Insurance creep

[Immelman]

44 minutes ago, Parker_Woodruff said:

Current stats within my agency show about 1/40 airplanes I insure experiences a hull claim - and my agency’s loss ratio (in dollars) is much better than most agencies - I’m certain of that from my past experience as an underwriter.

Parker, is that 1 in 40 per year?

[MikeOH]

6 hours ago, Missile=Awesome said:

How is this not Capitalism Mike?  There were massive reinsurance losses that forced some out of the market and forced increased costs that are passed on to the consumer.  Seems pretty “classic” to me.  You imply that insurance carriers and Capitalism is “all about greed”...It is about supply and demand and having a product or service that is needed/desired.  You can price based on supply and demand AND ultimately competition.  What am I missing?

I have two issues with this debacle that bother me:

First, is with how 'broad' the market pool really is, not with capitalism itself.  Namely, many here rant because WE as GA pilots keep doing the same dumb things that affect all of our rates.  Increases to cover those type of increases are logical, even expected, and historically rate increases have reflected that.  I suspect I'm not the only one here who, in their wildest imagination, thought we were in the same "pool" with Boeing!  As in, we get to help clean up THEIR mess!  I didn't know I was signing up for THAT!  I'll bet a whole lot of other GA pilots weren't aware of that exposure, either.

Sure, you can gloat that was my ignorance if it makes you feel superior. I don't care.

The second problem I have is that we are PAYING the insurance companies to take on a risk based on THEIR actuarial data of risk...when a nightmare like the BOEING MAX happens they should suck it up, NOT run out and MAKE us pay for their underestimate of risk.  I.e., quite literally get their profit back AFTER THE FACT!  When a company screws up they SHOULD go out of business; that, too, is capitalism.  Why should another market bail them out?

You, I suspect, view ALL of aviation from a hang glider the A380 to be our insurance "pool." I, emphatically, do NOT.

Put it this way, would you be okay if your HOME insurance went up by 40% to pay for the BOEING MAX?  It is not inconceivable that some higher level reinsurer is involved in other markets besides aviation.  Would you still be crying "classic capitalism?". And, happily pay since you 'want them to be around for you?"

Edited October 3, 2020 by MikeOH

[MikeOH]

5 hours ago, Parker_Woodruff said:

The passengers were the small bit. The Grounding Liability claims from all the operators for their unairworthy planes were the biggest segment of this whole deal.

Geez!  Never thought about THAT!  Thanks for the education.

[Missile=Awesome]

1 hour ago, MikeOH said:

I have two issues with this debacle that bother me:

First, is with how 'broad' the market pool really is, not with capitalism itself.  Namely, many here rant because WE as GA pilots keep doing the same dumb things that affect all of our rates.  Increases to cover those type of increases are logical, even expected, and historically rate increases have reflected that.  I suspect I'm not the only one here who, in their wildest imagination, thought we were in the same "pool" with Boeing!  As in, we get to help clean up THEIR mess!  I didn't know I was signing up for THAT!  I'll bet a whole lot of other GA pilots weren't aware of that exposure, either.

Sure, you can gloat that was my ignorance if it makes you feel superior. I don't care.

The second problem I have is that we are PAYING the insurance companies to take on a risk based on THEIR actuarial data of risk...when a nightmare like the BOEING MAX happens they should suck it up, NOT run out and MAKE us pay for their underestimate of risk.  I.e., quite literally get their profit back AFTER THE FACT!  When a company screws up they SHOULD go out of business; that, too, is capitalism.  Why should another market bail them out?

You, I suspect, view ALL of aviation from a hang glider the A380 to be our insurance "pool." I, emphatically, do NOT.

Put it this way, would you be okay if your HOME insurance went up by 40% to pay for the BOEING MAX?  It is not inconceivable that some higher level reinsurer is involved in other markets besides aviation.  Would you still be crying "classic capitalism?". And, happily pay since you 'want them to be around for you?"

I agree with one point: There should be NO too big to fail. GM, Chrysler, New York, California and any insurance company or airline OR Boeing should file for bankruptcy if they make poor decisions. Gloat?  Why would I do that?

[Missile=Awesome]

And ESPECIALLY AIG

[Parker_Woodruff]

6 hours ago, Immelman said:

Parker, is that 1 in 40 per year?

This is for the previous 12 calendar months for aircraft policies of all insureds, including those who have not been with me for a full year.

This excludes shop claims where physical damage was done to a plane due to improper maintenance or due to ground handling of an aircraft.

Being a growing agency where a high percentage of the airplanes I insure for the previous year haven't been with me for a full year, I think the true number is probably closer to 1/35 planes which will have a first-party claim in a given year (for my agency).  I suspect many agencies have claims on 4-5% of aircraft they insure per year.  It is true - different agencies attract more and less risky clients and subsequently experience different loss ratios.  I could prove that back when I was an underwriter.

This is something I have been able to track now that I upgraded agency management systems and will be sure to continually post to MooneySpace.

[Parker_Woodruff]

1 hour ago, MikeOH said:

 

The second problem I have is that we are PAYING the insurance companies to take on a risk based on THEIR actuarial data of risk...when a nightmare like the BOEING MAX happens they should suck it up, NOT run out and MAKE us pay for their underestimate of risk.  

 

What if I told you light, personal use aircraft typically have the worst loss ratio of all lines of business and the other lines of business subsidize light GA which was truly a loss leader? 

At some point, the buckets where we hope to allocate our risk get muddled.

[Davidv]

8 minutes ago, Parker_Woodruff said:

This is for the previous 12 calendar months for aircraft policies of all insureds, including those who have not been with me for a full year.

This excludes shop claims where physical damage was done to a plane due to improper maintenance or due to ground handling of an aircraft.

Being a growing agency where a high percentage of the airplanes I insure for the previous year haven't been with me for a full year, I think the true number is probably closer to 1/35 planes which will have a first-party claim in a given year.

This is something I have been able to track now that I upgraded agency management systems and will be sure to continually post to MooneySpace.

Thanks, very interesting.  If you can tell us, any feel for the size of the average claim? 

[Larry]

Parker -

Why not have a higher deductible for gear up, let's say 5-10K, no matter the cause.  The owner can opt in for a lower price.  Most auto and home policies have various deductibles.  Just offer me one.  For the right price, it would be worth it and it would make owners triple check their gear if they knew that they were on the hook for 10K.  

[Parker_Woodruff]

Just now, Davidv said:

Thanks, very interesting.  If you can tell us, any feel for the size of the average claim? 

Across my book of piston aircraft, it appears hull claims are coming in at an average of around $52,000.  Median claim is in the low-mid $60,000s.  These numbers are before deductibles which, in this data, range from $0 to 2.5% of the aircraft's insured value.

[Parker_Woodruff]

5 minutes ago, Larry said:

Parker -

Why not have a higher deductible for gear up, let's say 5-10K, no matter the cause.  The owner can opt in for a lower price.  Most auto and home policies have various deductibles.  Just offer me one.  For the right price, it would be worth it and it would make owners triple check their gear if they knew that they were on the hook for 10K.  

At least two insurance carriers offer this, but they also limit cosmetic hail claims to 10% of the aircraft's value.  There is no limit that the factory has set for hail damage depth upon which would cause the airplane to be unairworthy.  This means that almost any aluminum damage to your Mooney is cosmetic.  You might end up with some new golf ball technology and a settlement check for 10% of your agreed value.

[MikeOH]

20 minutes ago, Parker_Woodruff said:

What if I told you light, personal use aircraft typically have the worst loss ratio of all lines of business and the other lines of business subsidize light GA which was truly a loss leader? 

At some point, the buckets where we hope to allocate our risk get muddled.

Well, I had someone once tell me that, "you can't eat a percent.". It's the real dollar payout that counts.  I have no doubt we have the worst loss ratio percentage.  But compared to the magnitude of the claims paid out in other aviation markets, I suspect ours are a drop in the bucket.

The idea that our whole light GA insurance market wouldn't even exist without outside subsidy doesn't pass the sniff test.

[Parker_Woodruff]

2 minutes ago, MikeOH said:

 

The idea that our whole light GA insurance market wouldn't even exist without outside subsidy doesn't pass the sniff test.

You could, in theory.  But you'd lose some other efficiencies and I imagine rates would have to go up substantially.

[MikeOH]

4 minutes ago, 1980Mooney said:

As I suspected...commercial, air taxi and business jet/TP are squeezed on costs all around and are tired of subsidizing what they see as as careless and unprofessional GA losses and claims.... saying "no more".

Classic capitalism at work.

 BTW - let's not forget just 3 years ago these same groups said they were tired of subsidizing nationwide Air Traffic Control for GA.  I suspect those fees will be coming to GA as the airlines drown in losses.

Oh, puuhhleese!  After decades "they" are fed up and have banded together to say,"no more! Stick it to light GA!" and pressured the insurance industry to raise our premiums by 40% in a single year.  Yeah, that's way more believable than we're paying for the BOEING MAX losses from a year ago <sarcasm>

I do agree 100% with your second point; "they" have been pressuring Congress for years and after these China virus losses you may well be right that user fees are now a near certainty.

[MikeOH]

6 minutes ago, Parker_Woodruff said:

You could, in theory.  But you'd lose some other efficiencies and I imagine rates would have to go up substantially.

Hmm, we may be hung up the definition of 'subsidy.'. To me, it's an industry that cannot survive without outside 'donations' from, say, the government.

If you are referring to reinsurers that allow individual carriers to survive rare, out-of-norm, losses, then I agree.  But, that's not a subsidy to me, anyway.

[Parker_Woodruff]

Loss Ratios the last 5 years:

Piston GA - money loser as a percentage, but not a lot lost in terms of dollars

Agricultural aircraft - money loser for most carriers.

Pro flown turbine aircraft - very profitable for many carriers.  Unprofitable for a few.

Owner flown turbine aircraft - In general: Money loser

Airlines - trading dollars with the insurance companies while the insurance companies hope for no fatal accidents.  Typical attritional losses are about the same as the premium they pay.

Manufactured Products liability - small manufacturers (subcontractors to the OEMs): Very profitable

Manufactured Products liability - OEMs: Some pretty bad losses.

On-Airport General Liability - high loss ratios, in general.

[MikeOH]

17 minutes ago, Parker_Woodruff said:

Loss Ratios the last 5 years:

Piston GA - money loser as a percentage, but not a lot lost in terms of dollars

Agricultural aircraft - money loser for most carriers.

Pro flown turbine aircraft - very profitable for many carriers.  Unprofitable for a few.

Owner flown turbine aircraft - In general: Money loser

Airlines - trading dollars with the insurance companies while the insurance companies hope for no fatal accidents.  Typical attritional losses are about the same as the premium they pay.

Manufactured Products liability - small manufacturers (subcontractors to the OEMs): Very profitable

Manufactured Products liability - OEMs: Some pretty bad losses.

On-Airport General Liability - high loss ratios, in general.

Damn!

Looks like they should just do PL and pro turbine!  Every other market is a loser....just surprised it took multiple decades to figure out they needed to raise premiums 40% to make it work;)

[MikeOH]

Just now, 1980Mooney said:

I am curious....do you also feel the same about Boeing's Foreflight & Jeppesen, Garmin, Seattle Avionics, etc. or whatever brand is driving your avionics?  Do you also expect them to share the costs of their software or data in order to "EXPLAIN" their ridiculously high prices? 

I bet the incremental cost of their data and software updates are low. That would also imply they are "SCREWING us simply because they can" as you phrased it.

Classic capitalism at work...

Not at all.  No question they are 'overpriced' but they ALWAYS have been.  Classic capitalism and no real competitors.  Buy, or not.  My plane came with a 430W so I bend over and take the subscription price because I want to fly IFR.  But, no way am I spending another dime on Big G  glass avionics; my six pack is just fine, thank you.

We keep going back and forth on this...it's the SUDDEN and EXTREME price hike in our insurance premiums that I maintain is NOT 'classic capitalism.'.   Yeah, I get it, you think we light GA pilots paying for BOEING's losses is still 'classic capitalism.'. I don't.

We need to move on; neither one of us is going to convince the other.

[BKlott]

The Aircraft Insurance premium increases are significant but there are a couple of other insurance related issues which concern me and may also impact the affordability of flying. What is going to happen to Homeowners Insurance premiums as a result of the massive fires out west and what about Health Insurance premiums in the wake of COVID-19?

Those two things keep me up at night.

[daytonabch04]

9 hours ago, Jim Peace said:

I don't like the gear up exclusion idea....what if the gear up landing was not my fault, my plane has had a lot of annuals and work done by MSC's, lots of stuff could not be right.....a bit of sarcasm but unfortunately the truth...A MSC recently messed up my gear pretty bad, had to have an old school mechanic fix their crap....

I just renewed....I was told if it were just me for my 1964 M20C at 75k hull that it would be 1400 a year...

But I have a couple low timers as named pilots that I pay for (my way of giving back)....total came out to 2760 for the year and they can still be subrogated.....and probably would be in todays environment.

I have 17000 total pro pilot, 50 years old etc....

I would like to have something larger and faster in the future but not at these rates.....

something has to give....

If the price of new airplanes does not kill off GA the insurance part if it will.....

 

 

What MSC messed your gear up?

[Jim Peace]

17 minutes ago, daytonabch04 said:

What MSC messed your gear up?

private message being sent

[Parker_Woodruff]

10 hours ago, Jim Peace said:

 

I would like to have something larger and faster in the future but not at these rates.....

something has to give....

If the price of new airplanes does not kill off GA the insurance part if it will.....

 

 

Have you got a quote for what you want?  You may be surprised to find it's not as bad as you think...

[Jim Peace]

Just now, Parker_Woodruff said:

Have you got a quote for what you want?  You may be surprised...

I just bound with IAT....good for a year....

I changed brokers this year after 6 years...with an apples to apples comparison my old broker wanted 400 dollars more for same coverage with same underwriter...I called them and told them about the other quote I got and wouldn't you know all of a sudden they matched it dollar for dollar....so I dropped them and went with the company that gave me the lower quote to begin with.....

I don't like the games you guys play, it was the one with the lower quote who explained to me that my named pilots all these years could be subrogated...learned a lot and they earned my business.....

[Parker_Woodruff]

1 minute ago, Jim Peace said:

I just bound with IAT....good for a year....

I changed brokers this year after 6 years...with an apples to apples comparison my old broker wanted 400 dollars more for same coverage with same underwriter...I called them and told them about the other quote I got and wouldn't you know all of a sudden they matched it dollar for dollar....so I dropped them and went with the company that gave me the lower quote to begin with.....

I don't like the games you guys play, it was the one with the lower quote who explained to me that my named pilots all these years could be subrogated...learned a lot and they earned my business.....

I meant for the bigger and faster plane

[carusoam]

8 minutes ago, Jim Peace said:

 

I don't like the games you guys play,

Really Jim?

I’d like to not throw everybody under the bus...

Or you didn’t mean Parker specifically... 

 

Fun being out on the weekends around MS!

Best regards,

-a-