Understanding the Insurance Renewal Process
Too often we hear how unhappy owners are with their aviation hull and liability insurance experience and costs. Owners trust their brokers to represent them in the insurance market and obtain the best results but are they really advocating on your behalf? It is critical to outline the insurance renewal process, the role a broker plays, and how you as the client can help influence the results in this current challenging aviation insurance market.
At least three months before your current policy expires, the broker should provide a market update, especially in this dynamic environment. There should be a discussion about a renewal plan to prepare your expectations and avoid any unwanted surprises. Your broker should also review your existing coverage, risk tolerance, policy limits, deductibles, and propose making any necessary adjustments to protect your interests. Once the renewal plan is agreed upon and the relevant exposure information is aggregated, the broker’s responsibility is to execute the strategy.
The decision to market your aircraft needs to be carefully evaluated on an annual basis and a diligent effort must be made to seek competitive renewal terms. Your broker must differentiate you to the underwriters. We recommend highlighting your flying experience, recent training, education, ratings, and loss experience (preferably lack thereof). Clear articulation of operational protocols for bad weather, smaller runways, flying overseas, second pilot utilization, and maintenance policies must be well documented and disclosed. The CJP standard operating practices and the Gold Standard Safety program are excellent examples of the best practices for a safer pilot. But understanding how underwriting perceives you, helping ease their questions and concerns, generating new insurer interest, and facilitating why you are a better risk is not just the job of the broker. Though brokers need a relationship with their underwriters, you should too.
Ideally thirty days before your policy expires, the broker has a duty to disclose all renewal options – good and bad. Waiting until the final days before the renewal to present your results is unacceptable under any circumstance. For a major aircraft expense item such as aviation hull and liability insurance, it takes more than a few days to analyze how your policy might have changed. There is certainly value in staying with your existing insurer barring any major variations in their coverage or pricing but at the same time it makes sense to maintain backup relationships in case change needs to occur.
Most brokers are transparent in how they are compensated. They usually earn a percentage of the premium, typically 15 percent for aviation hull and liability, although some brokers have negotiated higher payments from the insurers or charge a broker or policy issuance fee so pay close attention. Unfortunately, this traditional compensation model can present a conflict of interest; the broker is primarily evaluated based on their renewal results and that usually comes with the cheapest price, which in turn comes with a reduction in their remuneration. In the event your premium went up, should your broker be compensated more for doing the same job as last year? The role the broker plays, and the value of that relationship should not be discounted. However, it is the partnership and experience you have established with your insurer that will prevail when there is an adverse claim or if we continue to experience a tumultuous market cycle.
AVIAA is the only global group purchasing organization for private aviation operating across all spend categories, including insurance. As experts in aviation procurement, they constantly monitor and analyze the market to provide actionable insights for owners and operators looking to maximize value across the supply chain. To learn more about AVIAA and exclusive insurance services offered for CJP members, please reach out to email@example.com or apply online at https://cjp.aviaa.com/insurance/