The Insurance Game

[n86121]

Caught in a last-minute hurricane (yes, winds typical of Hatteras NC, forecast peak around 35 knots, became a level II suddenly within two hours one morning), I had a loss last year.

I was ticked off that the underwriter, with whom I'd been a predictable customer for what, 10 years? jumped my deductible to $5,000 and my premium to $4,000.

Having owned a variety of aircraft for over 20 years, aircraft insurance has always been 'rigged.' Imagine any other industry where calling one broker would automatically preclude you from geting quotes from any other sources, in effect locking out any open-market competition?

Under the guise of 'maintaining order in the market.'

HA!

This year, when AIG withdrew a very good quote from a second broker, because AIG hadn't quoted through the first (meaing their broker fees are more important than your business), I finally got really pissed.

The New York Attorney General is an old friend from college, and I'd heard they were going after insurance abuse. So I sent him a note. We've talked since.

What they found in other 'markets' was that brokers would often only pass along the quotes that gave the best commissions.

BROKER - "I'm sorry, but XYZ refused to quote, so the best I could get you was $YYY." Or "XYZ's quote was even higher, so I suggest ABC"

(Which, by the way, typically pays a commision to the broker for collecting some simple information of 20% of your premium. They call it 'earned premium, should you cancel early, which is a nonsensical word for what the BROKER earned).

Or brokers would rig the pricing by telling more competitive underwriters that "the insurance had already been bound by another underwriter." Thus guarnateeing no quote.

So, in disgust with the current setup, having finallyexperienced it to a level of intolerance, and formerly familiar with some of the principals behind the early AVEMCO, this year I bound with AVEMCO, which is a direct underwriter. No brokers. No BS.

Historically, AVEMCO was intentionally non-competitive with anything other than plain-vanilla aircraft. In fact, often, when you bound with a 'competing' underwriter to AVEMCO, the other underwriter was often a subsidiary of AVEMCO; merely offering different insurance products into different markets.

The mafia has a name for this, I think...?

So my advice, if going through ANY broker, is to INSIST upon seeing the WRITTEN quotes from the underwriters they've quoted, includnig any turn downs.

Sunlight makes the BS go away.

Furthermore, since brokers may not always have (commission) 'relationships' with everyone, even if #1 broker 'locks you out,' try to get quotes from the others.

With AVEMCO on an $80k hull I'm running $3,000/year. With higher time in the aircraft they offer increased sub-limits (100-300k) at 'reasonable' rates.

They also bill quarterly, which helps to take the 'sting' out of my 4th quarter cumulative tax and insurance hits.

I don't think that AVEMCO has suddenly gotten aggressive, I thinkthe rest of the industry has simply got equally greedy; making AVEMCO's rates more competitive.

Good hunting.

David Wartofsky
bigcheese@potomac-airfield.com

[SkyKing]

How true... OH, HOW TRUE!

Gee, perhaps a little more sunlight would help. Could Scotty "Sky" Smith please step up to the microphone and explain further the 'broker effect' on rates?

We're waiting.....

SkyKing

[big al 08]

ha, ha, ha very funny skyking! maybe you can fill for david chapell (?) as he is missing. i knew this post would get your juices flowing, you're the man.

big al and hillery in 08

[SkyKing]

Hey Big Al,

I think I'm missing something... who is David Chapell? Is he another insurance broker helping to build even larger black skyscrapers?

Big Cheese only missed it by one word... it's not a game! It's a RACKET!

SkyKing

[big al 08]

it's a joke and he is a comic on comedy central who went missing. my retort was only in humor, i subscribe to you view on insurance. anyone who would do the math would sefl insure. 3k plus 5k ded = 8k or 10% not a good deal if you maintain profeciency and highly maintian the a/c the odds are very little your are going to smack it in and if you do a total most likely you will be too, so it does not matter. the ins com's when push comes to shove will only pay maybe out 50% -deductable, so go back and double the numbers. when they were insuring 337's for 1600.00 was the risk any greater? no!!! it's never been a good deal and will never be. baja bush pilots assoc. sells mex iliab ins for 100 and scott sells it for 500, duh (ripped once but not twice)
big al and hillery in 08

[Kevin McDonnell]

Dave Chapelle:

"The terror alert level has been raised to eggshell white on a Cadillac."

http://www.comedycentral.com/tv_shows/chappellesshow/

[WebMaster]

David, a little off topic, but did the recent sight seeing trip by the 152 drivers affect your operations at the time?

[Jerry De Santis]

Hey Bigcheese, I say AMEN to you insurance posting....AMEN!!!

It is a sermon worth reading.

Cheers
Jerry

[Don Hickman]

A most interesting post by bigcheese but I still don't begin to understand this insurance business. The company I am with had to pay out some big bucks two years ago when I had my little fender-bender down here in Mexico. I was expecting a big premium increase the following year but it didn't happen. However, this year they caught up with me and doubled the premium. I was complaining to a friend who is a local insurance agent and he said "let me see what I can do." He came back in a week with a quote for $3,000 less FROM THE SAME COMPANY! So I took it. Go figure.

[WebMaster]

My insurance was up for renewal recently, and I had relocated my plane from the big paved airport, which has a 5K, 8K, and 10K runways, to a little grass strip, which is officially 2700 feet long. I got my first renewal quote, which I was very happy with, and then they all caught on to the fact that the airport had changed. Two (2) changed their minds, no quote, and one, the carrier that I had was considering no quote. I wrote a long letter, attached a couple of pictures, and they came back with a quote. Substantial increase. I talked with my agent, and like Don, got it reduced to almost what was originally offered.
I thought it was quite fine.