AIN’s Corporate Aviation Leadership Summit (CALS) West brought together business aviation leaders to examine and discuss some of the most pressing issues facing the industries. Topics addressed during the gathering in Scottsdale, Arizona, included insurance & risk, managing generational differences, hiring & compensation, legal matters, skills retention, safety, training and FBO surcharges.

Insurance can be seen as something of a necessary evil, in part fuelled by perception issues stemming from stereotypes amplified on TV about insurance companies, agents, underwriters, and claims adjustors. Our round table discussion acknowledged that in the business aviation industry, insurance can be a significant value proposition and that there is a lot more to it than simply buying aircraft hull and insurance cover.

Here are some of the main takeaways from the roundtable session, which was led by Brint Smith with Aviation Alliant Insurance Services:

See your insurance company as your partner and not just a vendor to be managed or replaced.

With business aviation insurance, not only can get what you need but also may grow into at least liking your provider. It comes down to establishing the right relationships, which hinge on factors such your broker is communicating effectively with you and on your behalf. 

It’s about more than just price. If it suits you, underwriters and claims adjusters can become key business partners in any or all of the following ways:

• Looking for ways to insure risk/cover losses and not exclude/deny them
• Acting as a sounding board for ideas like for transitioning pilots, new business ventures and specific contractual engagements
• Can help you value your safety and best practices
• Provide a guide for supplemental lift feedback
• Act as a critically important partner to your enterprise resource plan and its exercise
• Writing checks if a claim occurs

Knowing where to find the value in insurance

For instance, war risk is possibly one of the most misunderstood insurance provisions. No aircraft owner has plans to go into war let alone fly anywhere near a war. It’s often been called a misnomer, but the problem is the name only accounts for 1/6th of the provision’s benefits. Here’s what the package of coverage the war risk provision provides:

1. Sabotage/malicious acts
2. Riots/civil commotion/labor disturbances
3. Confiscation/nationalization
4. Hi-jacking
5. Terrorism
6. War 

As you can see, the list of covered items is expansive. However, your insurance policy won’t cover any of these, unless you buy the war risk package. The concern is that aircraft owners still may not value the insurance package’s offerings because a U.S. domestic operator may simply not see these topics as true risks of loss because airports have fencing, 24-hour security, cameras and hangar doors can be locked. And, some see terrorism or hi-jacking as purely international risks. Unfortunately, recent protests in Europe and here have cast a light upon previously unforeseen value of the package for aircraft operators to cover risk such as sabotage and other malicious acts. This type of package could cost 10-15% of your policy’s annual premium, but the basket of benefits should not be ignored. 

What is the right way to work with a broker?

Several CALS West attendees told me their broker either recently retired or waits until the 11th hour to do their job. If an aircraft owner wants to review or change their insurance representation, what’s the best way to do so? Here’s a list of things to consider:

• You might have the right insurance company, but the wrong insurance broker.
• Brokers come and go but owners must continue to buy insurance.
• The core business aviation insurance market consists of about ten participants nationally in the U.S. because depending upon your aircraft age, type and usage, some insurers may or may not be interested or competitive.
• If you can get me a better quote, you’re hired.

With such a small national marketplace in the U.S., the ability of more than one broker to get you the best quote is actually a difficult task. The first thing to understand is the insurance companies only recognize one broker at a time and that is the first broker that contacts them about your operation. This doesn’t mean that broker is the best one for you or even truly understands your operation and its best attributes.

Brokers may tout their relationship with one or more insurance companies because of their premium volume, experience or individual relationships. These are important points but they’re not the only points to consider. Don’t forget that your insurance needs are about you and not the broker or underwriter. The broker, who is or will represent you in the marketplace, should begin and finish their work on that premise. 

A broker willing to race to be first with one or more insurance companies may ultimately only make you look bad. Being in a hurry can result in the delivery of the wrong information or incomplete information about you and your needs which may impact you over the long term. If you hire more than one broker at a time and more than one delivers a proposal to you, you are now responsible for determining which Insurer to select. You now must have the knowledge, expertise and experience to know which Insurer is best for you. Price is one variable but what about the policy contract, claims service or your risk management needs. 

To avoid this risk, only one broker should represent you will all insurers. This approach will ensure the best result if the broker has gone through the following steps:

• Reviews your current insurance policy
• Interviews the insurance buyer
• Makes recommendations
• Benchmarks the coverage with similar operations
• Provides a broker of record letter
• Handles full marketing of the policy
• Leverages the marketplace to ensure the right outcome

All of the above are important points, but it is the last one that ensures the best result as a broker who has developed the right specifications with you can now pitch one insurer against the other to ensure your needs are met.