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Thursday, April 1, 2004

Wrestling With Insurance

Two major factors driving flight training costs are insurance and maintenance. Maintenance is a big, predictable headache. Insurance has also been predictable lately, but not in a good way. Flight school operators have come to expect their premiums to go up year after year, with rates rising in recent years on the order of 10-20 percent.

Still, the price tag for insurance and increases of that magnitude are severe enough a combination to force some flight schools to drop coverage, or even fold their tents.

There may be some hope on the horizon, according to Larry Mattiello, president of Aero Insurance in Addison, Texas. Rates are coming down in some areas and for some operators, although he stressed that flight schools should talk to their brokers for how that trend specifically may affect them. The trend is driven in part, he explained, by an improving stock market.

With prospects for better returns from stock investments, underwriters become comfortable making more coverage available in the market place. Greater availability of coverage means more competition and, perhaps, lower prices. In some area, only one underwriter is offering coverage.

That predicament is a function primarily of the risk inherent in helicopter operations-and in flight training in particular. Flight schools can mitigate that somewhat by working closely with their underwriter to review the details of training programs, maintenance, and operations.

"If you take a proactive approach with your underwriter, and show a commitment and dedication to training and safety," Mattiello said, "the underwriter may not be inclined to drop you if you have an accident."

What can help with rates is participation in a program like USAIG's Safety Bucks, which offers credits for training based on premiums paid.

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