Insurance.....To Be OR Not To Be

There has been a lot of discussion about insurance in general and specifically for SR20’s and 22’s. I was an insurance broker soecializing in aviation (general up airlines) for 25 years and am also a SR20 Position holder.

To get down and dirty about the insurance issue with the real story may answer some of your questions and speculation.

1.There is not enough premium going into the system vs claims getting paid (the system being the domestic and international markets, direct and reinsurance. The real driver of rates is the international airline and product liability markets. In recent years they have been loosing their shirts on claims and have been operating at a loss for years. You can imagine what a Swiss Air MD-11 loss must cost for liability and hull.

  1. Buying split limits i.e. $1,000,000 with a $100,000 sublimit for person or passengers is almost like buying no coverage. In in a court award $100,000 is pocket change. Your exposure to financial disaster is real. You see if you had the financial ability to buy an SR20 or 22 The plaintiff is going to find out and go after you in a big way.

  2. The market conditions are not going to improve in the forseeable future for General and Airline insurance markets. Ther is only about $1.5 Billion in premiums in the market place and there are risks out there that can exceed $1 billion in paid claims and loss reserves (Swiss Air).

  3. It will be more and more difficult for very low time pilots to get insured in aircraft with over 200HP and no instrument ratings also more expensive. Since a good portion of the premium taken in by the insurers is invested to improve their return, the recent down turn in the economy and financial market yeild will equal accelerated increases in premiums and rates.

What are the solutions? Very few… an owners association dedicated insurance program sometimes works but the numbers of Cirrus aircraft are very low to interest an underwriter in a dedicated program. Factory training and yearly recurrency will help but again it is the overall aviation market place that will dictate availability and pricing …not just the individual aircraft and pilot. I will post and ideas or solutions that I may find about and I strongly suggest that you folks out ther continue to communicate about your insurance programs and pricing.

  1. Buying split limits i.e. $1,000,000 with a $100,000 sublimit for person or passengers is almost like buying no coverage.

I see this as one of the dirty little secrets of aviation insurance. It’s also a big reason I dumped my leaseback this year. Nobody is even the least bit interested in smooth limits in the rental market and the exposure is huge. Your just kidding yourself if you think you have any coverage. Even 1 million smooth won’t go very far once the legal machine cranks up on your behind.

There has been a lot of discussion about insurance in general and specifically for SR20’s and 22’s. I was an insurance broker soecializing in aviation (general up airlines) for 25 years and am also a SR20 Position holder.

To get down and dirty about the insurance issue with the real story may answer some of your questions and speculation.

1.There is not enough premium going into the system vs claims getting paid (the system being the domestic and international markets, direct and reinsurance. The real driver of rates is the international airline and product liability markets. In recent years they have been loosing their shirts on claims and have been operating at a loss for years. You can imagine what a Swiss Air MD-11 loss must cost for liability and hull.

  1. Buying split limits i.e. $1,000,000 with a $100,000 sublimit for person or passengers is almost like buying no coverage. In in a court award $100,000 is pocket change. Your exposure to financial disaster is real. You see if you had the financial ability to buy an SR20 or 22 The plaintiff is going to find out and go after you in a big way.
  1. The market conditions are not going to improve in the forseeable future for General and Airline insurance markets. Ther is only about $1.5 Billion in premiums in the market place and there are risks out there that can exceed $1 billion in paid claims and loss reserves (Swiss Air).
  1. It will be more and more difficult for very low time pilots to get insured in aircraft with over 200HP and no instrument ratings also more expensive. Since a good portion of the premium taken in by the insurers is invested to improve their return, the recent down turn in the economy and financial market yeild will equal accelerated increases in premiums and rates.

What are the solutions? Very few… an owners association dedicated insurance program sometimes works but the numbers of Cirrus aircraft are very low to interest an underwriter in a dedicated program. Factory training and yearly recurrency will help but again it is the overall aviation market place that will dictate availability and pricing …not just the individual aircraft and pilot. I will post and ideas or solutions that I may find about and I strongly suggest that you folks out ther continue to communicate about your insurance programs and pricing.

the above is, unfortunately, very accurate and telling. in my own circumstances, insurance availability (both amount and cost) may ultimately be the determining factor in whether or not i actually take delivery of the plane (a 2002 event). i started out with a sale/leaseback 172 with a sizeable smooth limit only to see it whittled down during the past few years. as much as i love flying (and this plane), insurance could ultimately kill the dream.

I’m not familiar with the term smooth limits. Can you help with an “aviation insurance for dummies” answer?

  1. Buying split limits i.e. $1,000,000 with a $100,000 sublimit for person or passengers is almost like buying no coverage.

I see this as one of the dirty little secrets of aviation insurance. It’s also a big reason I dumped my leaseback this year. Nobody is even the least bit interested in smooth limits in the rental market and the exposure is huge. Your just kidding yourself if you think you have any coverage. Even 1 million smooth won’t go very far once the legal machine cranks up on your behind.

I’m not familiar with the term smooth limits. Can you help with an “aviation insurance for dummies” answer?

Let’s say the insurance is, for example, $1,000,000 per occurance, with $100,000 sublimit per person. If you get into an accident and injure two people, the insurance company would only pay up to $100,000 to each of the injured people. The other $800,000 would not be paid.

On the other hand, if you have $1,000,000 “smooth”, meaning no sublimits, and the same scenario occurs, then the insurance company should pay up to $1,000,000 total (split between the people you injured of course).

David’s other point is also well taken – that in today’s environment maybe $1M smooth isn’t even enough…

I’m definitely not an expert on insurance so I’m sure someone will correct me if I’ve got it wrong.

Steve

  1. Buying split limits i.e. $1,000,000 with a $100,000 sublimit for person or passengers is almost like buying no coverage.

I see this as one of the dirty little secrets of aviation insurance. It’s also a big reason I dumped my leaseback this year. Nobody is even the least bit interested in smooth limits in the rental market and the exposure is huge. Your just kidding yourself if you think you have any coverage. Even 1 million smooth won’t go very far once the legal machine cranks up on your behind.

I’m not familiar with the term smooth limits. Can you help with an “aviation insurance for dummies” answer?

Thanks, Walt

Let’s say the insurance is, for example, $1,000,000 per occurance, with $100,000 sublimit per person. If you get into an accident and injure two people, the insurance company would only pay up to $100,000 to each of the injured people. The other $800,000 would not be paid.

On the other hand, if you have $1,000,000 “smooth”, meaning no sublimits, and the same scenario occurs, then the insurance company should pay up to $1,000,000 total (split between the people you injured of course).

David’s other point is also well taken – that in today’s environment maybe $1M smooth isn’t even enough…

I’m definitely not an expert on insurance so I’m sure someone will correct me if I’ve got it wrong.

Steve

  1. Buying split limits i.e. $1,000,000 with a $100,000 sublimit for person or passengers is almost like buying no coverage.

I see this as one of the dirty little secrets of aviation insurance. It’s also a big reason I dumped my leaseback this year. Nobody is even the least bit interested in smooth limits in the rental market and the exposure is huge. Your just kidding yourself if you think you have any coverage. Even 1 million smooth won’t go very far once the legal machine cranks up on your behind.

I’m not familiar with the term smooth limits. Can you help with an “aviation insurance for dummies” answer?

Let’s say the insurance is, for example, $1,000,000 per occurance, with $100,000 sublimit per person. If you get into an accident and injure two people, the insurance company would only pay up to $100,000 to each of the injured people. The other $800,000 would not be paid.

On the other hand, if you have $1,000,000 “smooth”, meaning no sublimits, and the same scenario occurs, then the insurance company should pay up to $1,000,000 total (split between the people you injured of course).

David’s other point is also well taken – that in today’s environment maybe $1M smooth isn’t even enough…

I’m definitely not an expert on insurance so I’m sure someone will correct me if I’ve got it wrong.

Steve

  1. Buying split limits i.e. $1,000,000 with a $100,000 sublimit for person or passengers is almost like buying no coverage.

I see this as one of the dirty little secrets of aviation insurance. It’s also a big reason I dumped my leaseback this year. Nobody is even the least bit interested in smooth limits in the rental market and the exposure is huge. Your just kidding yourself if you think you have any coverage. Even 1 million smooth won’t go very far once the legal machine cranks up on your behind.

I would agree that today one might be well advised to add some supplemental liability. The sad thing is that at least in the State of New York not one company is approved to write additional liability say of 1 million which would then provide 2 million smooth coverage. One company may be approved in 2001 but so far nothing. It really is a sad state of affairs. I would suggest that everyone write AOPA and put some pressure on their own endorsed insurance carrier to write some additional coverage.