is that reflected in your numbers?
Skill has not necessarily decreased, but technical understanding has sometimes not kept up with the development of new technologies on board. Today, the quality of training is mostly at a high level. Nevertheless, less time is spent on the water overall. So some people lack the routine that my father's generation takes for granted. We try to sensitize our customers here and pass on direct feedback based on our experience in claims processing. It pays off. Accumulation losses, i.e. major loss events in which several boats are involved at the same time, have a really significant influence on the loss rates.
How has the type of damage changed?
Individual damage is usually much more expensive today than it was 20 years ago because the technology on board is more sophisticated and complex. The causes of the damage themselves also change. For example, we are more likely to experience navigation errors due to incorrect use of electronic navigation systems. Ground contact is usually the result, which now accounts for around twelve percent of damage and has therefore replaced the classic, a collision with another yacht, as the front runner. Fire damage occurs ten times less often, but is usually so devastating that the damage volume is disproportionately high. Berlin, Neustadt or Norderney are some of the best-known examples of such accumulation losses in recent years. The situation is similar with mast breaks, which also occur less frequently than collisions or ground contact, but at around ten percent make up an equally large proportion of the total damage volume. This can mainly be attributed to rising prices for material and working hours. However, storms in particular have increased. The autumn storms Herwart and Xavier alone caused a whole series of accumulation losses in 2017. The phenomenon of climate change may not yet be fully illuminated, and the consequences may be felt more clearly in more distant regions than here. However, we also register changes here. The number of lightning damage, for example, has doubled in the last ten years.
Pantaenius is internationally active. Are there significant differences, on the one hand, in terms of customers and, on the other, in terms of damage between German sailors and sailors from other countries? And if so, how does that show?
Of course there are regional differences in the mentality of sailors and in the way water sports are lived. In Great Britain, sailing has a very sporty and tradition-conscious touch in many places. There are countless boats in the Mediterranean, but many owners do not see themselves primarily as sailors or even take part in a regatta; the boat is part of the 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. However, the causes of damage also differ regionally, even if only in a few cases significantly. Narrow and sometimes overcrowded marinas in the Mediterranean cause a lot of collision damage, albeit mostly small. Sweden and Denmark have an above-average amount of ground contact due to the rocky areas, and North America is particularly often affected by lightning damage due to the weather. In the Netherlands, on the other hand, we saw an increase in thefts of smaller motor boats for a while.
The pressure of competition in the boat insurance industry is known to be great - so great that, unlike in the case of car insurance, the insurance premiums for many providers for sailors have practically not increased for years. How long can this go on, given the increasing loss rates? 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 boat industry itself. The problem is more the comparability of the products. Even for most laypeople, a ship of very high quality is quite obviously different from an inferior one. When it comes to insurance, the main differences are unfortunately not always apparent at first glance. The idea that all insurance companies are the same continues to circulate and accordingly distorts competition. Like some of our competitors, we adjusted our tariffs a few years ago. After around twelve years of unchanged tariffs, this was an important and necessary step to ensure the quality of our work and ultimately the long-term satisfaction of our customers in view of the sharp rise in damage costs. We succeeded very well. Other providers failed to take this step and had to go out of business. Overall, the industry is recording significantly more market exits than new entrants, which affects both the insurers involved and the brokerage houses themselves. It was only recently that two of the big generalists withdrew from the yacht insurance business.
Major loss events such as hurricanes in the Caribbean or severe autumn storms in this country or various major fires in winter camps have certainly also burdened the Pantaenius balance sheet in recent years. Does that actually have any consequences at some point, apart from possibly increasing premiums, i.e., sailors who want to leave their boat in the Caribbean during the hurricane season or in this country during the winter in the water or in an open warehouse on land will have to impose stricter requirements or even expect exclusions from insurers?
The assessment of such specific risks as tropical storms and hurricanes is not the sole responsibility of the insurance providers in the German market but is closely linked to developments on the global insurance market, where these risks are placed. Here the screws have been tightened significantly. The world's largest reinsurer, Münchner RE, recently spoke of a "new normal" in connection with the increasing frequency and intensity of storms worldwide. Similar weather events are also expected in the future. We developed our hurricane clause after the devastating damage caused by Hurricane Ivan 2004 and now, after Hurricanes Irm & Maridie raised the bar for hurricane damage again, we need to adjust it accordingly. In concrete terms, this means: more specific regulations for the storage of the insured yachts. Even if we are happy to be one of the few providers to be able to 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 open air storage or in water in this country. Even if, in view of the increasingly violent autumn and winter storms, we would like our customers who overwinter in the water to take special care.
How important is personal contact with customers in the digital age, in which many insurance contracts have recently been concluded online? And do sailors think differently than someone who, for example, is "only" looking for cheap household or car insurance?
Even if sailing itself is commonplace for some thoroughbred water sports enthusiasts, the sailing boats themselves are almost never perceived as everyday objects. Whether it is hours invested or euros, the ship is an affair of the heart for almost all of our customers. On average, our head office in Hamburg still receives around 60 calls from customers every day. In the high season, the record is 250. Personal advice is still an essential part of our corporate philosophy today. Many of our customers also seek personal contact at water sports fairs or sailing events, ask questions and give us feedback on service or products.
Let's look ahead: Your newly designed and modernized homepage will go online shortly. How important is it for boat insurance providers today not only to be somehow present on the web, but also to be permanently active in social networks? And does that 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 like Facebook to give interested parties an insight into current topics from the Pantaenius world. We can only guess whether it will bring us new customers. However, we do register regional differences. In other countries, such as Denmark, the behavior of water sports enthusiasts with regard to social media is actually more pronounced than in Germany.
The sailing industry is subject to constant change. Be it that young people no longer want to commit themselves to just one hobby, sailing, or that sailing itself, keyword foiling technology, is becoming more and more radical and rapid. How do you react to this and what do you think are the next really big milestones in the boat insurance business?
Pantaenius is rightly considered a pioneer in the market and we are working flat out to earn this title in the future too. Radical racing yachts are also served within the Pantaenius Group, but through our sister company Pantaenius Unternehmensversicherungen. This regulation ensures that there are no adverse interactions between cruising sailors and professional crews. We have never closed ourselves off here 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 to a classic yacht hull and includes many exclusions. A big topic for the next few years will certainly be boat sharing and alternative owner models. In addition, advancing digitization naturally offers a whole range of options for making insurance products available as quickly as possible and also for customizing them. We will be bringing some new features to the market in the coming months. You can stay tuned.
And - at the end of the day, the question must be simple - who actually causes more or greater damage in relation, sailors or motorboat drivers?
In a nutshell: When it comes to rig and mast damage, the sailors are ahead. No seriously. Even if there are various clichés about different types of water sports enthusiasts, we can statistically refute the common prejudices. Both parties are almost always in balance. Good seamanship is a matter of course for most of our customers, whether under motor or sail. And for everyone who is unlucky, we are equipped. Come what may!
Pantaenius - The company
In 1899, Johann C. Pantaenius registered the company he founded in Hamburg in the commercial register. In the decades that followed, "the name becomes a term for marine hull and transport insurance," as the company's chronicle says. In 1963 Harald Baum joined the company, seven years later he took over Pantaenius. Baum continues to operate the industrial insurance business. At the same time, however, he developed yacht insurances tailored to sailors. With great success, Pantaenius is today the leading broker of boat insurance and liability policies in Germany. It is now run by the next generation with Anna, Daniel and Martin Baum.