Natural disasters and decreased consumer spending on boats have hurt insurance industry profits states a new market survey.
The Boat Insurance industry has struggled to stay afloat over the past five years due to low demand in the wake of the Great Recession, says IBISWorld industry analyst Eben Jose. An annualized 8.0% increase in oil prices also made boating more expensive over the period. Combined with low disposable income, new boat sales plunged more than 15.0% annually between 2008 and 2010. Likewise, existing boat owners chose to downgrade their boat insurance policies to cut costs. Consequently, industry revenue is projected to sink 0.9% annually on average to $25.9 billion over five the years to 2012.
Higher competition stemmed from online retail, facilitating the comparison of boat insurance products. It also led to increased market share for major companies like Allstate and State Farm, which were best positioned to offer discounted insurance to consumers seeking savings.
Aside from storm damage boat insurance claims, the three most common claims according to the National Boat Owners Association include hitting a submerged object while cruising, theft while anchored and collision with other boaters.
Better news for the industry is that disposable income is estimated to recover 1.3% in 2012, so people are more likely to be out on the water. Therefore, consumers will be more likely to upgrade their boat insurance. As disposable income increases, industry revenue is expected to increase. Additionally, IBISWorld expects interest rates to rise as the economy improves, which will drive investment income and industry revenue throughout the period.
For access to the IBISWorld report click here.