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