Q&A with BoatUS technical services director Beth LeonardPosted on Written by Reagan Haynes
When the business world gets tough, the tough quit their jobs and sail around the world. Or maybe thats just Beth Leonard, BoatUSs new technical services director and editor of its Seaworthy magazine, who says the perfect job is the one she now has.
Leonards path to BoatUS was anything but dull. She grew up summering on Lake Ontario basically getting on anything that would float and making it into a boat. After obtaining a business degree, she went to Europe in 1988 during the ramp-up to the 1992 Common Market.
She was working there as a management consultant for McKinsey & Co. in the financial services sector in the late 1980s and early 1990s when she and her husband had an epiphany. We decided we didnt like where the business world was going, Leonard says. We saw a lot of what ended up, I think, bringing down the market in 2008.
Frustrated with what Leonard calls the human cost of the post-merger business world, her husband proposed that they quit their jobs, buy a boat and sail around the world. My reaction was pretty much the same as if hed said, Lets build a rocket and fly to the moon.
It took him two years to talk her into buying the 37-foot fiberglass ketch on which they set sail in 1992. When they returned three years later they tried to settle back into their previous lives in the business world, but Leonard says, If anything, things had changed even more for the worse.
They spent the next four years building a custom aluminum boat, and Leonard began writing to earn income for their next adventure. They left in 1999, this time spending a decade sailing around the world.
Trade Only asked Leonard to talk about herself and her new role at BoatUS.
Q: Can you tell us more about your consulting background and how it informs your job at BoatUS?
A: I joined BoatUS a year ago July. In many ways it was a perfect fit. I have the writing background. I have the editing background. I have the boating background, and I also have the business background. I understand financial services and insurance and how all that works.
Were going through a huge transition here, where almost all of the senior management is stepping down they all started in the 1970s. Were having a big changing of the guard, which is scary for some people, but I see it as an opportunity to take the tremendous heart of this company and carry it forward.
The company I worked for is called McKinsey. Its an international management consulting company with offices all over the world. We worked with the Fortune 500 companies mostly, and at the CEO level. McKinsey billed itself as the confidant of the CEO, and my specialty was financial services, so I dealt a lot with banking and insurance issues.
I did a lot of merger-and-acquisition work and a lot of post-merger integration work. [Its] a company thats wonderful to work for. It cares a lot for its employees, but also its in a really competitive environment now, one that it hasnt had to deal with until recently.
I feel like with my background and BoatUSs culture we can figure out ways to keep whats important about our culture and still be competitive. One of my goals is not to give up that incredible culture, as other companies have done, to stay competitive.
Q: I imagine thats a departure from your past experiences.
A: It is. Thats part of the reason we went sailing. The post-merger integration was very much about getting the costs out. I saw the devastation that caused to individuals, to the skill sets of companies and to the customers of the companies. Its an incredibly destructive process, and in the end you can argue that it does provide customers with better products at lower costs, but theres a huge human cost along the way. I think there are much smarter ways to manage things. With a little bit of lead time and thought and care and concern you can do things to reshape a company that doesnt require that approach.
Q: Can you point to some specific examples of things that give BoatUS its culture?
A: Our members come first. They often say they cant believe weve taken so much time to talk to them when they cant get past the voicemail at so many other companies. We dont do everything right, but we listen and we really care.
Our catastrophe team is a great example. Its an interesting relationship because our catastrophe teams are not employees of BoatUS. Theyre independent surveyors who are working with us. I saw in the field, after Sandy, that their dedication to the team and to every one of our members is astonishing.
People will come to us and say, I cant even get hold of my other insurance company. What do I do? And our catastrophe team members will take the time to explain to them what they need to do, even though theyre not even necessarily members.
They all do a really good job of keeping members informed, and dealing with the situation for them.
During the middle of the catastrophe team response to Sandy, it snowed. Our catastrophe teams were always in warm climates like Florida. In about a 24-hour period, our marketing department put together care packages for every catastrophe response team member that included fleeces and cookies and a number of other things and sent them out to each member in the field to make sure they were warm. Theres no other company Ive ever worked for that wouldve thought to do that.
I think BoatUS is good at building partnerships across the industry. The marinas we visited while we were out were so grateful to BoatUS, in part because their cash flow at that point was almost dependent on getting something going from the salvage operation.
Our CAT team members are authorized to cut checks right in the field to get checks overnighted to people so they have the cash flow they need to keep going. I think BoatUS really understands that in a way that a non-boat insurer really doesnt.
Q: Why is there so much competition these days from non-boat insurers? I know that often consumers are looking for the best deal until something happens, and then they want the best company. How does BoatUS approach that?
A: Thats a really big issue right now. We have not had to market ourselves in a really direct way in the past. With more competition coming in, part of what we have to do is educate boaters about what it is theyre paying for and what it is theyre getting because if you look at the bottom line and only look at what its going to cost to insure your boat, thats only a tiny bit of the story.
The question is: What coverage are you really buying and what kind of a check will you actually get when something happens?
Because were all boaters we wrote insurance policies to meet our members needs, not to maximize our profitability, with the belief that if we did that well we would end up making enough profit. And thats been true until now. And now, in a more competitive environment, we have to work a lot harder to help people understand what it is were providing and how it differs from everybody else.
Q: Why is there so much competition when it seems like there are so many disasters occurring? Why are so many companies moving into this space?
A: First of all, competition is fierce across the board. When you look at auto or home insurers and think about insurance in general, your revenues are based on the value of what youre insuring. If you look at the aging automobile base in this country and the drop in housing values, insurers across the board are struggling. On top of that, a lot of insurers made their money investing their reserves, and as you well know, investments have not done particularly well, especially the fixed-income investments a lot of companies put their money into. Theyre no longer earning anything on those investments.
So thats driven fierce competition in the auto and homeowner realm. When those companies look at retaining their customers, a lot of them are looking at additional pieces of business to keep those customers loyal to them, not because theyre committed to boats or boating. Theyre less concerned about the profitability of that business than they are in fencing off the customer so they dont leave.
So you have companies entering the business who are less concerned with profitability because their main line of profitability is coming from elsewhere. Theyre entering the business not because they understand the industry and not because theyre looking to make a profit from the industry, but to build a wall around their existing customers. That, of course, creates big pressure for us. Especially for insurers like BoatUS, boats are what we do. We dont do anything else, so we are committed to the industry and we insure boats no matter what.
One of the things weve seen in business cycles of the past is that you get these periods where other insurers enter in large numbers. Then you have a disaster like Sandy and a lot of them exit in large numbers. When my husband and I were out sailing and we were in the Pacific we got a notice that our insurance company had been told they had to reduce their exposure to the boating market this was right after Hurricane Andrew and they canceled us in the middle of the Pacific with no warning in the middle of the policy period. Thats something that BoatUS would never do, but that other companies will do because its not their primary line of business.
When we see the other insurers coming in, their policies arent geared toward the kinds of disasters that happen with boats and what boaters need specifically. They dont have things like the catastrophe team.
Our first catastrophe team was 30 years ago with Hurricane Alicia in Houston. We had a big debrief in June where we brought in the CAT team members and sat in a big conference room to discuss, OK, what went right, what went wrong and what can we do better next time? I can almost guarantee that the multiline insurers wouldnt have had that discussion after Sandy.
Q: What are some of your plans and goals moving forward? What are some challenges? How do you plan to go about staying competitive while maintaining the integrity of the company?
A: Theres a whole senior management team working on this. My department can act as bridge between the industry and consumers. Theres a big role to be played in terms of educating consumers, but also communicating between the consumers and the industry. Were sort of an early-warning system in a way in my department because I have Seaworthy, which means I have access to the claims files.
In seeing those claims coming in, I see things coming down the line. Bob [her predecessor, Bob Adriance] was very good at picking out the pieces people hadnt quite put together yet. One example of an issue he got out very early on was ethanol. When he started seeing damage to engines in the Northeast and started having a bunch of claims he realized something was going on, and it turned out to be ethanol.
He was very helpful in communicating the facts around ethanol so people could do the right thing to address the situation. We can be a bit of an early-warning system through the claims files, the consumer protection department, which gets calls from members when they start seeing problems in their boats. When we start seeing trends there we can highlight them and go back to manufacturers to help them identify and understand them.
We also have our whole surveyor network and we interview them about what theyre seeing when they survey boats. When theyre seeing issues come up on boats theyre talking among themselves. We have all this information coming in that we can turn around and feed back to the industry.
At the same time, we can help the industry communicate things back to boaters, like maintenance issues that people arent doing well, or needs to be changed because circumstances have changed, like in the case of ethanol. We can communicate that back to boaters in a way thats very powerful, not just through our memberships, but also through organizations like the U.S. Power Squadrons or U.S. Coast Guard Auxiliary and our cooperating marinas. The reach we have gives us a huge advantage in linking boaters with the industry.
One of the biggest challenges in general right now is getting people involved in boating and maintaining the health of the industry. Thats one that weve all got to get involved with.
Q: What are some trends youre seeing right now?
A: Were working on lithium ion batteries because they are the future and they offer huge weight savings advantages over traditional batteries, but there also some safety challenges.
Right now there are a lot of do-it-yourself approaches to lithium ion batteries by boat owners who dont understand some of the risks, so we see a big role in educating boaters on those and working with the industry and the American Boat and Yacht Council on that. Its too early in the cycle for the ABYC to create a standard, but were having a constant discussion with them about how that might look in the long run.
Another area is electric shock drowning. I think the industrys done an excellent job in trying to educate marinas about that. But our role there is educating the boater because a lot of the discussion in the industry is to marinas. That was a big initiative for us this summer that we got a tremendous response on.
Id like to think that in another four or five years we might not have any more electric shock deaths, but its going to take an effort on everybodys part. Part of that message is: Dont swim within 100 yards of any electrified dock, whether its a marina or a private dock. Its an unhappy message. You know, I grew up swimming on Lake Ontario. We never thought twice about jumping off the dock, but back then if the boat had any sort of electricity at all, it was a battery running a 12-volt radio.
Even if a dock is certified as being OK, a new boat coming in that has a fault can create a problem. So its a moving target, unfortunately, which is why I wanted to write an article about it. It takes three things: An electrical fault either on the boat or on the dock, but usually its on the boat; it takes a ground safety problem either on the boat or on the dock, but usually on the dock; and it takes the fact that theres no over-current protection to shut the system down if something goes wrong. Marinas have done a great job, particularly, of addressing the safety ground wiring problem, but boaters have also got to understand that they need to address the problem on the boat.
Q: Can you talk about Seaworthy magazine and how it benefits members?
A: Seaworthy is unique in the industry as far as I can tell because its the only publication thats dedicated to making sure recreational boats are safe and seaworthy. I look at Seaworthy and think, Would anybody read a magazine about car wrecks or about burnt-down houses?
I cant see it. Whereas with Seaworthy, theres something alluring about learning from what goes wrong on boats. It has a really strong following, which I thank Bob Adriance for creating. Its a quarterly publication, and its based largely on what we see through insurance claim files. We share that with our readership to help them to figure out what they can do to avoid the problems others have run into.
Most of the publications Ive written for over time, if I wrote an article and got three pieces of mail, I was overjoyed. For the two weeks after Seaworthy goes out I get hundreds of letters on this 16-page publication. Its wonderful because its like a dialog with our readers.
It is a bit of a marketing piece for us, but its also a way for us to provide information to the general boating community. The electric-shock drowning article had so many requests for reprint that we put it up in a PDF on our website.
Certainly from a financial standpoint it makes sense to move Seaworthy to electronic publication entirely, but people do enjoy passing it around. It ends up in yacht clubs, so were kind of struggling over whether we can create that kind of feeling electronically, and Im not sure that we can. We did try to go electronic with it two years ago and we had such a backlash that we went back to print.
Q: BoatUS probably has a unique perspective on the frequency of natural disasters. Can you speak to whether you are seeing a quantitative increase in disasters over the past five or so years, or does it just seem more frequent as a result of increasing population along coastlines and higher property values?
A: We get into this discussion frequently, and the numbers speak for themselves in my mind. Yes, there are factors in there that there are more people and more money involved, but I think its hard to argue that there arent more disaster events happening.
When you look at snowfall in the winters between 2009 and 2011, its really unprecedented. In February of 2010, 49 out of 50 states had snow on the ground. Hawaii was the only exception. That was a first. Between Feb. 6 and Feb. 12 of 2010, there were 1,180 snowfall records set all across the country.
BoatUS has seen a huge change catastrophe teams used to be used strictly for hurricanes, but we have deployed catastrophe teams now for snowstorms, tornadoes and even for the derecho (a series of severe thunderstorms) we discussed sending a catastrophe team. We ended up not doing that, but so many states were affected in such a big way and we hadnt seen that kind of effect from a series of thunderstorms. Or if we have its far enough back in the annals of history that its not a weather event thats clearly recorded.
In 2011 there were 1,692 tornadoes, which is the second-highest total since recordkeeping began in about 1950. On March 23, 319 tornadoes struck across the Midwest in a single day. That was a new record. This year we had the tornado in Moore, Okla., that was absolutely devastating. You can see tornado seasons actually listed on a chart of the 16 costliest disasters and theyre tornado seasons that have happened in the last five or six years.
The bottom line is that we do see a huge number of weather-related events, and while part of the devastation from those does come from more population existing in areas like coastal regions, which seem particularly prone to these things, the absolute magnitude of these things is beyond anything weve seen before.
Q: How does the increase in natural disasters affect insurance premiums and coverage in general?
A: There tends to be a bit of a misperception that something like Sandy affects everybodys rates. Thats not strictly speaking true. If you live in the Northeast, where you had Hurricane Irene the year before and then Sandy, that certainly affects rates. But we do evaluate rates specifically to the risks in that area, and also specifically to the types of boats you own.
Boats are simply more expensive than they used to be, and that greatly affects the premiums we charge. All of those trends greatly affect pricing. At the same time, the one approach that some companies try to take is to cut coverage. Everybody has to make their own decisions about coverage. Theyve got to make their own decisions about the risks that theyre taking, the financial liability they assume, about what types of coverage make sense for their types of boating in their specific area.
What were trying to a better job of doing is to help people understand what options exist and how to make those decisions and create more tailored programs that address the specific needs of a specific boater. For instance, we have our angler program thats really focused on fishermen and have specific coverage in case your gear is stolen because fishing gear is often more expensive than other things that are stolen off boats.
I think you will see a group of companies that will compete on price, and theyll do that by reducing what theyre covering and how theyre covering it. And then theres a group of companies, particularly the specialty line companies, that are going to try to tailor programs that best match what a specific customer needs and price it for what a specific customer needs and help the customer understand the liabilities they assume if they choose not to have certain coverage.
Q: Is there anything else you would like to add?
A: I would say Im very excited. It feels like a difficult time in the industry right now. Were coming out of a really big, deep recession in an industry thats used to going up and down. I think were really at the beginning of what could be a golden period for boating, and being involved with it all is really exciting.
This article originally appeared in the October 2013 issue.