Market Value Insurance v Agreed Value Insurance

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Sandyshore

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From what has been discussed at the YC today a market value insurance policy takes massive chunks out of any claim compared to an Agreed value policy which pays for what is shown as the value in the policy.
Okay we all accept insurance policies have wear conditions but to cream a slice off further is poor they take the premium on the values we give them .
Understand the problem in question may at YC gone to the Ombudsman.
Is this a general problem with market values and how do insurance companies arrive at claims values ,do they just guess ?::
 
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Thank you Sullivan is not for me but thanks for your response
My policy is Agreed value the question was aimed more at those who have market value policies either knowingly or not (until they look at the small print).
It might help a Pal ,thats all.
 
I think the problem with boats is that it can be very hard to determine what the Market Value is - unless it is a popular model that comes on the market often enough for a genuine market to be observable.

I presume insurers charge a premium in relation to the value insured and so it seems that agreed value makes a lot more sense than market value.

Total loss in the boat market must be very rare - my annual premiums come to about 2% of the value of the boat
 
bedouin said:
I think the problem with boats is that it can be very hard to determine what the Market Value is - unless it is a popular model that comes on the market often enough for a genuine market to be observable.

I presume insurers charge a premium in relation to the value insured and so it seems that agreed value makes a lot more sense than market value.

Total loss in the boat market must be very rare - my annual premiums come to about 2% of the value of the boat
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i am 0.5%, agreed value
 
bedouin said:
my annual premiums come to about 2% of the value of the boat
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That figure on its own is largely meaningless as the premium covers the entire risk of which total loss of hull and machinery is relatively small. If the total value is low then the overall premium is higher as a %age. I have one boat insured for £13500 and the premium is 1.7% and another at £55k where the premium is 0.52%. Some insurers will give you a breakdown of the premium to show you how much each type of risk costs.

The use of %age of value is only useful when comparing cover for the same risks for the same boat with alternate insurers, but of course the monetary cost of the policy(ies) does exactly the same thing - that is whether one costs more or less than the others.

Your 2% is high and suggests you have a low value boat, more extensive cover or you are simply paying too much.
 
Tranona said:
That figure on its own is largely meaningless as the premium covers the entire risk of which total loss of hull and machinery is relatively small.
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In the gliding world , third party insurance is by far the most expensive part of the total bill. That's because an old wooden single seater worth £1500 and a brand new two seater worth £200k can both do many, many millions' worth of damage if they hit a jet. I'd expect it to be fairly similar in boating: a Westerly 22 and a nice new Bavaria, carelessly bounced round a marina, can probably do the same amount of damage to other boats.
 
Tranona said:
Your 2% is high and suggests you have a low value boat, more extensive cover or you are simply paying too much.
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Probably all three - but basically a comparatively low value boat.

But the point is that if the total premium is only say 1% of the insured value they chance of total loss must be much less than 0.5% (i.e. once every 200 years) so the details of the value of the boat is not a major issue in the profitability of the ins co.
 
bedouin said:
Probably all three - but basically a comparatively low value boat.

But the point is that if the total premium is only say 1% of the insured value they chance of total loss must be much less than 0.5% (i.e. once every 200 years) so the details of the value of the boat is not a major issue in the profitability of the ins co.
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Nothing to do with chances of a total loss. Just means, as JumbleDuck points out, third party liability premium is generally a fixed amount irrespective of the boat so accounts for a higher proportion of the total premium when the insured value is low. Not unusual to see premiums on very expensive boats to be even lower %age than mine and Sailorman's - which are typical for a UK based boat in the £50-100k range. When I had my expensive boat in the Med and cover into the Atlantic the premium was much higher at around 0.8% reflecting the increased risks and higher cost of repairs out there.
 
Tranona said:
Nothing to do with chances of a total loss. Just means, as JumbleDuck points out, third party liability premium is generally a fixed amount irrespective of the boat so accounts for a higher proportion of the total premium when the insured value is low. Not unusual to see premiums on very expensive boats to be even lower %age than mine and Sailorman's - which are typical for a UK based boat in the £50-100k range. When I had my expensive boat in the Med and cover into the Atlantic the premium was much higher at around 0.8% reflecting the increased risks and higher cost of repairs out there.
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But the value of the premium puts an upper bound on the likelihood of total loss. If they are only charging 0.5% then they must be assessing the likelihood of total loss at much less than 0.5% - otherwise they would soon go out of business.
 
bedouin said:
But the value of the premium puts an upper bound on the likelihood of total loss. If they are only charging 0.5% then they must be assessing the likelihood of total loss at much less than 0.5% - otherwise they would soon go out of business.
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I am sure that the likelihood of total loss is much less than 0.5%. Even 0.1% would mean one boat per year lost from the average marina, and I'd be very surprised if the rate of loss was anything like that high.
 
bedouin said:
But the value of the premium puts an upper bound on the likelihood of total loss. If they are only charging 0.5% then they must be assessing the likelihood of total loss at much less than 0.5% - otherwise they would soon go out of business.
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No. The %age of value is nothing to do with the probability of the claim. The size of premium is related to the value at risk. Your premium covers a range of risks, part of it is for loss of hull and machinery and this is value related. The probability of a claim is no different whether it is a £10k or a £100k boat. You are confusing size of risk with probability. They are not connected.
 
The point on Agreed value against Market value clearly you can see what you are insured for. Market value a pure guess.
One member at the YC has done some swatting up in the last few days and has mentioned the Financial Conduct Authority DO NOT like market value policies.
I am glad I have an agreed value policy so relaxed.
Those with a Market value might wish to have a rethink,thats all.
 
I had an interesting conversation with a man from Towergate about this recently. He told me that I MUST NOT under-insure the boat, so was encouraging me to pick the top-end value (so the premium went up), but then said that it was based on "fair market value". So I said "on the basis that YOU will tell me what the value is should we have a total loss, then surely YOU can define a value now and insure it for that as an agreed value". "That's not the way it works" was his reply. Heads you lose, tails you lose.

So I went with Y Yacht, who gave me an agreed value policy.
 
Sandyshore said:
The point on Agreed value against Market value clearly you can see what you are insured for. Market value a pure guess.
One member at the YC has done some swatting up in the last few days and has mentioned the Financial Conduct Authority DO NOT like market value policies.
I am glad I have an agreed value policy so relaxed.
Those with a Market value might wish to have a rethink,thats all.
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The real problem arises not when you are claiming on your own insurance where there is an agreed value, but when claiming direct from a third party. With your own insurer you are governed by the contract, which may include an agreed value. With a third party the claim is for negligence and they only have to put you back where you were, which in the case if a write off means they will offer only market value as a settlement.

There was a long thread recently here where the third party was trying to reduce the payment on the basis that the boat concerned had signs of osmosis and therefore its market value was lowered, resulting in the claim being more than the lower market value. The advice was to claim against his own insurance and let them recover from the third party.
 
Tranona said:
The real problem arises not when you are claiming on your own insurance where there is an agreed value, but when claiming direct from a third party. With your own insurer you are governed by the contract, which may include an agreed value. With a third party the claim is for negligence and they only have to put you back where you were, which in the case if a write off means they will offer only market value as a settlement.

There was a long thread recently here where the third party was trying to reduce the payment on the basis that the boat concerned had signs of osmosis and therefore its market value was lowered, resulting in the claim being more than the lower market value. The advice was to claim against his own insurance and let them recover from the third party.
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My experience from a motoring claim is that if you have an agreed value insurance on your own vehicle then in the event of a third party pay out you have some leverage to claim a higher value. The agreed value has to be reasonable and with evidence that you can justify this higher valuation, for example the typical condition and how yours may be better than average or better maintained or is rare and more difficult to replace.

My partner had a Volvo 245 estate that a wall collapsed on top of, we were offered £250.00 and the car would be written off, we ended up getting the bonnet dents repaired front end re spray and new lights total cost about £1200 with hore car whilst it was repaired, the car was insured as a classic vehicle agreed value.
 
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