Despite a market that’s become more favorable to flight schools, commercial aircraft insurance can be a drag on a school’s bottom line. Understand the underwriter’s formula and the ways in which a school can save money start to become clear.
Jon Harden, president of Aviation Insurance Resources, said the basic premium is based on the liability limits, hull value, type of aircraft, and type of use.
- Liability limits: Because liability is the biggest potential payout for the underwriter, having more people on the airplane increases the risk. To that end, a typical four-seat trainer will have a liability premium of around 20 percent more than a two-seat trainer.
- Hull value: Obviously a more expensive aircraft has to be insured for more, and thus costs more in the premium. But it goes beyond straight dollar figures. Harden said a larger fleet can actually cost less per aircraft because the school has more buying power and more leverage.
- Type of aircraft: Just like in personal and recreational aviation insurance coverage, the type of aircraft and the aircraft’s accident history have an impact on rate, as does its category and class. Tailwheels cost more, as do seaplanes, twins, and so on. Making sure the aircraft fits the mission is also important. That means using a Bonanza as a primary trainer is probably going to give the company pause.
- Type of use: It may be inconvenient to students and turn away some business, restricting an airplane to dual only or sightseeing and dual only can reduce premiums, although maybe not enough to justify the restriction.
AOPA Insurance Agency President Janet Bressler, adds that loss history, location, and even experience of your CFIs matter can also matter. Here are other ways to reduce premiums:
- Higher renter minimums: Harden said higher pilot requirements for a rental can save about 10 percent.
- Safety record: Safety pays. Most companies are offering a claims-free discount.
- Using the right broker: More than anything else, both Bressler and Harden said that it pays to go to an insurance agency who specializes in aviation. Because aviation has become a market-based, and not underwriter-based, Harden said aviation brokers know the limited number of brokers and can work to get the best deal. He recommends finding a broker you trust in aviation and going with that company.
- Get personal: Bressler said it helps for the broker and underwriter to have a good idea of the safety culture at your school. “Insist on a face-to-face ongoing relationship with your insurance company (in collaboration with your broker) – invite them out for a site visit – educate them and show off all the safety-minded aspects and quality controls throughout your operations,” she said.
- Get organized: Standardized checkouts, rental agreements, additional currency requirements, and anything else that can be documented helps a school’s case, according to Harden. Documentation will help an underwriter in case of a claim, whereas he says they simply have to write a check without it. If you don’t think your school is getting a good rate, presenting your case with documentation may be one way to get it down.
Interestingly, one area where buyers think they can traditionally lower premiums is unavailable to flight schools. According to Harden underwriters aren’t budging on deductibles, instead simply offering one (usually $1,000 or $2,500) and leaving it closed for negotiation. Bressler counters that some wiggle room may be available, but it’s unlikely to save the school money in the long run.
Shopping around is another traditionally smart way to save money that won’t help you much in commercial aviation insurance. The aviation underwriters will only quote a policy to one broker at a time, effectively locking out other brokers unless you release them. That means not only will you likely not get a better rate by shopping aviation brokers, Harden says it may hurt you if the underwriters see you jumping from broker to broker in an effort to save money. Recognizing it’s his business, Harden says the best thing to do is simply pick the broker that gives you the best service and who you think will get you the best deal and let them work through the range of underwriters.