We caught up with Jim Lauerman at Oshkosh, and he had a number of interesting observations -- and a few tips -- for us. Jim is AVEMCO Insurance's Chief Underwriting Officer, and he wanted, right away, to dispel a myth. "I'd bet this next paycheck that AVEMCO is still the largest underwriter of homebuilt aircraft. We're writing almost all the homebuilts -- not the super-high-performance ones, but most of the popular ones, even some one-offs. The impression was that we somehow got out of the homebuilt business -- that's not true, obviously."

It's about giving people what they need, and staying in business.

Mr. Lauerman reminded us, "We're a publicly-held company. We want to write homebuilts -- we want to write all the business we can -- but we have to do it profitably."

So, how do you evaluate a new design?

The approach should not surprise anybody. Jim said, "On a new design, we'll do our best to categorize it -- wing loading, V-speeds, and so on -- and then we monitor it. On a one-off, we typically write third-party liability only." That third-party business, he said, "is more-closely related to the aircraft, than to the pilot, for that type of coverage. It's kind of like our non-owner insurance."

Do renters need insurance?

"I really wish more people knew about non-owner insurance," Lauerman said. He ran a forum at Oshkosh, early in the morning. "There's a lot of enthusiasm about this -- we're hitting a resonant chord." Sixty-five people were there, at 8:30 in the morning. "Pilots don't know -- there's 300,000 renter-pilots who don't carry renters' insurance."

How pilots get in trouble (part 1)

"Most pilots," he explained, "think that the FBO's insurance covers them. Sure -- but after the FBO's insurance company pays the FBO, they have subrogation rights -- they can come after the pilot. The pilot stands to lose a lot, unless he is insured."

Non-owner insurance is inexpensive; you buy it by the year, "and it covers you in any airplane that meets the policy. [Twins, turbines, and a few other types are generally excluded --ed.]," Lauerman told us. "The policies are priced, based on the coverages purchased, regardless of the pilot. Based on the coverages chosen [AVEMCO also has the most-popular options prepackaged --ed.], the pricing can be well under a dollar a day." Part of the low cost is the program's ease of administration; policies are available on-line, 24/7.

...and the best thing about this?

"The best thing," Lauerman told us, "is that all these policies come with unlimited legal defense, by real aviation insurance attorneys -- even to defend your personal expenses." He put the program in perspective: "Buy as much as you want, but get something -- your first hour of attorney's fees can easily cost more than your coverage for a year."

If you think you won't get snared, think about this: particularly since September 11, FBOs have been hit with sometimes-enormous premium increases. One strategy they have taken is to increase their deductibles. If you bend their plane, and they have to pay, say, $5000 deductible, you'll probably get a call from your FBO's lawyer, to cover that $5000, as well as  loss of use of aircraft and the inevitable 'diminution of value' of the airplane you bent.

Sorry, your individualism isn't your only insurable quality.

"Everybody's an individual," Jim readily admitted, "but not every policy is individual, to that degree. We take you and your qualifications and record, and put you into a class or category, and rate that class." Insurance is about spreading risk, after all. "Everyone thinks he's an individual, but you've got to do the math. We have to determine what's a good risk and what's a bad risk -- as a class. We don't look at just one year, either. After a while, the numbers get more solid." Remember -- the idea isn't to raise rates; in fact, it's to keep rates as low as possible, while still providing coverage, and a reasonable profit for the company.

Just like the parents in the fictional Lake Woebegone (MN), all pilots consider themselves 'above average.' The numbers are better, when it comes to rating groups of people, than individual assessments. "What tends to happen a lot in this industry," Jim noted, "is that so many insurers think like pilots -- reacting to the last bad news they heard, or basing large-scale decisions on their own personal experiences. Numbers aren't perfect, but if you don't use them, you're left with personal bias, your limited personal experience, and so on. That's not good business: it's gambling, not insurance."

AVEMCO is giving away money. Well, just about...

As ANN told you last Spring, AVEMCO teamed up with Martha and John King in a new program, in a sort of new direction for King's offerings. The program, designed to educate pilots to think (there is no written test at the FAA for that), is designed to keep us from getting behind the airplane or the weather, as we blissfully operate systems. "It's too early to tell if that program has improved safety, but we believe that it will," Jim said. "We can't run numbers yet -- it's too early -- but we know that it can't hurt. We also know that it's the right thing to do."

AVEMCO is reducing rates by 5% for graduates of that King course; it also offers additional discounts to pilots who complete additional performance regimens -- a tailwheel endorsement, a float rating, or any number of other enhancements.

Jim understands: "Pilots complain about insurance rates. Insurance just takes the past to predict the future. What we're doing with the Safety Rewards Program is to change the actual numbers, so that 'the past' a few years from now will be a more-attractive picture than 'the past' does now. We might even end up with lower rates."

This program is more than AVEMCO's private crusade. Lauerman told us, "We are, of course, trying to do good business; but of course we're also trying to impact, even redirect, the industry. I believe we, as an industry, haven't given people the tools to be safer." [To that end, AVEMCO has a special section on their website, with some 'this really happened' scenarios. We can learn from them --ed.]

How pilots get in trouble (part 2)

As a guy who looks at every single claim submitted to AVEMCO ("I really do that -- even if it's just a quick scan," Jim said), Lauerman sees a lot of things emerge as patterns.

"There are certain things -- VFR into IMC -- that are no-brainers. Everybody knows about those... There's a few things that we hardly ever think about, though... Loss of directional control on the runway -- this is the most-common claim we see every day. Inability to use the rudders must be 30~40% of claims dollars." They're important, though: "You don't hear about these; most of them don't even get into the NTSB database -- but you're talking about millions and millions of dollars."

What's the root problem? "People just don't know how to use their feet. Think about this: God gave us feet to counteract adverse yaw."

FMI: www.avemco.com