Article published in World Aircraft Sales Magazine
Are you lucky or are you good? That’s the $25,000 question smart insurance underwriters ponder before they sign their name to millions in liability exposure on your turbine aircraft.
“Lucky” looks back in time and reveals a “good” operator merely because there have been no losses. The truly good operators don’t just rest on their laurels. They are actively engaged in the present to discover where a future claim might arise – then do all they can to keep that claim from happening. This process is fundamental risk management and many experts today prefer this be formalized into a Safety Management System (SMS).
To an extent the insurance industry does reward good fortune. In a stable insurance market, if you have no claims you can expect rates won’t go up. Increasingly however, insurers more strongly reward the adoption of safety best practices. Indeed those operators that practice them as part of a proactive safety culture are the ones most preferred by underwriters.
While aviation insurance companies have always encouraged these best practices, many are now taking an active role in making sure they are even more readily understood and available to their clients. This not only differentiates competing underwriters and adds value to the overall insurance transaction, but also reduces claims for these insurance carriers and enables them to keep premiums competitive.
Some insurance companies have recently hired or retained the services of aviation safety experts to add capacity for more loss-control consulting. Others have provided complimentary risk reduction tools such as fatigue management software for select customers.
Industry associations such as the National Business Aviation Association are endorsing IS-BAO audits as well as grassroots efforts to improve safety, imploring insurance carriers to recognize those that participate with favorable premiums. All of this is intended to encourage the voluntary adoption of safety best practices since the operators that do so have an uncanny way of being ‘luckier’ than those that don’t.
How do you know if you’re lucky or good?
What we sometimes find with new turbine aircraft owners is that they don’t know what they don’t know when it comes to aviation safety. If you are not a pilot but own an aircraft, how do you know what aviation practices and policies constitute an effective safety culture?
It is easy to build trust and confidence with a likeable pilot after a few greaser landings, but not all pilots value safety the same way. A pilot that has been lucky enough to build time through the trying early years of the profession, but only gives lip service to safety along the way can still find himself at the top of a flight department – he or she might be your pilot. How do you know?
That’s where the value-added services of some insurance carriers can come into play. The companies that do have loss control professionals send them around the country to see first-hand the best and worst when it comes to safety. Many will arrange for an inspection or interview for little or no charge, and can provide useful benchmarking data for comparison.
Sadly, this is an often untapped resource because operators are hesitant to have the insurance carrier scrutinize their flight operations. The reality is they are going to scrutinize the department after a loss anyway, so why not take advantage of the service, and perhaps avoid the loss altogether?
Another option is to hire a qualified outside safety consultant who can review your operations and provide a confidential report.
Hey, we’re good – now what?
Fostering an effective safety culture through SMS implementation or some other formalized best-practices program will have little effect on your insurance if your broker doesn’t know about it.
Since most turbine aircraft insurance is negotiated, brokers need all the “ammunition” they can get when marketing your account to the insurance community.
Make sure to outline in detail the policies and procedures you have in place to keep metal from getting bent in your flight department. This information will help prove to underwriters you are “lucky” because in fact you truly are that good!