insureds. We like them, and we want them to like us. Part of our hunger for acceptance is a tendency to fool ourselves into believing that we know how to underwrite “regular” insurance coverages, in addition to aviation coverages. “Regular” insurance, for the purpose of this writing, includes any type of insurance that doesn’t involve an airport or aircraft. I’d like to discuss two separate coverage extensions that I believe we, as aviation underwriters, are guilty of providing, even though they do not fall within our areas of perceived expertise. There are many more, but I think that I can make my point with two. These coverages are excess auto liability, and excess employers’ liability. We have a tendency to include these coverages in some of our policies for free. Why do we do this? Well, they’re what we like to refer to as “sleep” coverages, meaning that nothing bad will ever happen.
Excess Auto Liability As the name implies, this is coverage for cars. Most of our insureds have cars. Some have more than one. I’m reasonably certain that they all buy car insurance in one form or another. It is my understanding that auto liability limits, for the most part, are significantly lower than those that we offer in aviation. As such, if our insureds need or desire higher liability limits, there is a market out there for excess auto liability insurance. A lot of insurance companies provide this coverage. I’m pretty sure that these companies are staffed with underwriters that know how to underwrite excess auto coverage. Yet, for some reason unbeknownst to me, many of us in the aviation underwriting community feel compelled to add this coverage to our policies…for free. No problem, right? As I said earlier, this falls into the category of sleep insurance, because nothing bad will happen, right? The sad reality is that the world of excess auto liability can be rather nasty. Losses tend to start out looking pretty bad. Then, they tend to grow, over time, and get even worse. They adversely develop as time goes on. The numbers don’t improve. They only get worse. According to the Reinsurance Association of America, at the end of 2008, there were reserved excess auto claims
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in the U.S. totaling approximately $21.2 million. Five years later, reserves on that same year had grown over 300% to $91.8 million! Sleep insurance? Really? I don’t have any information pertaining to market premiums in 2008. However, with 300% adverse development, it’s probably safe to say that the industry results pretty much sucked (that’s a technical insurance term, by the way). It gets worse…adverse development actually began further accelerating in 2013 and subsequent years. Again, I’m looking in the mirror here. Self-loathing, remember? It’s interesting to me that, as aviation industry professionals, we pride ourselves on the fact that flying is statistically safer than driving an automobile. In 2018, there were over 500 aircraft fatalities globally. Compare that to 37,500 automobile fatalities in 2018 in just the United States. Yes, air travel is indeed safer! Yet, we charge money for the airplane coverage, but give the auto coverage for free. Ironic, is it not?
Excess Employers Liability OK, full disclosure…I don’t even know what employers’ liability is. I just looked it up on-line. It is defined as “an insurance policy that protects employers from liabilities arising from disease, fatality, or injury to employees something-something-something”. After barely reading the first sentence of the definition, my ADHD was red-lining, so I went back to making adjustments to my fantasy football roster. Hence, I don’t know what this coverage is, I don’t know what it does, and I don’t know why anyone needs it, but I include it on many of my policies…for free. Yes, I’m the Village Idiot! My point in all of this is that we, as aviation underwriters, should probably stick to what we know. We know lots about airplanes, pilots, airports, and manufacturers. But, do we know enough about some of these other coverages to feel confident that we’re acting in our shareholders’ best interest? We would consider it insane if an auto underwriter suddenly decided to include aircraft liability in their policies, so why should the reverse be any different? My advice to myself, and anyone willing to follow: Stay in you lane, bro!