At A Premium
Aviation insurance premiums have risen dramatically in the past few years, especially after 9/11/01. What recourse does the aviation industry have?
By Michelle Garetson/p>
By Michelle Garetson
Back in our May issue, a call for comment went out to the masses regarding huge spikes in product liability insurance premiums as well as for any other types of aviation insurance. This solicitation for other experiences came about after learning that a GSE manufacturer said his product liability insurance had spiked over 300 percent. His insurer named September 11 as the impetus for the increase.
GSE Today staff caught up with this manufacturer at a recent aviation show for follow up.
"What are you going to do?" said Terry Bosserman, President of Bosserman Aviation Equipment Inc. in Carey, Ohio. "You have to have insurance. I was able to 'barter' for a better rate and ended up saving several thousand dollars, but it was still a lot higher than it was a year or so ago."
PREDICTION VS. REALITY
Our prediction was that a loud outcry would surface from our readers. That didn't happen. Only one response came as a result and it reiterated what we had heard from others, "Our hands are tied."
Add to the premium hikes, the reduction in the limits of liability on offer, as well as more rigid and restrictive underwriting guidelines. Underwriters may now want more detailed information from you about your operations with respect to safety and security procedures.
CHANGES IN THE INSURANCE INDUSTRY
The aviation industry gone through a major upheaval in recent years, but so has the insurance industry. While it's easy to cite 9/11/01 as the culprit for huge premium increases, the aviation insurers offer that six straight years of aviation industry losses, lower returns achieved in a soft stock market, and lower interest rates are also to blame. Insurance companies also contend that commercial operators will continue to see rate increases, higher deductibles, reduced limits, and more underwriting mandates. A significant percentage, approximately 20 percent of the premium, for liability coverage for war and related perils for aircraft operators is expected to remain throughout 2002.
Add to this mix that aviation insurers are merging and acquiring other insurers. In January 2002, ACE USA became a part of USAIG. In April of this year, the Chicago-based insurance brokerage giant Aon spun off its underwriting business, which is now known as Combined Specialty Group Inc. and is based in Atlanta. Associated Aviation Underwriters Inc. (AAU) and the British Aviation Insurance Group (Canada) have joined forces to become part of Global Aerospace, the world's largest aviation insurance group.
WHAT CAN BE DONE?
Aviation insurers are constantly under pressure from stockholders to produce an underwriting profit. Until this industry can properly right itself, new aviation insurance companies are not expected to emerge to compete with present insurers.
What aviation businesses can and need to do is to stay diligent in current contractual agreements with insurers and continue to do their homework on the best prices and the best coverages available. Check the A.M. Best ratings for insurers under consideration. While there is little you can do if your insurer raises the rates, your hands are somewhat tied, but you do have a free hand in who gets your business.