Insurance and Tires - What's the Difference?
By Bob Mackey, Vice President, Falcon Insurance Agency, Inc.
What do insurance and tires have in common? The answer may surprise you. Allow me to share an interesting comparison between two things (insurance and tires), how they are made, distributed, and sold. If I'm successful you'll see there are some common threads between how we end up owning these commodities, who's working for you, where you fit into this mix, and how you can use what you'll read here the next time you buy insurance.
First, I know about as much about tires as you probably do. I know that when they wear out, I need to buy new ones from a tire dealer. I also know I have many choices and that I will pay a different price depending on which tires I choose to buy. There are cheap tires designed to just roll down the road at average speeds with an acceptable degree of road-gripping control. There are also tires that provide better performance. Between the two extremes are many other options.
I know a little more about buying insurance, but the process is somewhat similar to buying tires. I can buy insurance that has all kinds of expansions with extra coverages, or opt for only basic coverages.
Tire experts and engineers design the tires. The tire company manufactures them, the marketing department promotes their quality, and the sales department secures orders from various tire stores (dealers), who use the marketing materials from the tire company to sell tires to you and me. During the design and engineering process the tire company has to make sure their products meet government safety standards.
In the insurance industry, insurance company executives (legal experts) design insurance policies based on the requirements established by the insurance departments in each individual state. Some requirements for some lines of insurance are established on a federal level; however for the most part insurance regulations are established on a state-by-state basis.
The core parts of most insurance policies are common for all states; however each state usually imposes additional requirements for special additions to the basic policy to address cancellation provisions and other factors to protect its citizens. If you look at your aircraft insurance policy you will likely find a special endorsement that has been required by the state where you live. Similar to the safety regulations for tires, these state-mandated conditions in your insurance policy are there to protect you.
The insurance company, like the tire companies, promotes its products (insurance policies) to independent agents so they will include them in the product portfolios they present to their customers, or policyholders.
Tire dealers and independent insurance agents actually work for their customers, not the tire and insurance companies. Insurance agents make their income based on the policies they sell to their customers, usually between 10-15 percent of the premium. So, if an insurance agent sells an aircraft insurance policy for $1,000 the agency the agent works for receives between $100 and $150 commission.
The insurance company establishes price, conditions, and terms of an insurance policy based on negotiations between the agent and the company's underwriter. If the pilot/owner needs five hours of dual instruction prior to solo and five hours of solo prior to carrying passengers, the underwriter sets these conditions. An agent's job is to get the most favorable price and other requirements such as dual or solo hours, for their clients. If the insurance company's underwriter offers a price and/or terms that the agent feels are too strict, the agent will check with other insurance companies to see if they can get better terms for their client.
Some underwriters will work (negotiate) with the agent to come up with terms that are acceptable to the agent and ultimately, the client. In some cases the underwriters will not negotiate because they feel their terms and price are the best they can offer. In the end the agent works to come up with the best terms for their client.
When I buy tires, which fortunately I don't have to do every year, I look for a dealer with a wide selection who will recommend the appropriate tires at the best price for my vehicle and the kind of driving I do. Buying aircraft insurance should be the same. You should look for an agency that knows aircraft insurance (an expert), has a wide range of companies to get quotes from, and who can get the right aircraft insurance for you based on the airplane you fly and the type of flying you do…all for the best price.
Face it, we are not experts on everything we buy. Sure, we can read articles, talk to friends, rely upon the endorsements of the flying organizations we belong to, but when it comes to buying aircraft insurance we have to have that trust that tells us we are being taken care of. EAA appointed Falcon Insurance Agency to be the exclusive administrator for the EAA Aircraft Insurance Plan. Why? Because at Falcon we dedicate our agency to one goal: Each client always deserves to have the right insurance at the best price with our pledge for outstanding service.
We need tires and we need insurance, but above all else we need to know our tire dealer and insurance agent are watching out for us. Find out by calling the EAA Aircraft insurance Plan (Falcon Insurance Agency) at 866-647-4EAA (4322). You will find hard-working insurance specialists who can take care of your aircraft insurance needs, and I also believe you'll find the trust you're looking for.
EAA INSURANCE TIPS is a special EAA Member benefit. If you have an insurance related topic you’d like to see addressed or if you have any comments, please email firstname.lastname@example.org. If you need an insurance quotation call 866-647-4EAA (4322).