After five decades in business, it’s safe to say that Avemco Insurance Company knows a lot about general aviation — and some of it is surprising.
Celebrating its golden anniversary this year, Avemco is a direct underwriter of general aviation insurance. While officials say loyal customers are a main factor in the company’s success since it sold its first policy in 1961, being disciplined, running the numbers, and identifying patterns have also been crucial to the company’s bottom line. It’s not sexy or exciting, but it is the secret to success.
“Our numbers are not as predictable as those for auto insurers who have millions of units, but when we look at our numbers over a long period of time, we see patterns,” said Jim Lauerman, the company’s president.
And one of the most interesting patterns is a red flag the company sees in some customers who eventually crash their planes: Impatience and a know-it-all attitude.
Crunching the claims numbers also shows that a little humility should be part of a pre-flight. “A lot of times you don’t know what you don’t know — until it’s too late,” he said. “We’ll see low-time pilots who don’t understand what they are getting into, while we’ll see high-time pilots who know the risks, but think they can go through them.”
Knowing the risks is, obviously, paramount to success as an insurance company. That’s where the numbers trump emotion, Lauerman says.
“It’s easy to fall in love with aircraft in all the different segments of the industry,” he said, “like homebuilts — we love them, but we have to be realistic. We have to be grown ups.”
Being a “grown up” is a theme Lauerman returns to time and again. When asked how pilots can present themselves to get the best deals on insurance, he says they need to be “realistic” about the risk. “Put yourself in our shoes: What would you want if you were an underwriter? An experienced pilot who learned to fly in a simple fixed-gear airplane or a new pilot with lots of money who just soloed and is building a high-performance homebuilt? Which would make you most comfortable?”
The insurance pros want to see a “logical progression through aircraft,” as well as a customer who knows the answer to the question, “what aircraft is the right one for me for where I am today?”
“If customers aren’t realistic about where they are in the aviation experience, we can sense that right away,” Lauerman said. “The customers we want show they understand the risk and what they need to do to deal with it. They act like grown-ups.”
Another “grown up” thing to do is to call the insurance company BEFORE you buy a plane, he said. The worst calls are those where the insurance company tells the person coverage is not going to happen. “People get so angry, but we’re just the messengers,” he said. “The fact is, they probably don’t belong in that airplane.”
He noted that more customers are getting quotes and advice about insurance before going shopping for an airplane. That helps them be more realistic not only about the risk, but the costs. “There’s a natural tendency to want to buy the most expensive thing your budget allows,” he said. “But then there’s no reserve for training, maintenance and other costs.”
Pilots also should be realistic about how they are going to use their airplanes. “People will buy a high-performance airplane for that one big trip they are planning to take which, many times, they don’t even end up taking,” he said. “Maybe they would have been better in a simple fixed-gear aircraft.”
Lauerman is quick to point out that pilots “can dream — you can always dream” about your ideal aircraft, “but buy a little bit below that,” he said. “Be a grown up, accept responsibility. Understand that you live in the real world and choose a plane that gives you the maximum amount of enjoyment and utility but within your capabilities.”
Lauerman said Avemco has thousands of “ideal” customers: “They love the majesty of flight, but also understand the responsibilities that come with it.”
Here he returns to that familiar theme: Be a grown up. Accept responsibility. “They are not diverted by shiny things,” he added.
And it’s often OK if you have a claim on your record, he noted. In many situations, what’s important is how you react to being questioned about it. “If the person denies it or points the finger at someone else, that’s a problem,” he said. “It’s better for the person to say ‘I screwed up and this is what I learned from that experience.’”
Lauerman also notes that it’s when you file a claim that you discover the value of your insurance company. If you bought your insurance solely based on the lowest price, “that may not be the best value,” he said.
“We sell a promise,” he explained, “and the integrity of the person who makes the promise matters.”
Lauerman, who has been with Avemco 26 years, admits that when some people find out he’s head honcho at an insurance company, “they run away from me faster than if I was with the FAA, afraid I’m going to raise their rates.” But he wants his customers to look at everyone at Avemco as a partner who will let the pilots know “if we see you going in a direction that could mean trouble.”
Avemco will hold several customer appreciation events throughout the year, including at AirVenture in Oshkosh. The company also will host forums throughout the week of Oshkosh, including one from Bill Rhodes, PhD, who is in the midst of a study sponsored, in part, by Avemco, to determine the characteristics of successful pilots (See an update on the study in a future issue). Rhodes, who has been working on the Airmanship Education Research Initiative (AERI) for several years, is now moving into testing some of the theories he’s come up with. “We absolutely think he is on the right track,” Lauerman said. “Now it’s time to empirically verify the data.”
Turning lemons into lemonade
After Hurricane Katrina, Avemco paid claims for a large number of airplanes that were inundated with salt water. The planes were total losses and the parts couldn’t be salvaged. Instead of crushing the planes, the company arranged their donation to Build A Plane, a non-profit organization that places planes — whether restoration projects or kits — into the hands of kids in classrooms, EAA chapters, and other organizations. The kids learn how to work on planes, which — hopefully — will inspire their continued interest in aviation.
“It redeems an awful situation,” Lauerman said. “The planes won’t fly, but if we can get them into the schools, it may mean other airplanes can fly.
“There are not a lot of new mechanics coming into the industry,” he continued. “That concerns us.”
As natural disasters occur, such as last year’s flooding in Tennessee, and the flooding in other parts of the country this year, the company will continue to work with Build A Plane. “Our participation in that program is part of our philosophy of being part of a bigger community,” he said.
For more information: Avemco.com