Insurance 101: Shop for a broker, not for a quote
By John “JT” Helms
9/14/2001
When insurance rates go up, airplane owners begin to wonder if they are getting a fair deal from their broker. When they try to “shop,” they get frustrated because they don’t know who’s who in the aviation insurance industry, and they don’t understand industry procedures.
For many airplane owners, shopping for aviation insurance must seem like dealing with people from a distant country or even outer space. This article should illuminate a little bit about your brokerÂ’s job and how the industry works. Hopefully, it will provide insight, spark some questions for you to ask your broker, and help you get the quote thatÂ’s best suited for your needs.
First, there are two types of aviation insurers.
Direct-writer insurance companies provide direct individual coverage through employee sales representatives.
Most insurance companies, however, use agents or brokers who handle many of the functions involved with providing coverage.
This article will mainly cover agents and brokers, but you should expect many of the same services from a direct writer.
How much do you know about your broker? You should ask questions about his services and which companies he uses.
Among other services, a broker should advise you on what type of coverage you may need, request and compare quotes from all the appropriate companies, explain your policy to you, update your policy (i.e., add or delete pilots and aircraft), keep records of your accounts and transactions, and initiate or assist you with claims.
As for the companies your broker uses, aviation offers few when compared to most other types of insurance. My firm, Nation Air Insurance Agencies, deals with only about 10 companies, all of which are highly rated by A.M. Best.
“Best quotes” may mean different things to different people. Policies come up for renewal annually. One of your broker’s jobs is to compare and contrast quotes each year. In these times when rates are increasing, many people get hung up on price. There are several other parts to your policy, however, that you may want to consider. One or more of the following questions may help you decide that a slightly more expensive premium is worthwhile:
What are the deductibles?
What are the Open Pilot Warranty requirements?
What is the A.M. Best rating of the insurance company? (Excellent or Superior, sometimes referred to as A or A+, are the preferable ratings.)
What is the companyÂ’s reputation for claim service?
I am planning a trip to . . . Is that territory covered in the policy?
If you are unhappy with the service you receive, you can change brokers. Some people fear that they will get locked in to one broker or blocked from dealing with another. Most insurance companies do use a clearance system when a broker requests a quote. Your name, your airplaneÂ’s N-number, or both, are blocked for as long as four months. So if you call a second broker and ask him to request a quote, that company will not provide one. Insurance companies do this for a couple of reasons; both relate to keeping down costs.
First, most of the companies have offices around the country, or at least many underwriters in the same office. The companies do not wish to compete with their own quotes and lower the premiums they are offering.
Second, the company does not want to have to underwrite the same account more than once per year. This saves them time, sometimes referred to as money, and they can forecast how many accounts they will have to quote each year. (There is a finite number of airplanes, airports and other accounts out there.)
The underwriting guidelines that the companies use are the same for all brokers. If you are unhappy with your broker, you can assign another one to handle your account by signing a broker of record letter (BOR, also known as an AOR or agent of record). However, if a company has already quoted your insurance, the quote will remain the same when transferred to the new broker. This is typically done at or near the renewal date of your insurance.
Shop for an insurance broker, not for a quote. Many airplane owners go to way too much trouble “shopping their insurance” without considering the benefits. Give a good broker up-to-date information, and he will give you the best options for making an informed decision. Don’t waste your time by doing work that you are already paying your broker to do.
John “JT” Helms is the branch manager of the Pleasure and Business office of NationAir Insurance Agencies, in St. Louis, Missouri. His office specializes in light aircraft insurance. He can be contacted at 877-475-5860 or jthelms@nationair.com. Nation Air’s website is at NationAir.com.