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Insuring RVs

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It’s not just your grandparents heading down the road in those Winnebagos these days. As the population of RV owners grows, so does the market and the profit margins for insurers.

In the 1950s, those silver, bullet-shaped Airstream trailers became an icon of American travel, a sign of families on vacation or retirees heading to winter’s warmer climes.

And while those uniquely designed homes away from home still roam the country, much has changed in both the shape and scope of the American recreational vehicle.

Over the last 50 years, the industry has grown into a multi-billion dollar business, with annual retail value of recreational and conversion vehicle shipments topping $15.4 billion in 1999.

Likewise, the specialty insurance market covering these motor homes, vans and towable camper trailers has grown despite today’s soft auto market.

That growth is especially significant in the states where the majority of RVs are sold and used: Texas, California, Florida and Michigan. Together these states account for more than 25 percent of national RV sales.

There’s a recreational vehicle for every taste and budget, as evidenced by the increasing number of RV owners. And for each of those tastes and budgets comes a different usage, meaning that writing an RV as an addition to a standard auto policy may not be what’s best for the customer or for the independent agent’s book of business.

A hybrid of coverages The challenge in writing RV coverage is in providing customers with policies that are suited to their needs. And knowing what coverages are available can make a big difference.

“I know of no auto insurers who would write an RV without vehicle liability and collision, but I do it every day through our stationary travel trailer program,” said Randy Sellhorn, Foremost group market manager for recreational vehicle insurance. The program is just one of the coverages available through Foremost based on consumers’ different uses of RVs.

Three national specialty RV insurers, Foremost, Progressive and National Interstate, all write similar programs for RVs. While their coverages may be more comprehensive, standard auto companies like Allstate and State Farm continue to maintain a large market share.

Allstate alone insures more than 8,400 RVs in both Texas and Florida, and more than 22,500 in California. Neither Allstate nor State Farm, however, break motorhomes and towable trailers out of their personal auto lines for accounting or insuring purposes, so determining actual market share in these categories is nearly impossible.

“Motor homes are a complementary product line for [Allstate], similar to motorcycles, boats or tractors. Allstate agents try to offer our customers a complete protection package for homes and cars, in addition to these other things,” said Justin Schmitt, Allstate spokesman. “We’re looking to grow in Texas in all lines of insurance, including motor homes.”

But that growth will not entail entering into the RV specialty market. To date, Allstate has no plans to write RVs as a separate coverage from personal auto, though the company does not require customers to add RV policies to existing auto or home policies.

Nor does State Farm, another large insurer in the RV-rich states of Texas, California, Florida and Michigan.

“We prefer to include RVs with personal auto or homeowners as a multiple-line package,” said David Wolfe, spokesman for State Farm in Texas.

Unlike State Farm, Allstate and other large auto insurers, Progressive has been writing profitable RV-specific coverage for over 25 years.

“Our product is designed for RVers by RVers,” said Michael Bissler, RV product manager for Progressive. “In our eyes there really is no comparison,” between writing an RV as an RV or as an auto.

“We don’t offer [customers] a jazzed-up auto policy,” he said.

Bissler “guesstimates” that Progressive is the largest specialized RV writer in the country, though he could not release any figures verifying that claim. He did say that RVs tend to be a more profitable line than personal autos, however.

“Our experience would reveal that it’s probably a little bit better,” he said. “The drivers are absolutely a preferred risk. Do we want more of them? You bet. Do we encourage agents to actively go get more RV business? Of course.”

Progressive pulled out of the California market in 1989 following the introduction of Proposition 103, spurring the creation of National Interstate, a small but growing competitor. (Progressive has since re-entered the market.)

With roughly 5,000 RV policies written out of her office alone, Melisa Knudsen, vice president of Hi-Sage Insurance in San Diego, said the RV business is booming.

She and a group of other agents across the country brought the program to National Interstate about four years ago as a backup carrier in case larger companies like Progressive or Foremost were to pull out.

The National Interstate program is, by design, very similar to the Progressive program, Knudsen said, offering a full-timers policy, vacation liability and personal effects coverage with virtually any limit available.

The Foremost story Foremost, based in Grand Rapids, Mich., offers similar coverages. The company’s strong market share—roughly 5 percent of the national RV market—made it very attractive to Farmers Insurance Co., which recently acquired the company.

Foremost began writing travel trailer coverage in 1961. The company added motor homes in 1964, and has continued diversifying its RV offerings ever since.

Innovative packages have been critical to Foremost’s success. And that starts with asking the right questions, including how people use their recreational vehicles. It’s been key to Foremost’s success and, according to Randy Sellhorn, is key to the success of agents when writing RV policies.

“The typical RVer is going to use it for several trips a year,” Sellhorn said. “But for those who are referred to as snowbirds, they might be living in it for several months. Theirs is being used more as a residence and would probably only need a comprehensive, personal liability package.”

He points out that auto insurers don’t have coverages for vehicles where someone is cooking dinner at 70 mph, or coverages for thousands of dollars worth of personal effects that might be in the vehicle.

“It’s about a dual risk,” he said. “It’s a combination of automobile coverage and homeowners coverage, and the area between, well, that’s the space we fill.” And what a space to fill.

Who’s driving? There are currently 8.6 million RV-owning U.S. households according to a recent University of Michigan Survey Research Center study, and 9.3 million RVs on American roadways.

And the average RV owner—debunking the elderly snowbird myth—is 48 years old, owns a home, is married and has a household income of $47,000. In fact, 45 percent of today’s RV owners are between 35 and 54 years old, outnumbering those over 55 (40 percent).

The U-M study projects the number of RV-owning households will rise from the current 8.6 million to 10.4 million by 2010 – a gain of 21 percent, outpacing overall U.S. household growth of 15 percent. Perhaps the study’s most surprising finding was that one in five U.S. households intends to purchase an RV in the future, meaning more RVs to insure.

Figures from the National Highway Traffic Safety Administration shows this group of drivers to be very safe, involved in fewer fatal accidents in 1998 (21,671) than the 16- to 34-year-old age group (37,199) or the 55 and over age group (36,207). (The figures provided here do not correspond with the total reported fatal accidents for 1998 (37,081) because multiple vehicles were often involved in those accidents.) Put them in RVs and they become even safer.

NHTSA figures also show that of the 37,081 fatal accidents in the U.S. in 1998, only 40 (one-tenth of one percent) involved RVs. And profit margins reflect that safety.

In Texas, RVs were a comparatively safe risk for insurers in 1998, with earned liability premiums for recreational trailers totaling slightly more than $155,000 while paid and incurred losses totaled just over $2,700, according to figures provided by the Texas Department of Insurance.

Those same figures showed motor home premiums that same year totaled just over $9.2 million while paid and incurred losses reached just over $5.2 million.


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