Article featured in World Aircraft Sales Magazine
Let’s face it. On a purchase satisfaction scale of 1 to 10, aviation insurance fails to register even a 1 for most buyers.
There is simply nothing sexy about buying a stack of papers that promise to pay for a future loss that statistically has a low probability of ever happening. For this reason, many business aircraft owners make the critical mistake of focusing a minimum amount of attention on this vital component of their financial protection system. But since the aviation exposure likely presents THE largest financial exposure an individual or business faces, this can have devastating consequences.
Consider the legal ramifications of the recent Lear 60 accident in Columbia SC involving two prominent music stars, in which four of the six people on board – including both pilots – were killed; then you begin to realize what’s at stake.
“A lot of people don’t understand what’s in their insurance policy until they need to know it – and then it’s too late. Having an understanding of your policy – knowing what coverage you have – is key… This is not a task to give to your least qualified employee to handle, but rather just the opposite.”
VP, National Business Aviation Association
The most important decision you will make is the selection of the insurance broker.
If you do nothing else, getting this right will yield the greatest return, and is considered best practice by financial and legal experts in the aviation industry. But what is there to consider?
Hire the Right People
Should you allow your general lines insurance broker to handle the transaction? They are probably very good at taking care of your overall insurance needs but if you needed heart surgery, you would hire a heart surgeon, not a General Practitioner. Business aviation insurance is no different. You need a professional aviation insurance broker on your side.
Unlike other lines of property/casualty insurance, which are written on standard forms, aviation policies vary from companyto-company, some MUCH broader than others. This makes apples-to-apples comparisons extremely difficult.
A good aviation insurance broker can help you navigate to the policy that best fits your operation. In addition, these brokers deal with the underwriting companies every day on multiple aviation risks, and have large books of business with each giving them more clout. An aviation broker will know which underwriter at each insurance company is the most reasonable to deal with, what a competitive rate should be on a particular account, what coverages are available at no charge, and knowing when to negotiate – and how hard, to secure a lower premium, broader policy forms or ancillary coverages for their client.
If your local broker is sub-brokering your aviation policy through a wholesaler, be careful. This is a red flag. The more hands in the pie, the more chance an important detail will get missed.
The fact is; you’re going to pay the same commission either to your local agent or the best qualified aviation insurance broker in the business. That’s like having the option to buy a Chrysler or Lexus for the same price.
Credentials, Credentials, Credentials
Perhaps I’m convinced I would be best served hiring an aviation insurance broker, but how do I find the best candidate? Credentials, credentials, credentials. If you needed lasik eye surgery, would you pick an eye surgeon based on a marketing promotion? Of course you wouldn’t. The goal is to establish a relationship with a solid aviation insurance broker you can trust.
Your first task is to compile a short-list of respected aviation insurance brokers to choose from. Ask operators of similar aircraft what specific broker they use, and then research that broker’s website for information. You want a broker that not only has advanced insurance training and experience, but also one that is a pilot. Negotiating with an underwriter from a pilot’s perspective is a must. It’s like speaking a foreign language.
Other information you can glean from the broker’s website: how long they have been in business, how many other qualified brokers work there in case you have an important matter you need to discuss when your broker is not in the office [you’re looking for bench strength, not a one man shop].
Many brokers post a partial list of their customers to give you an idea of the caliber client that has chosen them. This is very useful information. If there are recognized companies on the list, you can assume these companies are with them for good reason.
Do they promote safety and risk management solutions as a way to complement insurance, or are they just about the money? Membership and participation in professional aviation associations such as NBAA, NATA, NARA and HAI, provide vital sources of current information to enhance the ability of the broker handling your account.
- It’s a Small Market
Don’t call several Aviation Insurance Brokers to get competitive bids. While this tried and true strategy is effective with many other products, it’s normally counterproductive here. Why? The aviation insurance market is very small.
Unlike auto insurance where there are over 500 insurance companies writing policies, only 14 aviation insurance companies do business in the United States. No one broker can represent all auto insurance companies. On the other hand, any good aviation insurance broker can, and will represent all aviation insurance companies. As a rule, an insurance company will only work with one agent at a time and it’s strictly on a first come, first served basis.
Once a broker contacts an insurer on your behalf, any subsequent broker that contacts them will be blocked from accessing that insurer. If your aviation broker is doing his/her job, they will be shopping all interested aviation insurance companies for terms and will present you with the best proposals. Calling more than one is simply a waste of time for most buyers.
By now, you have learned what savvy business aircraft owners already know. The financial stakes are too high to give anything less than full attention to your aviation insurance program. No one ever thinks it will be their plane that’s involved in an accident. Unfortunately, accidents can, and do happen – even to the best flight departments. Take command now before the loss.