Silly Insurance Questions ‘Do I really need an Aviation Insurance Broker?’, and similar… A thoughtful review of the basics in aviation insurance makes good sense. No question is trivial when the consequences of a mistake are huge, observes Stuart Hope.
Previously we discussed a large claim that was denied because the co-pilot did not meet the insurance policy’s pilot requirements. The policy was written through a general lines insurance broker [the holding broker], who in turn had sub-brokered the account with another insurance broker who handled aviation, but not as a specialty. This sub-brokerage arrangement normally is practiced so the holding broker can earn a commission even though he or she does not have expertise in aviation insurance. This process is very dangerous – something akin to the “telephone game” we all played as kids. By the time the message gets back to the originator, it can be completely different than when it started.
The most important insurance decision you will make is the selection of your insurance broker. If you do nothing else, getting this step right will yield the greatest return and is considered a “best practice” by financial and legal experts in the aviation industry. There are other important issues, however, which I present for your review.
Should your general lines insurance broker handle an aviation transaction? A general lines broker is probably very good at taking care of your overall insurance needs. But would you hire a general practitioner if you required heart surgery? 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 company to company (and some policies are MUCH broader than others). This fact makes apples-to-apples comparisons extremely difficult.
A good aviation insurance broker can help you find the policy that best fits your operation. 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 when to negotiate – and how hard. Furthermore, they are likely to secure a lower premium, broader policy terms, or ancillary coverages for their client.
If your local broker is sub-brokering your aviation policy through a wholesaler, be careful. The more forks in the pie, the more chance an important detail will get missed. You will not save money on commissions. You will pay the same commission either to your local agent or the best qualified aviation insurance broker, regardless of where you place your business.
How do I find the best aviation insurance broker? Credentials, credentials, credentials: If you needed Lasik eye surgery, would you pick an eye surgeon based on a marketing promotion? Your 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. Ask operators of similar aircraft which 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 really helps to understand the language. Other information can be gleaned from the broker’s website: how long has the firm been in business, how many other qualified brokers work there in case you have an important matter 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 client that has chosen them. If there are top caliber firms on the list, you can assume these companies are with the broker for good reason. Does the broker promote safety and risk management solutions as a way to complement insurance, or is it just about the money? Membership and participation in professional aviation associations such as NBAA, NATA and HAI provide vital sources of current information that enhance the ability of the broker handling your account.
Don’t call several Aviation Insurance Brokers to get competitive bids. While requesting competitive bids is effective with many other products, it’s normally counterproductive here because the aviation insurance market is very small. Unlike auto insurance where there are over 500 insurance companies writing policies, only 20 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 broker is simply a waste of your time.