Important factors which can affect the level of premiums are the type of aircraft, the amount of hull insurance, the limits of liability and especially the purposes of use of the aircraft and the pilot experience. Each of these factors carry a certain rating guideline which varies from company to company and each of them is impacted by the single most important factor in the rating process – pilot experience. The fact that most aircraft accidents are attributable in some way to pilot error is a fact and the insurers pay close attention to a pilots overall flight experience, his or her total flight time in the same category of aircraft (fixed gear or retractable, multi engine piston or turbine powered, fixed or rotor wing). The pilot’s experience in the exact make and model insured, their level of currency, and their loss history.

Without a doubt, a good track record is one of the major ingredients but other important factors which can affect the level of premiums are the type of aircraft, the value and especially the purposes of use of the aircraft. Each of these factors carry a certain rating guideline which varies from company to company and each of them is impacted by the single most important factor in the rating process – pilot experience.

Really, it is just a matter of ensuring that operators are open and honest and disclose all material matters regarding the risk to your Broker. In this respect you must provide all information, whether favourable or not, which might influence the judgement of an Insurer in determining firstly, if he will take the risk, and if so, on what premium and on what term. You can’t change the facts to attain a lower premium.

New Zealand is no different to anywhere else in this respect. Basically, the Insurers keep telling us that for the number of aircraft and helicopters owned and operated in New Zealand, for one reason or another the accident rate on an average is higher and thus New Zealand tends to attract higher rates.

In the simplest sense, the insurance industry operates on the basis of generating enough premium dollars to cover "expected losses". In the average home owners policy, motor vehicle and life insurance arenas for example, the large numbers of policy holders have enabled Insurers to predict with reasonable accuracy the amount of money they can expect to pay in claims in any given period. Unfortunately, the NZ aviation community does not offer the same predictability because there is just not enough units out there to generate consistent statistical accuracy. Therefore, more than in most other classes of insurance, aviation insurance is written on a subjective basis. In general terms however, the Insurers obviously have good times and bad times. In recent times whilst it would appear that claims in some quarters (particularly helicopters) have perhaps been exceeding premiums but operators currently negotiating renewals will see that Insurers are still holding rates down.

There is no doubt about it that aircraft owners with a good operational history do reap the rewards of lower premiums. I think everyone is striving to promote good operating practices to enhance safety which in the medium to long term can minimise insurance rates. The industry as a whole controls its own destiny and if all these initiatives and promotions do result in avoiding more accidents then the insurance industry will most certainly provide incentives in the form of reduced premiums.

Here again it is the law of large numbers. Although New Zealand has a relatively high helicopter population per capita, in real terms the numbers aren’t that great and there are hardly enough helicopters to generate the volume of premium to cover the level of losses. Also, compared against the average fixed wing, one does not see many ‘partial’ losses when it comes to helicopter accidents. By virtue of their configuration, even what appears to be a relatively minor "heavy landing" in a helicopter, the damage is usually extensive and results in a write-off. Adding to the problem, particularly in New Zealand are the demands of the industry and the higher than usual utilisation of helicopters for high risks uses in hazardous conditions reflects the differential in insurance rates between fixed and rotary wing.

Until the loss history improves and the accident rate stabilises, there is unlikely to be any major revision in the outlook of aviation insurers towards helicopters. Just as with fixed wing, the type of helicopter and the use to which it is put has a marked effect on the insurance costs. Internationally, one of the better aviation risks is the Corporate Turbine Helicopter flown by experienced professional crews. Likewise in this country, the private/corporate helicopter flown exclusively by one or two experienced pilots will attract surprisingly low insurance rates.

Does the type or model of helicopter make a difference in insurance rates?

Yes, most definitely. Higher valued turbine helicopters will attract much lower rates than pistons. It is a proven fact both in fixed wing and helicopters that turbine reliability is a major factor, but notwithstanding this, the same rules apply to fixed wing. It is well recognised that some machines of a specific type and model are better suited to particular uses and thus are more acceptable to insurers. Just as a Cessna 402 compares to a Cessna 150 so does a Bell Jet Ranger compare to an R22. Its horses for courses.

From the commercial operators point of view, be very specific as to what uses the machine is to be put to. It is not economic to offer all services to all people particularly with regard to the more hazardous uses. If an operator expects very little utilisation from a specific use which may appear quite hazardous to an Insurer then walk around it and concentrate on the core business. Other than the more dedicated uses such as Agricultural, Underwriters view private hire/rental, slung loads and, to a lesser degree, training as the more "risky" uses. It is a good policy to review insured values, possibly twice a year if component times are getting low. Working machines can be costing $10-$15.00 per $100.00’s insured so by carefully monitoring the current value of a helicopter can lead to considerable saving, but equally so, it is important not to under insure.

Contrary to popular belief, Deductibles are usually not much of a factor in reducing premiums. For some reason which is beyond me, Underwriters offer no significant premium reductions for higher deductibles, so I usually counsel my clients to stick with the low ones. In today’s market possibly the most effective means of reducing premiums is to self impose restrictions as to uses and pilots and try not to break anything.

Why not try a tour of Lloyds of London right here.

(Back to Top of Page)