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Keeping the cost of aviation insurance in check

The August 1939 issue of Popular Aviation magazine included an advertisement for the then three-month-old Aircraft Owners and Pilots Association.
Photography by Chris Rose.
Zoomed image
Photography by Chris Rose.

The ad, soliciting member applications, said, “Many vital problems face us now. Progress must and shall be made towards greater safety, increased landing facilities, low-cost insurance…” and more. Evidently the cost of insurance has been a challenge for as long as AOPA has existed, and aviation insurance premiums remain a complex topic today.

To better understand the current insurance environment, a report from independent risk management, benefits, and technology firm Milliman provides some context. You can find the complete U.S. General Aviation Admitted Market: Summary of 2022 Statutory Financial Results online.

From 2009 to 2018, total aviation insurance premiums written by GA insurance underwriters were steady, averaging $1.6 billion per year. But from 2019 to 2021 premiums increased 15 percent per year. And while premium growth slowed to a 10-percent increase in 2022, total written premiums had already zoomed to $2.7 billion—a stunning 70-percent surge in four years.

The rapid premium increases were not merely a money grab. The report shows that between 2016 and 2020, underwriters lost $700 million on $8.5 billion in premium. These massive losses led to “rate firming” (industry lingo for premium increases), beginning in 2019. We are in a safe era for GA, so what drove the losses when the NTSB data shows a steady reduction in both aircraft fatalities and severe injuries in the past two decades? Liability claims play a large part. “U.S. juries have been awarding significantly higher sums in recent years,” the report says. “The median value of a single-fatality award by U.S. juries has gone from $2 million to $5 million over the last few years.” And, like everything else, the cost of aircraft, parts, and labor has skyrocketed, driving the repair cost for damaged aircraft up significantly. The cost to repair or replace aircraft damaged by weather events such as hurricanes, tornadoes, hail, wind, and heavy snow also played a role in higher losses. This is why some aircraft insurance policies include a clause providing reimbursement to owners to relocate their aircraft out of harm’s way before hurricanes make landfall or other natural disasters strike.

The premium increases returned the underwriters to profitability—$92 million in 2021 and $100 million in 2022—but the insurance industry reports that recent profits have not yet made up for five years of losses. And the 4 percent profitability level this represents lags behind the post-9/11 historical average. From a purely business perspective, it makes sense. The cost to repair aircraft increased. Jury awards increased. But insurance premiums remained flat—until the losses were too much to bear. So, insurance premiums increased until underwriters returned to profitability.

During the National Business Aviation Association (NBAA) Business Aviation Conference and Exhibition, held in Las Vegas in October 2023, AOPA President and CEO Mark Baker met with insurance underwriters and brokers in an ongoing initiative to discuss options to keep aviation insurance affordable for pilots and aircraft owners. Of particular importance in these meetings was the cost of premiums for senior pilots and the need for pilots flying under BasicMed to remain insurable without a requirement to obtain a third class medical as they age.

Following NBAA, AOPA Pilot interviewed Eric Barfield, president of aviation insurance firm AssuredPartners Aerospace (an AOPA Strategic Partner); Jim Anderson, senior vice president for aviation underwriter Starr Aviation; and a senior vice president and an underwriting manager from another aviation underwriter (whose identity cannot be disclosed because of their company’s policy, so we’re calling them Underwriter X). Some common themes quickly emerged.

Senior pilots and perceived risk

When you apply for aviation insurance or renew your policy, your rate is not based on a formula, it’s based on perceived risk. And there is a lot of discretion on the premium you will pay. Asked if senior pilots are paying higher premiums based on having a higher rate of accidents or incidents than other pilots with similar experience, Barfield said, “I don’t think there’s uniform published statistics that anybody can point to. The underwriters have their internal experience, which is typically what they point to. And underwriters look at risk profiles and risk probabilities more so than they do statistics. And what I’ve learned is that I think the underwriters experience is that they have a frequency issue with older pilots, not necessarily a severity issue.” He said, “Those don’t tend to be severe accidents or fatals, we just have some prop strikes and we have those types of things. And so, what that translates to, they use frequency risk mitigation tools. A lot of times underwriters use deductibles, let’s make the frequency of claims go down by increasing the deductible, increasing the premiums, and by doing that, they get more skin in the game and the frequency dies down.”

“We do see across the board that older pilots basically cost us a little more per year than their counterparts of a comparable experience level,” said Underwriter X. “Now, that’s not to say that every 75-year-old is going to have that accident, but we see an increase over under-70 group. Both in severity and frequency…..We have to charge more for the older pilots to keep our losses in a realm compatible with the mid-range group. We also do it for younger pilots.”

Treat every interaction as an interview

All stressed the importance of your interactions with your broker or underwriter. How you present your qualifications—and yourself—will be judged and can have a significant impact on your premiums. For the best rates, come prepared.

Underwriter X said, “A lot of times you just have the conversation. They start explaining the type of training they get…I’ve had customers that will say, ‘I’m not just going to John down the corner who will sign me off. I’m going to that new young lady down there. When I come out of the airplane, I’m going to be soaked in sweat because she’s put me through my paces.’ So knowing that they’ve got that minds et that they’re aware that their skills might be deteriorating and they’re going to go to somebody that’s going to call them out on it versus, ‘yeah, I’m going to sign you off.’…A guy the other day was telling me that as he aged, his personal minimums got tighter and tighter and tighter. And I thought, this is what we want. This is the kind of client we want to insure.”

“Some pilots tell their story better than others, and they’ll send us a copy of their latest Wings phase,” said Anderson. “Maybe they haven’t flown a lot, but they did a Wings phase with a CFI. And of course, as you know, it counts as a flight review. I just worked with a gentleman who was renewing his turboprop insurance with us. It’s a late model aircraft, new to market, all this kind of stuff. He put together a five-page dossier on all the things that he’s done, all the training he’s completed over the last three to four years. Told us how much he’s exercising. He had a doctor write a summary for him. That tells me a ton about this risk.”

Training and recent flight experience is the best way to ensure the lowest rates

Every conversation returned to training and recent flight experience as the best indicators of a lower-risk applicant. Barfield said, “If your background is I’m 69 years old and I just got my license two years ago, that’s the story. But underwriters are going to say, ‘Tell me more, because we’ve got very limited experience.’ It would be helpful to know I’m a 300-hour pilot at 69, but I’ve only been flying for two years versus I’m a 300-hour pilot at 69 and I got 250 hours back in 1975 and I’ve flown 50 hours in the last 30 years. And probably the biggest thing—and this is where we coach our folks to elaborate on is—all right, let’s talk about your training.”

“I would say recurrent training is lacking,” said Anderson. “Because time and time again we see accidents that are currency related, proficiency related. Prop strikes, bad landings, things like that. There’s nothing wrong with the weather, there’s nothing wrong with the airplane. If you’re not flying at least five hours a month, 60 hours a year, you need to be involved in something like the Air Safety Institute, or a Wings program.

“So, let’s go to a Bonanza, the values are going to be higher. We’re going to look for pilots that have things like instrument ratings, right?...Probably as we start to increase the complexity of aircraft, the thing that I look for that’s very hard to quantify from an underwriting standpoint is how much you embrace training. If you’re going to do the minimum, so are we.”

BasicMed and light sport aircraft provide options

Flying under BasicMed instead of with an FAA medical certificate and flying light sport aircraft (that do not require medical certification, only a driver’s license) are solid options to help keep you flying longer.

We asked if there is any difference between BasicMed and a third class medical in terms of cost of premiums or insurability for pilots. Anderson said, “No. The day that BasicMed became effective, we were willing to take it. [AOPA did its] homework and there’s no difference from the standpoint of accident safety from a pilot who has a third class medical as opposed to BasicMed. So, we’re good with it.”

In fact, a Congressionally mandated report by the FAA in 2023 found no differences in safety when comparing private pilots flying with BasicMed to private pilots who obtain third class medical certificates.

“Do we treat BasicMed any differently? We don’t,” said Underwriter X. “Our policy says if you have an accident, you just need to have the correct certificate that the FAA requires of that airplane and you. So, we don’t charge more. We don’t charge less.”

Anderson said, “So there’s both. You have a light sport pilot and you have a light sport aircraft. For the most part, light sport we welcome with open arms. Pilot and aircraft.”

Training, and preparing a dossier of your flying and training activities over the past 12 months, are relatively simple ways to keep the cost of insurance premiums in check. Taking advantage of BasicMed and flying light sport aircraft provide meaningful options. And although the choice of light sport aircraft is currently limited, the Modernization of Special Airworthiness Certification (MOSAIC) expansion of light sport (expected in mid-2025) will significantly expand the number of qualifying aircraft. AOPA will continue to advocate for the expansion of BasicMed and MOSAIC, and continue meeting with insurance underwriters and brokers on additional initiatives to help keep premiums in check, which we will report in AOPA Pilot.

[email protected]

Alyssa J. Miller
Kollin Stagnito
Senior Vice President of Media
Senior Vice President of Media Kollin Stagnito is a commercial pilot, advanced and instrument ground instructor and a certificated remote pilot. He owns a 1953 Cessna 170B.

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