Ok, I'll take your word for it that it's much worse than what's shown in the pic. However, it's gelcoat not paint (much much thicker than paint, quite a bit tougher too).
The frayed fiberglass isn't such a big deal as long as it didn't crack or break structurally and the keel is the strongest part of the hull... I imagine the dealership will just spread some resin on the frayed glass, let it cure rough sand it down then slather on black gelcoat let it cure and sand it down flush with the rest of the gelcoat then buff it out to a high luster again. You won't be able to tell there's a repair there without a magnifying glass and a real good eye.
ps. I wasn't trying to convince you that your insurance was a bad idea, I was trying to convince me that it's a good idea.... and I'm just not convinced all-n-all. Too little peace of mind for too much money for my wallet, I'll still pass on it. But thanks for the info anyhows.
- Michael