Nathaniel Spencer

AVSC 3020

Professor Esselman

Utah Valley University

Underwriting Criteria

Underwriters go through a variety of different processes to determine potential risk in

order to select insurance premiums. In this essay, I am going to identify which criteria is most

important and how they affect premiums, and what pilots and aircraft owners can do to lower

their insurance rates with respect to these criteria. Since there are many criteria that can be

mentioned I will be using the reading and the internet to answer the questions that are found

above.

As an underwriter, there are many factors that need to be evaluated in order to make the

best decisions. Underwriters come across problems when selecting insureds and one is, “how to

decide whether to accept or reject an application for insurance” (Wells, Chadbourne p. 241). To

help answer this questions underwriters put their focus on “four principal areas: (1) the type of

aircraft to be insured, (2) pilot qualifications, (3) geographical considerations and (4) the purpose

for which the aircraft is to be used” (Wells, Chadbourne, p. 241).

Type of Aircraft

With many different types of aircraft being flown today, knowing the type provides

underwriters the ability to know how susceptible to loss the aircraft may be in the future. In this

criteria, there are three subcategories: age, construction, and configuration. Age refers the life
span of each aircraft sense some can last a longer than others. Construction is far more important

because each aircraft is built differently and one might be more durable than the other. Each

underwriter must, “recognize that relatively minor damage can necessitate the replacement”

(Wells, Chadbourne, p. 242) of an aircraft and how risky that may appear in future use. Lastly,

configuration has its own unique complications for underwriters due to the fact that every aircraft

has a characteristic that is different but creates its own set of problems that need evaluation. For

example, some airplanes might have a conventional landing gear, while others might have a

tricycle landing gear and applies to the type/placing of the engines on the aircraft as well.

Pilot Qualifications

The FAA has an intricate licensing system that can help them tremendously and can give

underwriters the, “assurance that the aircraft the company is insuring is operated by a qualified

pilot” (Wells, Chadbourne, p. 243). But this isn’t enough for the underwriter since they also need

to take into consideration the background, flying hours and accident record to ensure the pilot is

adequate for the insurance being quoted. Along with these factors the underwriter may find it

necessary to restrict some pilots due to inadequacy of training to the considerations above.

Geographical Considerations

Down this pipeline of qualifications the geography of where one is flying is something

that underwriters must also take into consideration. As per the geography, the airport location

plays a significant factor into the underwriter evaluating risk. Most places have their own

weather patterns and “hazards associated with flight operations and must be considered” (Wells,

Chadbourne, p. 245).
Purpose of Use

With so many different sizes and types of aircraft that are used, it becomes important for

the underwriters to determine the risk associated in preforming the job. With every aircraft

having a unique susceptibility to loss the, “attitude and aptitude of its pilots”( Wells,

Chadbourne, p. 244) must be accessed as well. Each risk must be, “classified relative to some

common denominator… the purpose for which the aircraft is to be flown is employed as that

common denominator” (Wells, Chadbourne, p. 244-245) However, generally speaking the

purpose of use is categorized as (1) business and pleasure, which applies to individually owned

aircraft, (2) industrial aid, which applies to corporate-owned aircraft, (3) commercial, which

refers to charter and air taxi, and (4) special use, which encompassed any other unusual

purposes. Each category has its own unique challenges for underwriters to evaluate and varies

from flying experience, load factors, hours flown, and exposure to serious peril.

Making Insurance Cost Less

As pilots and aircraft owners alike are trying to minimize the amount of risk that goes

into flying the underwriters are trained in finding everything that might be a potential risk.

Insurance whether it is for your home or plane is all about reducing that potential loss. In the

article, 7 Ways to Lower Your Rates on Aviation Insurance, it talks about seven ways that aircraft

owners and pilots can lower their insurance costs. I am going to talk about three ways that I think

are essential to doing so. First, keeping up with your trainings is a great way to decrease your

rates. The article states that, “regularly participating in flight training can help lower the risk of

an accident or incident and lowered risk often equates to lower rates” (N/A, 2017). Second,

logging more flying hours. As logging more hours get you more experience in different types of

situations by continuing to do so you can lower your rates. Flight hours is something that
underwriters look at and for pilots “the more hours you fly, the lower your insurance rates will

be” (N/A, 2017). Lastly, you can continue to fly safely. The reason that people’s claims go up is

due to accidents, so the less you have the less you need to pay. The article mentions that “Many

aviation insurance providers will offer a discount for maintaining a claim-free status for a certain

amount of time” (N/A, 2017). Out of the seven that were listed I feel as if these three were the

ones that pertained more to the criteria that was mentioned previously to help pilots and aircrafts

owners alike know what is being evaluated and how to bypass some of those considerations to

lower their premiums.

 References

N/A, (2017, January 23). 7 Ways to Lower Your Rates on Aviation Insurance. Retrieved

September 28, 2019, from https://aegisinsurancemarkets.com/Blog/PostId/240/7-ways-to-lower-

your-rates-on-aviation-insurance.

Wells, Chadbourne (2007) Introduction to Aviation Insurance and Risk Management, Third

Addition. Malabar, Florida: Krieger Publishing Company.