Aviation policies vary from company to company, and some are much broader tha

The good news about aviation insurance

With jet-A fuel costs reaching record highs, business aircraft owners and their flight departments are feeling a big pinch in their budgets. The good news is that they are receiving some relief from an unlikely source-aircraft-insurance companies. The aviation-insurance industry equivalent of a heavyweight title fight is in full swing, and the big winner is the aircraft owner.

In one corner of the ring are the companies that have written insurance coverage for business aircraft owners for decades: USAIG and Global Aerospace, which have been in the aviation arena since 1928 and 1929, respectively; and AIG Aviation, which began in 1947. Long term, these three companies have been the field's 800-pound gorillas.

In the opposite corner of the ring are the challengers that have begun offering business jet coverage in just the last year or two. They include Allianz Aviation (a division of the German insurance giant Allianz Group), Starr Aviation (Chubb Group) and Travelers Aviation (part of the red-umbrella company).

The challengers are stout, well-capitalized companies with plenty of muscle (read "capacity"), making this a very even fight. This is a radical departure from past insurance cycles, when carriers that chose to enter the aviation segment have been much smaller and less well capitalized and lacked the horsepower to write the high-coverage-limit policies demanded by jet operators.

Why the change? Post 9/11, insurance premiums for business jets skyrocketed. Coverage for War Risk perils was canceled and then re-offered at greatly increased pricing. Over the following five years, rates doubled and in some cases even tripled, while corresponding coverage limits were severely restricted.

But a few trends developed that ensured the status quo would not be sustained. The stock market recovered nicely from the effects of the terrorist attacks. Meanwhile, the safety record that business jets have enjoyed has continued to improve, thanks to increased pilot training, more advanced avionics and safety initiatives promoted by organizations such as the National Business Aviation Association and the National Air Transportation Association. The result has been healthy profits for the incumbent insurance carriers. Add to the mix the very light jet revolution and you have a highly attractive environment for insurance companies that had previously avoided writing business aviation coverage.

Enticements To Switch
So what roadblocks must these firms overcome to gain market share? Clients of the incumbent insurers aren't going to end relationships they have had for years without good reason. To get your attention, the newcomers need to offer much lower premiums than you're currently paying-at least 20 to 30 percent lower and possibly even less. That's exactly what some companies are doing. The incumbents briefly adopted the "rope-a-dope" technique, but then counter-attacked with their own rate reductions, matching the challengers blow for blow.

How can you tell whether the lower-priced policies are really bargains? It's not easy. Unlike other lines of property/ casualty insurance, which are written on standard forms, aviation policies vary from company to company, and some are much broader than others. This makes apples-to-apples comparisons extremely difficult.

Granted, some of the newcomer firms have produced policy forms that are as broad as the incumbents'. In many instances, they offer increased coverage limits and add
coverage they were previously reluctant to include-such as charter-referral liability, garage-keepers liability and on-premises auto liability-at no additional charge. The incumbents, however, have come roaring back with their own additional coverage offerings and have in some cases created coverage never before offered.

Claims Performance
Another battleground between the established firms and the challengers concerns claims performance. An insurance contract is simply a promise to pay and you can't determine what you really purchased-claims performance-until after you have the loss. However, one historically accurate measure of an insurance company's claims performance is how that company has handled losses in the past.

Some insurers, fairly or unfairly, have developed a reputation for playing hardball with claims, while others are seen as finding a way to pay claims even when coverage is technically questionable. A big hurdle for the challengers is that potential clients can't review their performance on past claims because these companies are new to the aviation arena. (Several have written aviation insurance as a line in the past, but only indirectly as members of a "pool" insurance arrangement.)

The established aviation insurers have pointed to this lack of track records as ample reason to stay with them rather than "chancing it" by signing on with one of the challengers. The challengers, though, have countered with a strong defense: While companies like Allianz, Chubb and Travelers may not have track records in aviation, they all have good reputations in other types of insurance, so one would expect they would deliver the same claims performance in the aviation line. 

How many rounds the fight will last is anyone's guess, but with strong companies on both sides, you won't see a knockout. Both the long-time insurers and the newcomers can argue compellingly that their programs offer an excellent fit for your operation.

Be that as it may, you should never move your policy from one company to another without careful thought. Working closely with an experienced, trusted broker who has the necessary relationships with underwriters will prove invaluable in your decision-making process. In the end, you're the ultimate judge in this fight; you must decide the winner for your own insurance dollar.

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