Light Sport Flying with In Flight USA - March 2011

LSA’s and Insurance

By Ed Downs

Wow, you really are a devoted aviation buff!  The title of this column included the word “Insurance” and you are still reading!  To be sure, most readers will have had some reason to deal with insurance of some kind, sometimes leading to lawyers, lawsuits and other unpleasantries that are anything but “entertaining reading.”  As an aviation professional that is now working his second half century stint in the business, this writer has certainly seen the good, the bad and the ugly of insurance.  That is why I called long time friend and advertiser, Lee Duncan (Aircraft Insurance Agency of Waxahachie, TX) the other day to play “insurance catch-up.”

As an LSA certification consultant dating to the beginning of Sport Pilot and S-LSA aircraft in 2004, I was initially disappointed to discover that insurance underwriters were viewing the Sport Pilot movement with a high degree of skepticism.  Insuring a pilot without a medical certificate was problematic and there was considerable confusion as to just what an S-LSA was.  Fortunately, Lee was able to bring me up to speed, and the news is good.  “First,” explained Lee, “a lot of folks who have been out of flying for a period of time remember the nearly catastrophic increase in rates the we saw in the late 1980s and early 1990s.  The have come down a lot since then, and are often less than auto insurance rates when you consider the cost per $1,000 of insurance coverage.”  “Second,” continued Lee, “the industry has come to understand what Sport Pilot is all about, and there is no problem getting both personal and aircraft hull coverage for the safe pilot and a recognized S-LSA airplane.”  Those encouraging words kept my conversation with Lee going for the next hour, so let me simply share some interesting observations in a list format.  Now, just like insurance policies, I must toss in a disclaimer.  This writer, while having personally owned and insured 14 airplanes (over a period of 50 years, including three warbirds), is not an insurance expert.  The following thoughts are gleaned from interviews, personal experience and research, but are not intended to replace a detailed conversation with your own insurance expert.

1. Back in the 1970s, there were more than 40 companies writing aviation insurance, with strong competition keeping prices competitive.  By the late 1990s, that number had dropped to only six or seven companies.  Today, we see almost double that low number, and competition is returning to the market.
2. The price and availability of aviation insurance is not related to only a ratio of premiums taken in versus losses incurred.  Insurance companies do not take your premium and simply set it aside, hoping you will not bend anything.  The multi- billion (trillion?) dollar insurance industry invests those premiums in a variety of financial vehicles to make money off of your good flying habits.  Some companies invest better than others.  A sudden increase in your rates could be nothing more than the results of a down trend in the stock market.  Try another company that may have been smarter in selecting their investment portfolio.
3. As a Californian, you call your friends in Kansas and talk about buying an S-LSA.  Your friend tells you what he is paying for insurance and, having just purchased the same plane, you expect to get a similar price on your plane.  Surprise, Surprise, Surprise!!  Your insurance rate is significantly higher.  What gives?  Location can make a huge difference in the price of insurance.  Many states, counties, cities and airports load on their own insurance requirements that can drive up prices.  In some cases, driving an extra 10 minutes to another airport can save you hundreds of dollars.
4. Flying with no medical certificate, flying a tail dragger or unknown S-LSA may increase your rates by 10 percent to 15 percent. But that may add up to only $100 to $150 per year.  Not a deal breaker.
5. Most insurance companies now require a minimum “time in type.”  Don’t fight it.  Take some dual and do what the insurance companies hope you will do, which is to improve your skills.  Regular recurrent training, participation in the FAA WINGS program and/or factory specific training can pay for itself in premium discounts.  Pick an insurance provider that offers such benefits.
6. Shop carefully.  As previously mentioned, competition is on the increase.  Both insurance premium rates and the quality of coverage can change a great deal in the time frame of only a year.  Pay attention to the details of just what is covered by your aviation policy.  In many cases, aviation insurance offers a better value than auto insurance.  For example, auto policies typically insure your car for market value (the insurance company sets loss value), versus airframe insurance, wherein your airplane is insured for a predetermined stated value, which is pretty much your call.

Sure, there is a lot to consider, much more than just price.  This is where a trusted agent comes in.  To be sure, one can shop on the Web or by “800” number, but a well qualified, experienced agent is your best bet.  Be sure to ask your agent questions about special issues that might affect flying as a Sport Pilot or in an S-LSA.  Be comfortable that your agent can “speak” sport pilot with knowledge and authority.  If not, go shopping.  The quality of service this writer has received from the insurance industry, over the years, has always been directly related to the quality of my agent.  Sport Pilot and LSA insurance is now the norm and getting better.  Isn’t it nice to get some good insurance news for a change!

My thanks to Lee Duncan and her staff at Aircraft Insurance Agency.