Insurance

Is anybody out there insured with Nation Air (formerly VanGuard)? I just got a letter from them stating they are no longer going to provide coverage for this class of airplane due to poor loss experience. Effective May of this year I need a new insurance company. Anybody else get this letter? I've never had a claim and I have a stock RV-6 insured for a hull value of $65,000.00. Does anyone have experience with AOPA insurance? Suggestions?
Scott Hersha
N601RV

Try:

Trish
SkySmith, Inc.
518 SW 3rd, Suite B
Ankeny, IA 50021-3048
515-289-1439

I have got along great with them.

We're still here.

Please go back and read the letter again. We are a broker that works with every insurance company available. We would love to keep you as a customer.

Just because Phoenix Aviation Managers is no longer going to do a preferred rate program doesn't mean that NationAir can't handle your insurance needs. We aren't planning on being any less the RV experts than we were when we got Phoenix to start that preferred rate program for you all 5+ years ago.

There are only two companies which are really competing for RVs right now, and we work with both of them. One of those companies does require that you be an EAA member (yes, the EAA's Program is available thru us).

I would hope that you appreciated the rates that we were able to get Phoenix to offer. That also artificially kept AIG's rates low, so even those of you not insured thru NationAir benefitted from us arranging that.

To give you an idea of how we are and plan to remain leaders among insurance agencies with respect to RV insurance... In December, we invited and joined the manager of AIG's Light Aircraft Division to visit Van's Aircraft for the very first time. They have always been the most competitive company with our preferred rate program thru Phoenix, and they wrote about the same number of RVs that we did thru Phoenix. I have a great relationship with AIG as we write lots of other aircraft thru them. What amazed me was that he'd never been up there. There is another agent who writes a lot of RVs (and almost exclusively thru AIG) and he'd never done that.

John "JT" Helms
Branch Manager
NationAir Insurance Agency
Light Aircraft Office

Scott,

I can insure you with AIG or the EAA program as well. I have access to all the carriers currently writing homebuilts.

I am located in IL but can insure WI, SC & TX.

I am an advertiser here too and a 7A (#70026) builder.

You should have no probelm getting insured no matter who you choose.

I had insurance with Falcon Insurance when I owned a Cessna 172 for seven years and was completely satisfied with the service. They work with EAA and have indicated they would love to insure my RV-9A now and after it is finished. Their rates were better than most and have a very good reputation for handling claims from what I have heard. I will use them when the time comes.
Jim Wright RV-9A 90919 Wings Arkansas

Agents vs Insurance Companies

I'm glad for your good experience with them. However, I want the readership of this forum to understand that you are talking about an agency and agents don't set rates nor do any claims handling (other than initial reporting). I'm not trying to downplay your good experience with them, just trying to help you all understand better who provides what services. You've attributed good comments about services the insurance companies provide.

The insurance companies set the rates and handle claims. All aviation insurance agents use the same 8 existing insurance companies (assuming they do use all 8), only 2 of which currently really compete on homebuilts. And all agents are quoted the same rates (one agency doesn't get cheaper rates than others.)

I'd anticipate the next post to ask, "What should I expect from my agent?" or "How do I know if my agent is doing a good job for me?" or something along those lines. I'd say that you likely know whether you're happy or not, but here's a brief list of what I'd expect:

Knowledge about your plane (and all airplanes)
Knowledge about insuring planes
Good relationships with all available insurance companies
Good reputation in the industry
Prompt, Good Communication (verbal and written)

With respect to the last item, I'd certainly expect more than just, "your renewal premium is $XXX, send it to... I've won over more business than you could imagine by spending more time with new customers than their previous/current agent had spent with them over several years.

John "JT" Helms
Branch Manager
NationAir Insurance Agency
Light Aircraft Office

Why the "high" loss rate

JT,
Aside from all the confusion this situation has caused, one thing keeps gnawing at me. Why is Phoenix getting out ?
Are there any patterns of losses that we should be aware of ? Clearly, we have a much larger iterest than just financial......

Lastly, I just got insurance on my 4 in December through NationAir/Phoenix. Aaron explained that I will get "the letter" from Phoenix sometime next fall and we'll just get quotes from another carrier. Unfortunate, but no big deal.

John

Phoenix's departure

The first thing I think I should do is explain the loss ratio. Insurance companies use the loss ratio as a guide in their underwriting of both their pricing and whether or not they'd accept a particular risk. It is determined by dividing the total $'s paid out by the total $'s taken in and earned. The and earned part is important because if they take in $1000 from a customer, and at 6 months into the policy period he has a $500 loss (assume no deductibles), the insurance company still has 6 months of coverage left out there that could potentially have claims turned in on it. So, they pro-rate that bottom number to adjust for that.

Insurance companies usually do loss ratios in various ways to get an idea of where they're doing well, and where they aren't. They'll do an over all Light aircraft ratio, a tailwheel ratio, a homebuilt ratio, an RV ratio, etc. It can even get down to very specific ratios like one for RV-4s for example.

The last thing I'd say about loss ratios in explanation of them is that for a company to feel they made money they really need to have a ratio of under 70%. This is because their underwriting expenses and the commission paid to the broker/agent is not taken out of those numbers. Direct writers don't really enjoy any better expense ratio because while they don't pay commissions to anyone, they have to employ sales staff of their own. So, their ratio would really also need to be about 70% to be profitable.

Phoenix's loss ratio for each of the first 3 years of the VanGuard Program was over 100%. 2003 was a very good year, and that one good year brought the loss ratio for the life of the program under 100% but not by much. 2004 was not such a good year.

They'd hung with it as long as they felt they could, and I admire them for that. They are a classy company. They made a business decision. As I've heard another insurance executive say, "we can't keep selling $1's worth of Bananas for $.95.

If I had to generalize the type of accidents that I saw a lot of in 2004, it was a lot of landing accidents (mostly in Tailwheel RVs) on both turf and paved strips. We did have a couple in nosegear versions as well on soft fields. It's not that I thing turf is bad, but extremely short turf fields are going to get harder and harder to insure planes on (in my humble opinion.)

RVers and Homebuilders in general fly to strips like that (or base their planes there) more frequently than the vast majority of the production GA planes that these companies insure. I think they're going to have to get over their trepidation of turf strips, but they may do that by ultimately surcharging those who are on grass or if they want to go to any grass strips (other than in an emergency) or something like that. I mean, the EAA's program (which should be pretty homebuilt friendly right?) won't write coverage for planes on turf if it's under 2500'.

I recently talked to the head of Global's EAA Program, and their loss ratio is just under 100%. I would hope that would turn around, and soon. It doesn't do you all any favors to have less choices of insurance companies willing to do homebuilts.

One thing that I think you have going in your favor in a way is the shear number of RVs out there and being built. The underwriters will write coverage for whatever you all are out there flying in large numbers. But, that doesn't mean they're going to give it away. They'll price it like they think they have to make money on it. Not hand over fist, but some. They are in business.

NationAir is doing what we can to continue promoting homebuilding in general, and especially for RVers. I see and visit the heads of the insurance companies on a regular basis. I took the head of AIG's Light Aircraft Division to Van's Aircraft in December. He'd never been before (I was amazed... they write about 1500 RVs). It was a very productive trip. AIG changed several things about how they underwrite RVs because of that trip. (no they didn't lower their premium.) The primary changes were to encompass insuring the RV-10s that are coming fast.

Hope that helps you understand a little better.

JT

JT,

Can you discuss what issues they had/have with the builders risk policies? I understand how the ratio could be 100% on the flight policies, but I would have thought that the builders risk policies would be almost all profit for them?

Another question: How come the liability piece is required on the builders risk? My sole purpose for insuring was in case my house burns down or gets knocked flat by a hurricane, but I remember being told that the liability piece was required. Is it a law that it be included or something?

Thanks
PJ

It isn't all bad news!

I got "the letter" last fall saying Phoenix wouldn't renew my policy, and just got "the call" yesterday from NationAir with the new quotes for this year.

I was very surprised that my rates for this year with AIG (through NationAir) are going to be lower than last year.

Why? Because I have more hours this year. Last year I only had 70 hrs total when I took my first flight in my RV9A.. now, I have over 200.

I'm also wondering if AIG might rate the 9A differently than the 6A, 7A, and 8A. All four types were considered the same plane with Phoenix.

Yes, there is slightly less coverage with AIG (passenger limit of 100K vs. 200K last year) but overall, I'm very pleased that my rates didn't jump 10-20%.

-Clay

Yes, AIG does view the 9A differently and much more favorably than the others.

I have talked to them a lot about the basic flight characteristics of the 9A model and they do understand that it is a much more (in AIG's words) "docile" aircraft, much more trainer like, and so, more forgiving of a lower time pilot than say my 7A.

As we build hours, especially time in type, we will get more breaks and as long as the basic annual increase for that class of aircraft is less than our personal increase in skill and risk level to the Insurance Company we should see lower premiums. That isn't always how it works out as seen with Phoenix leaving the market.

The best thing any of us can do besides the obvious "fly safer" we always get told, is that while we are building over several years if we continue to fly as well, we should make every effort to get time in as similar an aircraft as possible. If you can co pilot with someone in type so you can log those hours they help too.

My experience has been that the Agent (me for example) needs to talk to the underwriters and make the case for you if you are close to being what the guidelines call for. If we can give you the "flight plan" for the next few years while you build to make you as desirable a risk as possible then we are earning our pay as well even if we don't sell you anything. We flight plan everything else why not how to make ourselves less of a risk to the Insurance Underwriters if we can?

If you are way off, say zero time in type, building an 8 taildragger with no tail time and all you've flown is 150's or 172's the only one that can probably help you is yourself by getting time in tails and then in type if possible. If not you have to bite the bullet and pay higher rates until you build a track record of experience that the Underwriters can live with and will give you discounts for.

As JT has said before we Agents don't set the rates, and we all get the same price from the same companies, it's what we do ahead of time, as well as while we are your Agent representing you and with the things we can affect that seperates a good agent from the others. If you have an Agent you trust or like or know and he knows the aircraft by all means go with him or her. The companies we place you with are all going to be the same ones. I have the same ones as everyone else.

Just my two cents worth. Hope it helps now I'm going back to the dungeon (basement) to pound some rivets.

Builders Risk and Liability

As for the builders risk, sure there are fewer exposures to risk, but the premiums are lower than in-flight coverage as well. With all the builders risks we've written, we've had very few claims. We have had avionics theft claims, and one repetitive vandalism claim, and then we've had one engine theft which was a $30,000 claim. It takes a lot of $400 policies (that was Phoenix minimum premium and what most of their builders risks cost) to make up for one $30,000 claim and then make money too. That claim was another reason I think Phoenix stopped writing coverage for RVs. They, too, felt like the builders risks were not all that great of a risk until that time.

The reason Phoenix and some other companies place a minimum premium on those policies is that it just doesn't make economic sense for them to write a policy below a certain premium. Also, with insurance the underwriters have to worry about what might happen. They are taking in premiums in anticipation of what claims they think will come in for a certain class of business.

As for the liability being attached to the builders risk, Phoenix and AIG won't write policies without some liability being attached. Global's EAA program will. It's a matter of each companies individual preference. If you ask Global to add it, they charge more for it. Some folks need it due to a hangar lease requirement.

JT