Insurance rates for aircraft maintenance companies are based on 4 main factors:
- What type of maintenance is done: If the company is overhauling engines, then the insurance is much higher than if they are performing routine maintenance and sending specialty overhauls to specialty shops.
- How much revenue. The revenue is a factor because it’s the way insurance companies measure how much volume is going through the shop on an annual basis. It allows them to size up their exposure. Less revenue, less aircraft. More revenue, more aircraft.
- Claims: Recent claims receive the most attention. The size of said claims is also important. Claims will taint your record for 5 years.
- What limits of liability are carried. The main components in an aircraft maintenance facility policy are:
- Aviation Products Liability: if the aircraft has an accident and they make a claim back against the maintenance shop for alleged faulty work.
- Hangarkeepers Liability: if a customer aircraft is damaged while in the care, custody, and control of the maintenance shop. (this is the most expensive component as it has the highest frequency of claims.)
- Commercial General Liability: this coverage is for anything that happens at the shop such as a slip and fall accident.
So here are the things that we address in order to obtain the most competitive insurance rates available:
- Present a completed application of insurance with as much detail as possible. Transparency and documentation allows the underwriter to deliver their best rates as their file is documented to show what they were looking at. A good broker will add context with your company history.
- Always be honest about revenue, but use present year revenue since you don’t really know what will happen next year. You can project, plan, or budget but using this year’s revenue is a safer bet. An exception to this would be the recent loss of a large source of revenue.
- Claims must be addressed head on. Why did the claim(s) happen? what changes have been instituted so that such claims never occur again? The broker will document this in the submission to the insurance company. The underwriting file must have documentation showing that despite the claims, you are a good company to bet on because you are conscious of claim causes and consequences, and you have taken action.
- Choose limits carefully. Each company must decide on its own limits. Factors to help make this decision are as follows
- What are the limit requirements for your land lease or airport municipality.
- What type of aircraft do you work on. Light aircraft with less passenger capacity arguably requires less liability protection than large jets with high passenger capacity.
- What type of aircraft are in your hangar at any given time. Averaging the value of aircraft you work on by this number provides guidance on what Hangarkeepers limit of liability to choose from.
- Peer review. Your broker can tell you what most of your peers are choosing and why. This will help you make the right decision for your business.
Above all, partner up with a broker who has a reputation of honesty and integrity. A broker with such reputation will earn the lowest quote in the marketplace because underwriters don’t have to second guess the information.
Honest brokers with good reputation have relationships with all available underwriters. Needless to say working with a broker who is not appointed with all insurance companies means you will never get the benefit of competition from the entire marketplace.
Finally, an honest broker is invested in a long term relationship with you. They are far less likely to try to take advantage of your business as the market ebbs and flows. When it comes to insurance, stability is perhaps your greatest asset.