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Experts Offer Aviation Insurance Best Practices

Dec. 14, 2021

The past few years have proved to be challenging in terms of insuring business aircraft, with large premium increases becoming the norm for many operators. Partly in response to numerous large claims, some underwriters have left the market. This reduced number of insurers, coupled with consistent demand, has led to rapidly increasing rates. So how can business aircraft operators obtain the best rates and ensure coverage is appropriate for their operation?

Demonstrate Professionalism

Experts say to get the most competitive rates, operators should approach the insurance process with an attitude of professionalism.

“The underwriting process really starts with the client’s attitude,” said Doug Bell, vice president at Starr Aviation, an aviation insurance underwriter. “Do you care as much about your safety as we do? We often say, ‘The best continue to invest,’” referring to ongoing commitments to safety, including annual simulator training and other important risk-mitigation measures.

Joe Williams, vice president and managing director of aviation at insurance broker Marsh McLennan, has observed that a lack of commitment to recurrent training, poor attitudes and lack of proper preparation are common signs of a lack of professionalism in an individual or organization.

Brokers and underwriters can recognize patterns of professionalism from seemingly small variables, such as the neatness and completeness of your application or renewal and pilot history forms.

“It is incumbent upon us to ensure we are mitigating risk to the greatest extent possible, and that we can demonstrate this to a potential underwriter.”

Eric Canup Director of Flight Operations, Live Oak Bank

“As an industry, business aviation has not done a great job demonstrating we are a good risk to take,” said Eric Canup, chair of NBAA’s Domestic Operations Committee and director of flight operations for Live Oak Bank. “It is incumbent upon us to ensure we are mitigating risk to the greatest extent possible, and that we can demonstrate this to a potential underwriter. We all pay for lack of professionalism through higher insurance rates and possibly higher regulatory scrutiny,” he added.

Canup encourages aircraft operators to learn more about professionalism by participating in the NBAA Domestic Operations Committee’s PREFLIGHT campaign, which officially launched at NBAA’s 2021 Business Aviation Convention & Exhibition (NBAA-BACE).

PREFLIGHT stands for:

Preparation
Respectful
Ethical
Follows policies and procedures
Leadership
Integrity
Genuine
Humble
Transparent

Be Genuine with Your Broker and Underwriter

Experts recommend getting to know your broker and underwriter. If you’re unable to meet your underwriter in person, request that your broker set up a short virtual meeting to introduce your organization or share any changes to the operation. If that’s not possible, write a few paragraphs describing your risk management processes, training procedures and safety measures you take.

Insurance brokers may be compensated in different ways, and experts say it’s important to understand their relationship with the underwriters they present to you. Be sure your broker is representing your best interests by presenting you with unbiased information from multiple underwriting quotes and not simply steering you to one underwriter.

If you have a good aviation insurance specialist broker, stick with them, say the pundits. There is a limited pool of business aviation underwriters – fewer than 20 – and most will only work with one broker at a time. In other words, having two brokers shop your policy at the same time is unlikely to give you optimum results.

“Your broker is your advocate when you go to the market, so enjoy a good relationship with your broker, but don’t continue the relationship blindly,” Canup recommended.

Another key aspect of the insured-broker relationship is the need to “respect the process.” When seeking or renewing coverage, provide thorough and accurate information as requested by your broker or underwriter, Williams said.

Even if you’ve been with your aviation broker for a long time, fully respond to their questions in a timely fashion, said Williams. “The underwriters ask questions for a reason. Not answering is counter-productive.”

“The underwriters ask questions for a reason. Not answering is counter-productive.”

Joe Williams Vice President and Managing Director of Aviation, Marsh McLennan

Bell and Williams also recommend giving your broker time to properly shop your policy. Asking for new proposals a week before your renewal date will not produce ideal results. Be sure to give your broker at least a few weeks to present your organization’s package to underwriters so they can develop proposals.

Describe your operation to your broker and underwriter accurately, review quotes and the policies in full, and ask questions to be sure the coverage is appropriate for your operation. Report changes in your operation to your broker or underwriter in a timely manner – including changes in geographic regions of operations, new aircraft or pilots, and different hangar locations – to keep your coverage in synch with your operations.
Canup said in the past he never really took the time to read the policy in-depth or ask questions of his broker. But when his organization’s premiums increased for a second year in a row, he decided he was doing a disservice to his company, and he really dug into the policy’s details. He also sought a new broker. Both steps resulted in lower premiums and a more productive relationship with his new broker.

Finally, shop your policy at least every few years but experts say not to change your carrier too frequently, the experts say.

“The more an underwriter gets to know you as an operator and the more they know about what you’re doing to mitigate risk, the more they view you as a favored operator – one they want to keep,” said Canup.

At the end of the day, Bell says relationships matter in ensuring the best value for premiums paid.

“The most desirable accounts are the hardest to get,” he said. “The underwriter understands the risk with their long-term clients. Those relationships should provide the most latitude for the operator over time. We insure people, not companies, and there’s a comfort level with people you know,” Bell concluded.

Insurance Pricing Getting a Little Better

After years of shrinking supply, the business aviation insurance sector might see two new underwriters join the market in 2022. Experts suggest the added supply might result in flat or slightly reduced premiums, but operators shouldn’t expect substantial decreases.

Supply is not the only factor at play in premiums. In the past few years, the insured output has exceeded premiums. While accidents that make major headlines account for some losses, attritional losses, such as those related to major storm events, are also affecting the market. Bird strikes, hangar rash and localized weather events such as hailstorms result in millions of dollars in claims every year.

The worldwide general aviation insurance market is about $2.1 billion, yet the market still suffered a $50 million overall loss in 2020, Bell said. The March 2020 tornado that stuck the John C. Tune Airport in Nashville resulted in approximately $100 million in damages alone.

Other factors impacting business aviation insurance premiums are the growth of the aerospace industry and “nuclear” awards for liability, which basically means very large monetary awards due to the escalation and social inflation on the value of claims. Satellite and commercial space transportation losses impact the rest of the aviation market, too.

In short, gross premiums are being exceeded by paid out losses, Williams explained.

Review NBAA’s insurance and risk management resources.

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