Four Keys to Successfully Navigate Aircraft Insurance
Aviation insurance is a commonly misunderstood industry. Consumers who are familiar with purchasing auto, home and even boat insurance, typically expect the same ease and infinite numbers of options when it comes to obtaining an aircraft insurance policy. However, unlike shopping for these general insurance policies, where thousands of brokers and underwriters eagerly anticipate your business, the aviation insurance market is considerably smaller.
The underwriting ‘pool’ for general aviation insurance is anywhere from 12-15 carriers in total depending on the type of aircraft you are purchasing and its asset value. Big players include AIG, Allianz, XL, Global Aerospace, QBE, USAIG and CV Starr Aviation. As the insurance purchaser, you access these underwriting companies through aviation insurance brokers, who shop and obtain policies for the more than 210,000* general aviation aircraft in the U.S.
With a limited number of insurance options, it’s more important than ever to successfully navigate the aircraft insurance purchasing process. Take heed of the following four items to help ensure you are getting the right policy for your aircraft.
1. Select the best broker.
Finding an experienced aviation insurance broker is a critical first step in scoring the most desirable policy. Talk with other pilots about their broker and obtain referrals. Turn to owner/pilot associations such as CJP (Citation Pilots), TBMOPA (TBM), POPA (Pilatus Owners) or MMOPA (Piper PA46 series) for broker options. Or ask your aircraft dealer. Many dealers have preferred brokers who can guide you through the process.
Look for a broker with access to all the general aviation underwriters in the market space, and one that will shop your profile to each of them. Ask the broker upfront if they have a full complement of underwriting contracts. Ask that they put this in writing thus being transparent with you. This will help ensure you have the negotiating power needed to get the best policy at the best price.
When reviewing potential brokers’ backgrounds and expertise, look for experience in the class of aircraft you plan to purchase. If you purchase a Pilatus PC-12, you want to work with a broker who knows turbine aircraft, and more importantly has placed a significant number of Pilatus PC-12 policies. This gives you added leverage. If you select a broker who only shops policies for piston aircraft, he or she may not know where the premiums should fall. Without specific market knowledge for that type of aircraft the broker may not know where the best underwriting option lies. Putting you at a disadvantage.
2. Put your best foot forward.
Shopping your profile to an insurance underwriter is similar to taking a home offer to a seller. Your broker works to show you are a minimal risk and a good “buyer.” Once you select the best broker for your needs, it’s time to ensure you present the best profile picture to the underwriters who will ultimately insure your aircraft and provide liability coverages, which protect you.
“My job as an insurance broker is akin to that of a salesman,” said Tom Hauge of Wings Insurance. “I work to position the buyer in the best possible light to the underwriter. The level of thoroughness achieved through interviews with my clients directly correlates to the quality of the quote.”
Come prepared to give your broker all the information needed to put you in front of an underwriter. Your broker will ask about your:
- Pilot experience (the more detail provided, the better)
- Planned utilization for the aircraft, including estimated annual flight hours, territory you plan to operate and how you will use the aircraft for pleasure or business purposes
- Detailed training plan (if you are transitioning into a higher performance aircraft or turbine transition, this area is particularly important to define)
Your broker will also dig into your use case for the aircraft, including:
- Where you fly
- How many times a year you utilize the aircraft
- Expectations on liability coverages / any third-party passenger exposure
- Where the aircraft is based and how it is secured when finished flying
- And more
3. Strike at the right time.
We’ve all heard the saying “strike while the iron is hot.” This saying holds true in aviation insurance as well. Since insurance underwriters typically only validate quotes for 45-60 days, you don’t want to start too soon, but waiting until the last minute will limit the number of underwriters your broker can connect with on short notice.
Hauge recommends starting to look at insurance four to six weeks out from your acquisition date.
“One of the biggest mistakes I see is buyers who contact a broker when they are still trying to decide what plane to purchase and have three or four different planes in their consideration set,” said Hauge. “I recommend people start by determining the aircraft that meets their mission, know the type of aircraft you will buy, and then contact your broker to look at the specifics for that situation.”
Knowing what aircraft you will purchase and searching for policies that meet your specific needs will help you unearth the best policy options.
Likewise, Hauge advises against waiting until the purchase to shop for insurance. Brokers prefer a minimum of two weeks to put your profile in front of all applicable underwriters. While you can get a policy on shorter notice, chances are your broker will not have had time to shop for the best rates and work with the underwriters to get the most competitive pricing for your policy.
4. Understand your policy and options.
Aviation insurance policies can vary widely. When you get down to the final step of selecting one insurance policy over another, choose the proper policy for broadness of coverage, liability limit needs, checkout or transition requirements and finally pricing.
- Do you plan to dry lease time in the aircraft to a third party? Does the policy cover this use? Can dry leasing be added to the policy?
- What minimum experience requirements do your pilots need to have to be approved by the policy underwriting company? Do all your pilots currently hold these qualifications and experience, and if not, what will be required to have them approved by the insurance underwriting company?
These are just two examples to consider. When you review your policy choices, make sure all your missions/usage, pilots, etc. are covered. Without this knowledge, you could find yourself in an uncovered situation, responsible for a multitude of damages.
With the right broker by your side, and the proper information, timing and knowledge about your policy, you can smoothly navigate the aviation insurance purchasing process and gain a policy that best fits your needs.
For more information on aviation insurance or recommendations on insurance brokers, contact your KCAC sales team member.
* General Aviation Manufacturers Association, 2016 General Aviation Statistical Databook & 2017 Industry Outlook