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Do Claims Cause Insurance Premium Increases?

By Bob Mackey, Senior Vice President, EAA Insurance Solutions administered by Falcon Insurance Agency, Inc.

October 30, 2014 - Have you caught any of the auto insurance ads on TV that talk about “accident forgiveness”? They show the aftermath of a car accident with the at-fault driver shaking his head with a bewildered look his face. Then the company spokesman tells you how the insurance company will not raise the price of your car insurance and why you should be doing business with them.

If you have an airplane accident that results in a claim will the insurance company raise the cost of your insurance? I can’t speak to car insurance, but regarding aircraft insurance the answer is a definite maybe.

One of the more favorable aspects of aircraft insurance is that for the most part it’s still a people business; underwriters often examine each individual risk to determine how much the premium should be, or even whether the company should offer a policy quote.

When there’s been an accident with a claim, the underwriter will review the facts and also obtain input from the insurance agent. Further, the underwriter will very likely take into consideration the details of the accident and what the airplane owner has done since the accident, (i.e. recurrent or refresher training and other self-improvement steps).

If an accident results in a significant claim, this will definitely impact insurability and the cost of insurance. There’s a saying in the aviation insurance business: “More premium does not make a bad risk better.” In other words, if the insurance company would normally charge a $1,000 annual premium for a policy but the pilot had a claim in the last three years for fuel exhaustion resulting in a $100,000 claim, the company could charge 10 times the regular price for insurance ($10,000) and still not appreciably improve its risk. It’s not just the dollar amount of the claim; it’s also the nature of the accident. Any accident that is the result of recklessness or carelessness is not going to go over very well with the insurance company.

I once helped an EAA member who was having a difficult time securing insurance after he had a gear-up landing and, in a separate incident, an FAA violation for flying into instrument meteorological conditions with no instrument rating. I was able to negotiate an arrangement for insurance at a slightly higher price, but the pilot was required to attend a three-day high-performance aircraft course on an annual basis. Further, the pilot decided to obtain his instrument rating.

With the annual course requirement, the additional training, and instrument rating, the insurance company ended up with a much better risk…without simply charging a large increase in premium.

If you have an accident:

  • Secure the airplane from further damage
  • Get all the facts
  • Don’t assume any responsibility or admit fault
  • Contact the insurance company or your insurance agent
  • Don’t try to hide any facts from the insurance company, and
  • Do whatever you can to assist the insurance company

Stuff happens; that’s one of the reasons we buy insurance. Be smart, be safe, and make sure if something happens you cooperate with the insurance company.

If you need assistance with your aircraft insurance, you can find the help you need with the EAA Aircraft Insurance Plan administered by Falcon Insurance Agency, Inc. All you have to do is call
866-647-4EAA (4322), or you can learn more about the EAA Plan and request a quote.

Happy and safe flying!

Bob Mackey is senior vice president with Falcon Insurance Agency, the official administrators of EAA Insurance Solutions. If you have any comments about this article or if would like to see a specific aviation insurance topic addressed in a future article, send him an e-mail.

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